CORPORATE GOVERNANCE AND FINANCIAL REPORTING TIMELINESS
CHAPTER ONE
INTRODUCTION
Background of The Study
Timeliness is a fundamental characteristic of the financial reporting of information to agents and users to enable them to make informed decisions about an entity. Information potentially loses relevance with age and extended delays in the availability of financial statement information render the information less useful for economic decision-making. Although regulatory requirements and pressures exert a significant influence over financial reporting timeliness, there remains considerable discretion over when firms release their financial statement information within regulatory windows (Hung and Phuong, 2018).
Timeliness of financial reporting is one of the attributes of good corporate governance because shareholders and other stakeholders need information while it is still fresh and the more time that passes between year end and disclosure, the more stale the information becomes and the less value it has (Odit, 2015). Timeliness is considered as one of the qualitative characteristics of useful information by the American Accounting Association, where the conceptual framework of financial reporting of accounting standard setters worldwide such as the International Accounting Standards Board (IASB) recognizes timeliness as one of the characteristics which determines the relevance of accounting information (Larker and Tayan, 2018). Users need timely information to enable them make a promptly review to decide whether to continue or stop their investment in a company. Delays in disclosing timely information on the preparers’ part would result in greater market inefficiency (Omar & Ahmed, 2016).
Corporate governance in its simplest form refers to how corporations are managed and governed. It refers to the internal mechanism established to govern, control and manage the activities of a corporation.Odit(2015)explain that sound corporate governance mechanisms help assure investors that they will get their capital back and receive an adequate return on their investment. They help companies to reduce mismanagement, remedy any deficiencies in governance mechanisms, to prevent abuse of power and to manage risks effectively (Jouini, 2013). Although it is believed that compliance with these recommendations is the essential basis for evaluating the quality of the governance system, and therefore the protection of the reputation of the company and the interest of the shareholders (Alsmady, 2018). However, on the path of the shareholders, quality and reliable information (especially on the operations of the directors) has become a commodity that must be paid for in order to effectively and efficiently assess their performance. Hence, the shareholders’ direct and indirect investment in corporate governance mechanisms (agency cost) is aimed at increasing their confidence in the quality of financial information presented by the directors (Onuorah, Anastasia, & Imene, 2016).
Firms with good corporate governance provide transparent disclosures and are investor friendly therefore are able to access capital markets on better terms. A well-developed financial system provides a market for corporate control while a strong legal system protects investors’ contractual rights by minimizing the risk of loss from managerial opportunism.
Corporate governance covers some issues such as roles and responsibilities of board of directors, composition of the board, directors’ remuneration, accountability, financial reporting and auditing, risk management and internal control and shareholders’ rights and protection. From this we can see corporate governance influence financial reporting quality. Timeliness is a crucial part of financial reporting quality as financial reporting that is available on time is useful to users that want to use it make decision (Iyoha, 2012)
There are regulations that specifies when to make available financial report by companies in Nigeria such as the security and exchange commission. Despite these regulations, there are still companies that fail to file their financial report at the right time. This gave rise to this research, whichrelates corporate governance to financial reporting timeline. There had been some research on corporate governance and financial reporting all over the world such asOnuorah, Anastasia, &Imene (2016) in Nigeria, Odit(2015) in Kenya,Abu-Risheh(2012) in Jordan, Klai & Omri(2011), and Clathworthy and Peel(2010) in UK. There are some researches on timeliness in Nigeria such as Okougbo & Rapuluchukwu (2014), Iyoha(2012) and Fagbemi & Uadiale(2011). However,this research done in Nigeria has not related corporate governance specifically to timeliness of financial statement enough, whichleads to this research.
Statement of the Research Problem
There have been some researches on corporate governance and timeliness of financial report individually and together. Clathworthy(2010) examined the effect on the effect of corporate governance on timeliness of financial report in UK private companies. The result of this is that corporate governance factors have an important influence on financial reporting timeliness. Odit(2015), researched on the effects of corporate governance on timeliness of financial reporting of companies listed at the Nairobi securities exchange. The result of the research shows that corporate governance that includes directors’ composition and diversity has greater influence in improving the timeliness in presentation of financial reports. It also shows that audit committee composition had a negative relation to the timeliness on presentation of financial reporting.
Researches on timeliness of financial reporting in Nigeria was mostly that of general factors that affect financial reporting timeline but none about how corporate governance characteristics specifically affectfinancial reporting timeline.
In light of the above, the following research questions guided the study:
What is the effect of board size on financial report timeliness?
What is the relationship between board meeting andfinancial report timeliness?
Whatis the effect of board independence on financial report timeliness?
What is the relationship between audit committee independence andfinancial reporting timeliness?
What is the effect of CEO duality on financial reporting timeliness?
Objective of the Study
The broad objective of the study is to find out the relationship between financial reporting timeliness and the following corporate governancecharacteristics: number of independent director on the board, audit committee meeting frequency, board size andboard meeting frequency. The specific objectives of the study are to:
find out the effect of board size on financial report timeliness;
examine the relationship between board meeting financial report timeliness;
determine the effect of board independence have on financial report timeliness;
find out the relationship between audit committee independence and financial reporting timeliness;
examine the effect of CEO duality on financial reporting timeliness.
Statement of Research Hypothesis
The following hypothesis guides the study.
HO1: There is no significant relationship between financial reporting timeliness and board size.
HO2: There is no significant relationship between financial reporting timeliness and board meeting.
HO3: There is no significant relationship between financial reporting timeliness and board independence.
HO4: There is no significant relationship between financial reporting timeliness and audit committee independence.
HO5: There is no significant relationship between financial reporting timeliness and CEO duality.
Scope of the Study
The population of this study is thecompanies listed on the Nigeria stock exchange for the year 2018. The study covers a period of ten years, between 2008and 2017.
This period is chosen because in recent time, corporate governanceand qualityfinancial reporting which reporting timeline is crucial to has been called for in earnestfor some time now and the trend also continued in this periodchosen. It also shows the recent standings to reflect result closest to that of real time happenings.
Significance of the Study
All the users of financial reporting information wantquality to make informed decision while the regulatory body alsowantqualityfinancial report in the market to aid investors and improve the confidence they have in the market as well as improving the marketquality. Timeliness is an important fundamental of financial reporting quality as it makes sure information is available when needed to provide a good basis for making informed decision.
This research shows how principles of corporategovernanceaffect the timeliness of financialreport. The result of this research will help companiesadjusttheir corporategovernanceinternal code to ensure informationare available when needed which will result in investors wanting to invest in them as they will be trusted and alsoavoid penalties from regulatory bodies.
Regulatory bodies will also be able to adjust the current corporategovernance code to correct the problem of late filing of financial report which will result in improvedinvestors’ confidence and improved marketquality.
Limitations of the Study
This study is limited to how some principles of corporate governance influence financial reporting timeliness. It does not explore other issues that can affect financial reporting timelines. It’s also limited to how this few principles of corporate governance influence financial reporting timeliness and not how it influences other characteristics of financial reporting quality.

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