How could earnings quality profit from risk management committee presence?

This study examines the effect of risk management committee presence (RMCP) on earnings quality (EQ) among 152 publicly listed firms in Nigeria over the period 2015-2024, yielding 1,520 firm-year observations. Using the Modified Jones Model to measure earnings quality through discretionary accruals, panel regression analysis was employed to test the relationship between RMCP and EQ while controlling for firm size, leverage, profitability, audit committee strength, board independence, and ownership structure. The Hausman specification test indicated that the Fixed Effects model was most appropriate for addressing firm-specific unobserved heterogeneity. Results reveal that risk management committee presence significantly reduces discretionary accruals by approximately 4.23% (β = -0.0423, p < 0.01), indicating higher earnings quality. Control variables performed as theoretically predicted: firm size and profitability negatively affected discretionary accruals, while leverage and ownership concentration positively influenced earnings management. Audit committee strength and board independence demonstrated complementary monitoring effects. Post-estimation diagnostics confirmed model robustness, with corrections applied for heteroscedasticity and serial correlation using cluster-robust standard errors. The findings validate agency theory in emerging markets, demonstrating that specialized risk oversight mechanisms enhance financial reporting integrity. The study recommends mandatory risk management committees for systemically important firms, enhanced corporate governance disclosures, strengthened minority shareholder protections, and capacity-building programs for board members. These findings provide evidence-based guidance for regulators, corporate boards, investors, and auditors seeking to improve earnings quality in Nigerian capital markets.