Risk Committee Attributes, Financial Leverage, and Firm Value of Listed Manufacturing Firms inNigeria

Abstract

The Nigerian business environment is characterized by inconsistent policies, bureaucratic hurdles, regulatory compliance challenges, uncertainty surrounding the foreign exchange market, tax regimes, energy costs, rising raw material prices, and restrictive trade regulations. These factors hinder investment, innovation, and growth initiatives among manufacturing firms. The research investigates how financial leverage influences the connection between the attributes of risk management committees (RMCs) and the value of listed manufacturing companies in Nigeria. A correlational research approach was adopted. The sample includes forty (40) manufacturing companies from five (5) different sectors that are registered on the Nigerian Exchange Group (NGX). Data were collected from the annual financial statements of the firms, covering an eight-year timeframe from 2015 to 2022. The hypotheses were tested using the multiple regression method. The results from the Panel Corrected Standard Errors (PCSEs) estimates indicate that the expertise of the RMC positively affects firm value in a significant way. Moreover, the attributes of RMC such as size, independence, gender diversity, and overlapping directors negatively and significantly influence firm value, whereas the diligence of RMC has a positive but not statistically significant effect on firm value. Additionally, when interacting with the moderating variable of financial leverage, RMC diligence, independence, and overlapping directors positively and significantly affect firm value. The results of this research provide significant insights for those overseeing corporate governance (CG) code reforms in Nigeria to review and strengthen the existing risk management committee codes where necessary. More so, this study recommends that the Financial Reporting Council of Nigeria (FRCN) should ensure that the risk management committee consists of members with diverse backgrounds and expertise in risk management. The firm’s management should aim for an optimal balance between debt and equity financing based on its risk appetite and ability to meet debt obligations. In addition, the RMC of the firm should establish key performance indicators to assess the level of its risk management efforts. Finally, the firm’s management should strive to foster collaboration and communication between the risk committee and the top management of the firm. between Halal tourism concepts and hotel management practices.