This study uses three complimentary theories to explain the interaction between governance mechanisms and institutional quality to determine the financial reporting quality (FRQ) in financial institutions in Nigeria, South Africa and India: agency theory, institutional theory and stakeholder theory. These theories and models exist on complementary levels: agency theory focuses on the micro level of firm governance, institutional theory focuses on the macro level of forces in the environment, and stakeholder theory focuses on the intermediate level of accounting for multiple groups.

2.1.1 Agency theory

Agency theory ( Jensen & Meckling, 1976) views the firm as a contract between the agents (managers) and principals (shareholders) who entrust the managers to take care of the business. This delegation leads to agency problems because managers, who have better information and have incentives that are different from shareholders, may use this discretion for their own gain and not to represent the economic reality ( Tripathy & Agrawal, 2022; Adegboyegun et al., 2021). The theoretical framework for studying the relationship between governance mechanisms and the reduction of agency costs and the improvement of FRQ is the theory of agency. The impact of board gender diversity on monitoring quality is one pathway by which it appears in the agency theory. The agency theory pathway of board gender diversity is through its impact on monitoring quality. In terms of group-level consequences, it has been claimed that gender-diverse boards can help mitigate conformity biases, broaden the scope of the review of management decisions and provide a greater diversity of risk views for board decision making, thereby enhancing monitoring effectiveness and, hence, FRQ ( Alkhayyal & Jaafar, 2026; Toerien et al., 2023). The empirical evidence from Erin et al. (2022) and Gbadebo (2024) in Nigeria and Toerien et al. (2023) in South Africa also support the superior ESG disclosures resulting from gender diversity, in line with the expanded monitoring perspective. With this in hand, agency theory provides the micro-level explanatory framework for the analysis of governance mechanisms as determinants of FRQ in financial institutions in the three countries in this study.

While agency theory has great analytical strength, it comes with its share of drawbacks in emerging economy settings. The theory was formulated mostly in the context of the Anglo-Saxon corporate governance model that assumes that a legal system is well-functioning, shareholder ownership is dispersed, markets for corporate control are active and regulatory enforcement is credible, which is not the case for every country studied, including Nigeria, South Africa, and India ( Rajpurohit & Rijwani, 2022; Okyere et al., 2021). When institutions lack enforcement power, independent directors may have limited legal authority or practical influence to challenge management decisions; audit committees may become de facto monitoring bodies and external auditors may be subject to commercial pressures that threaten their professional independence. This is because the contextual factors suggest governance mechanisms which are believed to have an impact on FRQ may be ineffective in institutionally weak settings, thereby limiting the potential agency theory in its pure form to explain ( Ajibade et al., 2022; Shinde & Bhalerao, 2021). This restriction encourages the use of institutional theory as the second theoretical underpinning of this study.

2.1.2 Institutional theory

Institutional theory developed by DiMaggio & Powell (1983), Meyer & Rowan (1977) and North (1990) focuses on the influence of formal and informal institutions on the behaviour of organisations and financial reporting quality (FRQ). Institutions are considered as the “rules of the game” which are both formal and informal constraints, including laws, regulations, and governance codes, as well as norms, culture, and trust systems ( North, 1990); ( Bhullar & Gupta, 2024); ( Debbarma & Roy, 2023). The theory suggests that the higher the level of regulatory enforcement, the effective functioning of the rule of law, investors’ protection, and low corruption, the lower the incentives for opportunistic reporting, and the stronger is the effectiveness of regulation, the higher will be the FRQ. The theory implies that the greater the regulatory enforcement, the greater the effectiveness of the rule of law, of investor protection, and the lower the level of corruption, the higher will be the FRQ as these characteristics will reduce the opportunities for opportunistic reporting and strengthen the effectiveness of regulation. World Governance Indicators which include regulatory quality, rule of law, government effectiveness, and control of corruption are widely used to measure institutional quality ( Okyere et al., 2021; Rajpurohit & Rijwani, 2022).

