Corporate governance and financial reporting quality: Mediating function of internal control from emerging markets

Abstract

Existing research on corporate governance, internal control, and the quality of financial reporting has focused more on developed countries and provides little insight into the sub-Saharan African markets necessitating this research. The purpose of the research was to explore corporate governance’s impact on financial reporting quality and the mediating role of internal controls. Utilising a quantitative research design, the study analyses data from publicly listed companies across Ghana, Nigeria, and South Africa from 2009 to 2021. Logistic regression models using SPSS version 23 were used to analyse the relationships between the variables. The study reveals that diverse skills and expertise on corporate boards and audit committees’ independence significantly impact financial reporting quality, supporting existing literature and echoing findings from Cole and Schneider (2020) and Musa et al. (2022). However, contrary to existing theories, the study indicates a lack of significant mediating effect of internal controls in the relationship between corporate governance variables and financial reporting quality variables. These findings suggest significant implications for policymakers, practitioners, and academics. For policy, tailored governance frameworks need to be developed. Practitioners are urged to reassess internal control systems and enhance board training and diversity. Academically, further research is encouraged to extend these findings across more diverse economies.