CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter presents methodological issues of the study. These issues explained are, population of the study,

sample size and sampling technique, source of data collection, measurement of the research variables, as well

as techniques use for data analysis.

3.2. Research Design

This study adopts a research design to capture the extent of audit committee characteristics on the performance

of consumer goods firms in Nigeria. This design is seen appropriate because it enhances a broad examination

of the major questions raised in the study. This design investigates the relationships as well as the cause and

impact of audit committee characteristics on the performance of consumer goods firms in Nigeria.

3.2.1 Population of the Study

The population of the study comprises of all twenty (20) consumer goods companies listed on the Nigerian
Exchange from 2013-2022. Similarly, the use of longitudinal (panel) research design will be adopted, which is
a good technique for evaluating variables in cross sectional and time-series data. Therefore, all consumer goods
companies listed on the Nigerian Exchange Group make up the study’s population.

The are listed as follows;

1. Cadbury Nigeria Plc.
2. Champion Brew. Plc.[Bls]
3. Dangote Sugar Refinery Plc[Cg+]
4. DN Tyre & Rubber Plc[Mrs]
5. Flour Mills Nig. Plc.[Cg+]
6. Golden Guinea Brew. Plc.[Rst]
7. Guinness Nig Plc[Cg+]
8. Honeywell Flour Mill Plc[Cg+]
9. International Breweries Plc.
10. Mcnichols Plc
11. Multi-Trex Integrated Foods Plc[Bmr]
12. N Nig. Flour Mills Plc.
13. Nascon Allied Industries Plc
14. Nestle Nigeria Plc.[Cg+]
15. Nigerian Brew. Plc.[Cg+]
 16. Nigerian Enamelware Plc.
17. P Z Cussons Nigeria Plc.[Cg+]
18. Unilever Nigeria Plc.[Cg+]
19. Union Dicon Salt Plc.[Brs]
20. Vitafoam Nig Plc.

3.2.2 Sampling Size and Sampling Technique

Census sampling technique will be used to select sample size for the study. Thus, the study will filter the sample

firms using the following two-point filter. Thereafter, all firms that scaled the filter will be selected using census

sampling. The two-point filter is as follows.

i. Firms must be listed on or before 2013 because the scope of the study is from 2013 to 2022, and firm must

be listed without being delisted within the period of study.

ii. Firms must have complete data for the study period that is 2013-2022.

The following criteria are taken into consideration in the selection of the sample size.

i. The selected firms must be consistently quoted for a period of 10 years on the floor of Nigerian

Exchange Group (2013-2022).

ii. The selected firms must have relevant data for all variables during the period under study

iii. The selected firms must contain up to date data prepared and presented in line with IFRS standard

as at 2013 to 2022.

From the above criteria therefore ten (10) consumer goods firms were sampled for this study.

3.3 Data Collection

As a quantitative method will be used for this study, the study will mainly use secondary method of data because

through this means annual reports or financial information of the selected consumer firms will be analyzed for

the last ten years 2013 - 2022.

3.4 Sources of Data

The main source of data for this study is secondary. The secondary data for this study were obtained from the

annual financial report of listed consumer goods firms in Nigeria from 2013-2022. The reason for using

secondary data is that the variable used in this study are quantitative and such as variables can measured.
3.5. Techniques of Data Analysis

3.5.1. Multiple Regressions

The study will use multiple regression technique to evaluate the effect audit committee characteristics on

financial performance.

Multiple regression technique using panel data is suitable for the analysis of data due to the nature of the

work. This is because of the panel character of data, that is, its combination of time series, as well as cross-

sectional attributes, these justifies the application of a panel data methodology (Pooled effect regression will

be computed but subject to both random and fixed effect where one will be chosen after the Hausman and

langrangian multiplier test). The is in line with works of (Hafsi & Turgut, 2013; Harjoto et al., 2014;

Mohammad, 2020).

A multiple regression will be applied to test the hypothesis based on the following model:

ROASSit= α + β1ACINPit +β2ACMTNit + β3ACSIZEit + βFIAGEit + β8FSIZEit + Ԑit……. Where, ROASS

= Return on assets

α = Constant

β0 = Intercept estimates

ACINP = Audit Committee Independence

ACMT = Audit Committee Meetings

ACSZ = Audit Committee Size

FIAGE= Firm AGE

FIZE= Firm size

3.6 Variables of the study

The variables of the study are of two type, namely dependent variable and explanatory variables (independent

and controls).
3.6.1 Dependent variable

The dependent variable of this study is return on assets (ROA), which is an indicator of how profitable a

company is relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a

company's management is at using its assets to generate earnings (Gallo et al., 2016). ROA will be measured

using profit after taxation divided by total assets (Tyas & Khafid, 2020).

3.6.2 Independent Variables

Independent variables are audit committee attributes (independent, meeting and size) which will be controlled

by firm size and age of the firms. Audit committee Independent will be measured as proportion of independent

non-executive directors on the committee (Allegrini & Greco, 2013) Audit committee meetings as total Number

of meetings during the reporting period (Manita et al., 2018). Audit committee size is total number of committee

members (Guping et al., 2020) Firm Age is number of years (Bédard & Gendron, 2010). Firm size natural

logarithm of total assets (Tsalavoutas & Dionysiou, 2014).

3.6.3 Variable of the study and their measurement

Variable Acrimony Measurement Source

Return on asset ROASS Profit after taxation Tyas & Khafid, (2020).

divided by total assets

Audit committee ACINDP Proportion of (Allegrini & Greco, 2013; Odewale,

Independent independent non- 2020; Uwuigbe & Ajibolade, 2013)

executive directors on

the committee

Audit committee ACMTG Total Number of (Manita et al., 2018; Ofoegbu et al.,

meeting meetings during the 2018; Shahbaz et al., 2020)

reporting period

Audit committee ACSIZ Total number of (Guping et al., 2020)

size committee members

 Firm Age FIAGE Number of years (Bédard and Gendron, 2010)

Firm size FSIZE Natural logarithm of Tsalavoutas and Dionysiou, 2014

total assets

3.7. Model Specification

The following models were used in achieving the objectives of this study as well as for testingthe hypotheses

formulated in chapter one:

To measure financial reporting quality the study, use discretionary accruals to measure earnings quality a

proxy for the dependent variable.

3.7.Limitation of Methodology

The study tends to change because of incomplete record found in some of the companies and or the companies

have been bankrupted.