Financial institutions is a sector that is exposed to multiple regulatory bodies and has a higher level of coercive, normative, and mimetic pressures, which further add to compliance pressures and influence reporting behaviour ( Bhullar & Gupta, 2024; Goyal & Gulati, 2024; Tripathy & Agrawal, 2022). The impact of financial outcomes on governance and institutional quality can be more significant in these situations, especially via FRQ as an intervening variable ( Bhatia & Kumari, 2026). Cross-country differences further illustrate institutional theory’s relevance. South Africa has a relatively well-functioning institutional environment, backed by the strong governance frameworks of King IV and the active enforcement mechanisms, which do reduce but do not completely preclude the occurrence of reporting distortions ( Marais et al., 2024; Mpungose & Nzama, 2024; Naidu et al., 2024). Institutional duality is observed in India as high formal regulation and family ownership of farms is mixed and matched resulting in different compliance outcomes that align with institutional complexity ( Goyal & Gulati, 2024; Shinde & Bhalerao, 2021; Tripathy & Agrawal, 2022). Nigeria, on the other hand, has weaker institutions with gaps in the enforcement of the laws and high corruption risks, reducing the effectiveness of governance and could lead to symbolic, non-substantive compliance ( Ajibade et al., 2022; Erin et al., 2022; Ibrahim et al., 2024; Okyere et al., 2021). Yet, as institutional theory predicts, governance structures have different effects on FRQ across countries based on the strength and credibility of the country’s institutional environment.

2.1.3 Stakeholder theory

Stakeholder theory was developed by Edward Freeman in 1984, and it extends responsibility not just to shareholders, but to all other actors and those affected by corporate decisions, such as creditors, employees, regulators, customers and society ( Freeman, 1984). Organizations have moral and strategic responsibilities towards these stakeholders, which can be fulfilled with the support of transparency and credibility in financial reporting and making informed decisions ( Coleman et al., 2026). The stakeholder theory describes the importance of financial institutions, which have multiple stakeholder groups, and imposes greater accountability pressures on them, leading to greater expectations for them to deliver on FRQ ( Kaawaase et al., 2021). Financial statements are critical for creditors to evaluate the credit risk; transparency in financial statements is required for monitoring systemic stability for regulators; reliable information is important for employees’ benefit and employment security decisions; and financial institution information is important for society, especially in the context of the criticality of the financial system ( Bhatia & Kumari, 2026; Sobhan et al., 2026). The institutional demands on FRQ are normative and coercive, stemming from the pressures of these stakeholders, especially in the financial institutions.

Governance mechanisms gain stakeholder legitimacy when they are proven to serve the interests of the stakeholders ( Oyerogba et al., 2024). Board diversity, audit committee independence, and robust financial reporting oversight signal commitment to stakeholder accountability ( Coleman et al., 2026). In institutional environments where there is support for stakeholder protection (South Africa), these attributes of governance have positive impacts on FRQ (both in terms of agency cost reduction as well as stakeholder credibility enhancement); in institutional environments that are weaker in terms of stakeholder protection (Nigeria), governance mechanisms are isolated from the protection of stakeholders and thus hinder the gains of FRQ ( Abaidoo & Agyapong 2023; Ahmed et al. 2022).

There is a lot of research interest in the relationship between governance mechanisms and institutional quality (IQ) to financial reporting quality (FRQ), especially in emerging economies. This section is a synthesis of empirical evidence gathered from studies that were done in Nigeria, South Africa and India. The review is organised into three parts, first considering the general picture of FRQ studies and then breaking down the results into two main categories: effect of governance mechanisms on FRQ and effect of institutional quality on FRQ. The countries are explored one after the other, with a particular focus on country-specific dynamics that can influence reporting behaviour in financial institutions.

2.2.1 Effect of governance mechanisms on financial reporting quality

In Nigeria

Empirical research in the Nigerian context has studied the relationship between internal governance structure and financial information quality of firms, and this body of literature has grown. The study of Adegboyegun et al. (2021) took a different turn from the previous studies and investigated the relationship between real earnings management and FRQ in listed manufacturing companies, showing that managements of discretionary expenditure and sales negatively affected FRQ in listed manufacturing firms. Hasan et al. (2022) added a comparative analysis that included Nigerian firms, and this study found that better governance was positively related to better FRQ results, as indicated by board independence and audit quality. Taken together, these studies confirm that the quality of governance is an important factor influencing FRQ in Nigeria, and that the institutional context significantly moderates the relationship between these factors. Kaawaase et al. (2021) using data from financial institutions in Uganda report that in addition to board independence, board expertise and board role performance and the quality of internal audit were significantly predictive of financial reporting quality, while the quality of internal audit was a strong predictor of board role performance. The results emphasized that high-quality governance mechanisms and good internal controls are integral to enhancing the quality of reporting in African financial institutions.

