Audit Quality and Investor Confidence in the Nigerian Capital Market: Evidence from Panel Data Analysis

This study investigates the effect of audit quality—proxied by Big 4 affiliation, audit fees, and auditor tenure—on investor confidence, measured through stock prices and trading volume, in the Nigerian capital market over the period 2010–2024, using a sample of 148 listed firms. Drawing on agency theory, signalling theory, and the institutional theory framework, and employing fixed-effects and random-effects panel regression models with Hausman specification tests, the study finds that Big 4 affiliation and audit fees exert significant positive effects on stock prices and trading volume, while auditor tenure exhibits a non-linear, inverted-U relationship with investor confidence. Control variables—firm size, profitability, leverage, growth opportunities, firm age, and liquidity—yield largely expected signs. The findings contribute novel evidence from a frontier capital market context, challenging universalist assumptions about audit quality signalling and offering critical policy prescriptions for the Financial Reporting Council of Nigeria, the Securities and Exchange Commission, and listed firms seeking to restore waning investor confidence in one of Africa's most strategically important capital markets.