Does Board and Audit Effectiveness Mitigate Financial Constraint of Nigerian Firms?

This study assessed whether board and audit effectiveness reduce financial constraint of the non-financial firms in Nigeria. The KZ index was used to measure financial constraint, and gender diversity and independence of the audit committee were adopted as determinants of effectiveness of the board and audit. Using data extracted from the annual reports of all the 87 listed non-financial firms in the Nigerian Stock Exchange (NSE), the analysis was done by running the descriptive statistics, correlation and regression. The results of the analysis show that gender diversity has negative and significant effect on financial constraint, while audit committee independence although has negative association, but is not significant in mitigating financial constraint of non-financial firms in Nigeria. This study therefore concludes that gender diversity helps save firms from financial constraint problem, while independence of the audit committee does not mitigate financial constraint of firms in Nigeria. These simply imply that that while high gender diversity on the boards of directors reduces financial constraint of firms, independence of the audit committee does not mitigate financial constraint situation of firms in Nigeria. It was however recommended that firm should ensure more gender diversity as it helps unveil more access to finances, reduces information asymmetry, minimizes agency conflicts, and aids transparent financial reporting and control, thereby improving access to finance.