Building on this, Ahmed et al. (2022) carried out a systematic review of 204 research papers on financial disclosure by financial institutions and found that the main factors that influence financial reporting quality were monitoring attributes. The review indicated that governance mechanisms, such as boards of directors, had received relatively less attention in previous research, but audit mechanisms had received a lot of attention. The study also found inconclusive evidence of the influence disclosure quality on firm performance and valuation and thus recommended further research, especially in the emerging market countries like Nigeria, South Africa, and India. In the latest extension of the conversation, Ajibade et al. (2022) focused on the development banks, and they studied the interactive effect between the adoption of IFRS and the corporate governance on the faithful representation aspect of FRQ. Based on their findings, they noted that the governance environment was an important moderating factor of the FRQ benefits of IFRS use, suggesting that the benefits of IFRS do not follow automatically if the board is not improved. Likewise, Erin et al. (2022) showed that board diversity, specifically gender diversity, had a positive impact on the quality of sustainability reporting, a part of FRQ.

To support these results, Rimamshung et al. (2023) showed that the Board size, CEO duality, and Board composition have a significant impact on FRQ in the consumer goods industry, with a negative moderating effect of CEO duality that focuses decision-making power and reduces the effectiveness of board monitoring. Gbadebo (2024) specifically considered the influence of board diversity on FRQ in Nigerian listed companies and found that boards with diverse composition were found to have high FRQ due to better quality deliberations and less groupthink. Ibrahim et al. (2024) examined the effect of listed non-financial firms’ attributes and audit committee characteristics on FRQ and concluded that board independence, audit committee size, and frequency of audit committee meetings were statistically significant determinants of FRQ. These results indicate that companies with better information quality of their audit committees produce more reliable financial reports and fewer manipulated accruals. ( Hassan et al. 2025; Cheisviyanny et al. 2024).

With a specific focus on the Nigerian market, Oyerogba et al. (2024) analyzed the correlation between a Composite Corporate Governance (CCG) index and the quality of Sustainability reporting of the listed Nigerian banks. The study revealed that better governance processes led to better quality of sustainability reporting. Larger boards with more independent members, higher levels of financial expertise on the audit committee and more robust protections for shareholders were linked to more quality sustainability disclosures, in particular. The results of this study corroborate the increasing awareness that good governance is essential for transparency and accountability in Nigeria’s banking system.

In South Africa

South Africa has a comparatively sophisticated corporate governance framework, with a series of King Reports, that offers a unique context to explore the relationship between governance and FRQ. In South African listed firms, Eloff and Steenkamp (2022) examined the earnings management relationship between the integrated report quality and earnings management, which revealed that the relationship between integrated report quality and earnings management was statistically significant and negative, meaning that South African listed firms with higher quality integrated reports were less likely to engage in accrual and real earnings management. For them, it was a sign of the discipline of integrated reporting that improves transparency and limits opportunistic reporting. Along the same lines, Mokabane and Du Toit (2022) reported that the governance characteristics of board independence and the existence of specialised board committees were related to increased reporting quality and thus the value-relevance of integrated reporting.

Abaidoo and Agyapong (2022) investigated how the quality of institutions affects financial development in the Sub-Saharan African economies. They found that the combination of good governance, regulatory quality, rule of law, and accountability had a strong positive impact on financial sector development. The findings reinforced the importance of robust institutional structures to support the development of the financial sector and financial transparency of companies. On the basis of this evidence, Abaidoo and Agyapong (2023) built upon the evidence and confirmed the positive effects of governance and regulatory frameworks on financial institutions development in 36 SSA countries. The study demonstrated that during times of increased macroeconomic uncertainty, governance quality continued to be a link to financial institutions’ stability and efficiency, further implying that good governance is important for financial institutions to remain stable and efficient under adverse economic conditions ( Shabbir et al. 2026; Sadiq et al. 2026).

