Corporate Governance Metrics and Audit Report Lag: A Comparative Analysis of Tier 1 and 2 Deposit Money Banks in Nigeria

Audit report lag (ARL) is a critical component of financial reporting, reflecting the time between the fiscal year-end and the publication of audited financial statements. Although, considerable research has been conducted on the determinants of ARL, gaps remain in understanding the specific effects of corporate governance metrics, particularly within Nigeria’s banking sector. This study, therefore, examined the effects of corporate governance metrics specifically audit committee independence, board size, and institutional ownership and ARL in Nigeria’s Tier 1 and Tier 2 Deposit Money Banks (DMBs). Using a comparative analysis, the study applies dynamic heterogeneous panel estimators, including the Mean Group (MG), Pooled Mean Group (PMG), Dynamic Fixed Effect, Augmented Mean Group (AMG), and Common Correlated Effect Mean Group (CCEMG) estimators. The AMG and CCEMG estimators are chosen based on the presence of cross-sectional dependence (CD) among the entities, with the final selection determined by root mean squared error (RMSE) for each bank classification. The analysis spans an 11-year period from 2012 to 2022, covering 10 DMBs (five from each tier). The findings indicate that, in Tier 1 DMBs, audit committee independence and board size are associated with longer ARL, while institutional ownership reduces ARL. In contrast, for Tier 2 banks, all three-governance metrics audit committee independence, board size, and institutional ownership are linked to shorter ARL. These results highlight the importance of tailored corporate governance strategies for improving the timeliness of financial reporting. The study recommends that Nigerian DMBs optimize the board size and independence of audit committees and encourage institutional ownership to enhance audit efficiency.