In the South African context, Toerien et al. (2023) explored the link between gender diversity in the Board and the quality of ESG disclosure, which is now recognised as part of FRQ. Their evidence suggested that gender diverse boards were more likely to provide material information on ESG than homogeneous boards, which aligns to the idea that diverse boards can offer a wider spectrum of stakeholder views on what should be reported. Naidu et al. (2024) built a custom governance index for companies listed on the South African Exchange and discovered that governance quality ratings were significantly and favorably linked with FRQ indicators such as audit quality and earnings persistence, highlighting the need for a holistic evaluation of the governance framework, rather than relying on a single indicator.

Financial statement manipulation was significantly lower when audit committee effectiveness was high, especially regarding the financial expertise and independence of the committee and was enhanced when audit committee effectiveness was complemented by good ethical leadership at the top, according to Marais et al. (2024). Although in a sophisticated governance setting, such as within the context of the JSE, the use of impression management strategies is widespread, as reported by Mpungose and Nzama (2024), these strategies can have a detrimental effect on FRQ beyond the scope of simple accruals-based measures. Overall, these results suggest that governance mechanisms in South Africa have some impact on FRQ, but this impact is contingent. Ruziwa et al. (2025) analyzed audit committee characteristics and the quality of the ESG reporting of JSE-listed companies, concluding that the independence of the audit committee, and the number of times the committee meets, positively predicted the quality of the ESG reporting.

In recent years, the scope of the governance and reporting quality research has been extended. Oreshile et al. (2026) investigated the impact of good quality enterprise risk management on the probability and intensity of financial distress across 12 Sub-Saharan African countries and discovered that the better the quality of enterprise risk management, the lesser the chances of financial distress, and the less severe the distress. The results indicated that effective risk governance mechanisms strengthen organisations’ resilience and financial stability. Likewise, Yilmaz and Nobanee (2026), based on the data of 14 emerging economies including countries with financial reporting quality characteristics similar to those of India and South Africa, found that the increase in financial reporting quality significantly improved the investment efficiency through the reduction of underinvestment and overinvestment issues.

The evidence was further provided by Coleman et al. (2026), who analysed the listed companies in Nigeria and Ghana, and they concluded that the effective corporate governance mechanisms had a significant impact on lowering accrual based earnings management. The study revealed that audit committee independence, audit committee size, joint audit, and multiple board committees increased the reporting integrity and reduced the incentives for earnings manipulation. Additionally, the governance mechanisms seemed to be more effective in the global companies, where transparency in reporting seemed to be a stronger incentive.

In India

The corporate governance framework in India has been significantly transformed in the last two decades due to the Companies Act 2013 and the Listing Obligations and Disclosure Requirements (LODR) by the Securities and Exchange Board of India (SEBI). Shinde and Bhalerao (2021) examined the effects of governance reforms on earnings management in seven industries trading on the National Stock Exchange, finding that in general, earnings management decreased in the post-reform periods, but with variation in the results between industries. Tripathy and Agrawal (2022) analyzed earnings management in the Indian banking sector and concluded that the corporate governance mechanisms, such as audit committee (AC) independence, CEO duality, and their interaction had significant explanatory power regarding discretionary accruals, where higher governance strength mitigates earnings management. Rajpurohit and Rijwani (2022) did a structured literature review on the corporate governance-FRQ connection in EMs, drawing upon the evidence of India and other similar economies. Their analysis supported that board independence, CEO non-duality, institutional ownership and audit quality were the most consistently significant governance factors of FRQ.

Debbarma and Roy (2023) examined the creative accounting practices of NSE listed companies and concluded that the size of the board, concentration of ownership, and the characteristics of the audit committee were significant factors that deters from creative accounting. In the Indian insurance industry, the authors Goyal and Gulati (2024) examined FRQ and discovered that the board size, board independence and institutional investors of the company had significant impact in explaining the variation in FRQ. The findings of their study showed that more value-rewarding and conservative earnings were generated in insurers that were better-governed, especially if they were private companies. Makri et al. (2024) investigated the board traits and integrated reporting in India listed companies and found that board diversity, board tenure and independent directors were positively related with the completeness and reliability of the integrated reports. Building on this understanding, Bhullar and Gupta (2024) showed that governance mechanisms affected investment efficiency, an indirect channel that impacts economic outcomes. From an Indian perspective, the evidence points to the importance of governance mechanisms as a determinant of FRQ, moderated by the extent of the quality of the wider regulatory and institutional environment.

In conceptual terms, Hewage et al. (2026) summarized the literature on the quality of Corporate Reporting Transparency (CRT) and pointed out that there is no consensus on a definition of reporting transparency. The study contended that transparency needs to be broad based to include governance, operation, social, environmental, and risk aspects. In emerging markets such as Nigeria, South Africa, and India, stakeholders’ growing expectations for more detailed disclosures, covering sustainability and governance issues, are relevant in this broader picture.

2.2.2 Effect of institutional quality on financial reporting quality

In Nigeria

An institutional environment in Nigeria is marked by weak enforcement capacity, regulatory fragmentation, and high perception of corruption that pose great challenges for FRQ. Okyere et al. (2021) studied the earnings management and capital structure of firms operating in sub-Saharan Africa, including Nigeria, and found that institutional quality plays a key role as a moderator: a firm’s operating environment with a lower rule of law and governance effectiveness index showed higher propensity of engaging in earnings management thus leading to lesser FRQ. Hasan et al. (2022) made an explicit attempt to consider institutional variables and found that these variables had a significant interaction effect with the governance-FRQ relationship. Even when legal institutions are weak, firms with apparently robust internal governance mechanisms demonstrated earnings manipulation, indicating that the effect of internal governance mechanisms on earnings manipulation is less effective than the effect of strong external institutional constraints. This was supported by the findings of Ajibade et al. (2022) who demonstrated that the FRQ effects of IFRS were not uniform, with little evidence of benefits in actual reporting practice where the regulatory body was weak and not credible.

Erin et al. (2022) noted that the low effectiveness of corporate governance in enhancing sustainability reporting was attributed to the institutions found in Nigeria which are lacking in effective enforcement and transparency. Similarly, Ibrahim et al. (2024) reported that the extent of FRQ observed impacts was influenced by the regulatory environment of the Securities and Exchange Commission and Financial Reporting Council of Nigeria. Gbadebo (2024) made the point that the benefits of board diversity were only realised in practice if the board was well institutionalised, especially when the minority view was not backed by the institutional structure in reporting decisions. Overall, Nigerian evidence highlights the role of institutional quality as a direct determinant and as a key moderator of FRQ.

In South Africa

In comparison with sub-Saharan countries, the institutional environment in South Africa is well developed, with a strong legal framework, listing requirements of the Johannesburg Stock Exchange, the Independent Regulatory Board for Auditors and a legacy of accountability from the Truth and Reconciliation. Even though they did not explicitly refer to institutional quality, Eloff and Steenkamp (2022) indirectly recognized its role by citing the statutory framework in South Africa that supports the observed link between integrated reporting and less earnings management. The subtle image is consistent with that of Toerien et al. (2023) who suggested that institutional frameworks that shape ESG disclosure do not supplant but rather work alongside governance frameworks. This is an important case study on how institutional quality raises the bottom of the FRQ in the market in South Africa.

In South Africa, governance mechanisms translated more effectively into FRQ outcomes, compared to similar emerging economies, due to its more robust institutional structure, demonstrated by Naidu et al. (2024). They found that companies with higher governance scores had more uniform relationships between governance and earnings quality in their governance index analysis. The institutional focus on ethical leadership in South Africa as captured in the King IV, which they define as ‘tone at the top’, intensified the audit committee monitoring’s effectiveness, as per the findings of Marais et al. (2024). The result suggests that formal institutional norms, rather than statutory enforcement, can be used to reinforce FRQ, either as substitutes for or in addition to it. Ruziwa et al. (2025) noted that the South African regulatory framework on sustainability reporting, which makes it mandatory for firms listed on the Johannesburg Stock Exchange, imposed an institutional pressure that improved the quality of ESG reporting without any influence from the firms’ governance choices. However, in this relatively good institutional context, Mpungose and Nzama (2024) found that opportunistic reporting was not eliminated but is persisting.

In India

India presents a very interesting context for analysing the institutional quality impacts on FRQ, as the formal regulatory framework is highly developed while at the same time informal institutional attributes – such as relationship business ties, family control, and selective enforcement – add to the institutional complexities. Shinde and Bhalerao (2021) supported their argument with empirical evidence that the governance reform periods coincided with a decline in earnings management, suggesting that they contributed to the improvement of the FRQ through institutional change, as opposed to changes in governance at the firm level alone. Based on their structured review, Rajpurohit and Rijwani (2022) concluded that the regulatory development in India, especially the progressive strengthening of disclosure requirements by the Securities and Exchange Board of India (SEBI), was a critical institutional quality improvement which increased the cost of earnings manipulation and required disclosure to be more transparent, thereby improving FRQ. The researchers of Tripathy and Agrawal (2022) found that institutions’ legal protection of minority shareholders and the effectiveness of external auditing oversight strongly influenced the impact of bank governance on FRQ outcomes.

Debbarma and Roy (2023) have observed that, when the regulatory activity of the SEBI is stricter, the relationship between ownership concentration and creative accounting is not that strong as highly concentrated ownership structure was not able to exploit with reporting discretion when the regulation is tight. Goyal and Gulati (2024) highlighted that the role of sector-specific regulatory quality was crucial, as they found that the FRQ outcomes in the insurance sector were not only explained by firm-level governance but also by the ability of IRDAI to oversee the sector. Firms operating under closer regulatory scrutiny exhibited lower discretionary accruals and greater earnings conservatism. A similar result was obtained by Makri et al., (2024) who also recognised that institutional pressures in the integrated reporting environment in India, which is still emerging compared with South Africa, gave selective incentives for improvement of FRQs, specifically for companies with international shareholders. Bhullar and Gupta (2024) found that the regulatory environment in which investment disclosure takes place, or the institutional quality, had a significant influence on the link between governance and investment efficiency, which is clearly FRQ dependent. Indian evidence thus reveals that institutional quality has both direct and moderating effects on FRQ, and that such effects are stronger and more consistent where regulatory capacity is greater and regulatory enforcement is more credible.

This study has used Systematic Literature Review (SLR) methodology with a PRISMA 2020 framework. Narrative review was not used because it would be less reproducible, less transparent, and less systematic than the SLR, could be vulnerable to selection bias, and would not have ensured a high level of validity of the empirical evidence identified, screened, evaluated, and synthesized ( Page et al., 2021; Aslam et al. 2025). PRISMA 2020 is the methodological framework that has been identified as best practice for conducting comprehensive and well-managed evidence synthesis and is accepted as a methodological standard by the journals that are indexed by the Scopus database. The PRISMA 2020 is the methodological framework embraced as best practice for comprehensive, well-managed evidence synthesis and is recognized as a methodological standard by the journals that are indexed by the Scopus database ( Tranfield et al., 2003).

Table 1 provides details of search string construction by conceptual cluster. The main database used was Scopus because of its controlled indexing with standardized information, with full coverage of peer-reviewed journals in accounting, finance, business management and economics (discipline classification), the ability to filter by relevant subject areas, and the convergence of indexing standards of high impact journals. Google Scholar was used as an additional source to gather peer-reviewed articles that might not have been included in the Scopus database because of indexing issues in journals or based on regional publications.

Search Parameters: Boolean connector: Concept 1 AND Concept 2 AND (Concept 3 OR Concept 4) AND Concept 5; Date range: 2021–2026; Language: English only; Scopus subject areas: Accounting, Business/Management/Economics, Social Sciences, Economics/Econometrics/Finance.

Identification Phase: A combination of (Scopus + Google Scholar (supplementary search)) generated a total of 82 records.

Screening Phase: The title and abstract of 73 (after deduplication of 9) unique records were screened to determine eligibility and 46 went forward for full text screening. Records were excluded during the Eligibility Assessment Phase because four were inaccessible, four were outside scope, and four were focused on a non-financial institution. Of the remaining 34 studies, 34 studies were retained for final synthesis.

Final Data Set: 34 peer-reviewed studies.

Data Extraction: A structured protocol captured: publication metadata; country context; research design; sample characteristics; governance variables (board independence, audit committee attributes, CEO duality, board gender diversity, ownership structure); institutional quality variables (rule of law, regulatory quality, control of corruption, government effectiveness, investor protection); FRQ proxies (discretionary accruals, earnings persistence, value relevance, timeliness, integrated/sustainability reporting quality); key findings; theoretical frameworks applied. Verification of extraction was done through cross-checking of 10 randomly selected studies (~29% of dataset). Mixed Methods Appraisal Tool (MMAT) adapted to cover a range of research designs. Five dimensions evaluated on a three-point scale: clarity of research objective; methodological consistency; sample size; reliability/validity of the measurements; analytical rigor. Evidence strength is put in context using quality ratings (no studies excluded regardless of quality).

Thematic Synthesis: Findings synthesized across studies with similar governance and institutional quality themes, and theoretically grounded themes organized into theoretical framework categories (agency theory, institutional theory, stakeholder theory).

Comparative Jurisdictional Analysis: Analysis of the relationship between governance and institutional quality across Nigeria, South Africa and India to identify country-specific moderating factors. Direction-of-effect tabulation provides an overview of effect consistency and intensity, by jurisdiction.

Overall Design: Dual Database Search, A-Priori Eligibilty Criteria, Structured Data Extraction, Quality Appraisal and Multi-Dimensional Synthesis, are used for coherence, replicability and methodological rigour in accordance with best practices used in SCOPUS-indexed systematic reviews. Table 2 provides detailed analysis for a-priori eligibility criteria for the inclusion and exclusion of previous studies in this study.

Table 3 provides a summary of the PRISMA record counting across all four phases, and Figure 1 presents the corresponding PRISMA 2020 flow diagram.

The empirical findings from Nigeria, South Africa and India show remarkable similarity in the direction of governance-FRQ relationships, but significant variation in impact magnitudes and mechanisms. In all three jurisdictions, the variables that are statistically significant are board independence, effectiveness of the audit committee and CEO non-duality. But the ways in which governance work are very different, however.

In Nigeria, governance mechanisms show less and more dependent linkages with FRQ improvements. The review of the studies reveals that the board diversity and the attributes of the audit committee strongly affect FRQ, but these impacts are significantly weakened in situations of weak external control regimes ( Gbadebo, 2024; Ibrahim et al., 2024). This indicates that governance is generally mainly internal monitoring, strengthened board debate, increased board audit activity, and absence of reinforcing external institutional feedback. South Africa’s governance structure, by contrast, is more resilient in its direct effects on FRQ. The sophistication of governance norms embedded in the King Reports, and the sophisticated institutional infrastructure (IRBA oversight and JSE listing requirements), help to ensure that improvements in governance lead more reliably to measurable improvements in FRQ. In the comparative studies ( Naidu et al., 2024) it is clear that the identical governance mechanisms result in higher FRQ gains in South Africa than in emerging markets that are constrained by institutions.

India is an “intermediate case.” The governance reforms as a consequence of the post-2013 reforms yielded noticeable improvements in FRQ, especially for firms that are under greater scrutiny by the SEBI ( Shinde and Bhalerao, 2021; Aslam et al 2026; Rehman et al. 2023; Debbarma and Roy, 2023). However, the concentration of ownership in the family and “family” business practices, as well as lack of consistency in the application of “family” governance, create a bifurcated governance landscape: in domestic business practices, there is a lower degree of effectiveness of formal governance mechanisms while in the more internationalized firms, the effectiveness of formal governance mechanisms is reduced. This institutional diversity in India is in contrast to the more homogenous governance context in South Africa and the more homogenous weak institutional foundations in Nigeria.

One of the key lessons derived from the cross-country comparisons is that the quality of institutions is not just an intervening variable between the quality of governance mechanisms and the FRQ, it is a key variable that affects the efficacy of governance mechanisms. This is clearly illustrated in the evidence base for the three countries. Low rule-of-law indices, regulatory fragmentation (SEC, FRC and CBN with overlapping mandate) and reduced enforcement credibility are all negatively impacting governance-FRQ relationships in Nigeria, significantly. Board of Directors and independent audit committees are also shown to have a high incidence of earnings manipulation in the most well-governed firms ( Hasan et al., 2022; Ajibade et al., 2022), indicating that internal governance mechanisms are inadequate to provide external constraints alone. The IFRS adoption evidence is relevant: adoption of high-quality accounting standards resulted in very little FRQ improvement if credible enforcement institutions are lacking ( Ajibade et al., 2022; Aslam et al., 2026b; Peng et al. 2025). This pattern reflects an institutional trap wherein formal rule adoption outpaces institutional capacity to enforce compliance.

South Africa’s institutional environment operates in the opposite direction. Governance-FRQ linkages are increased by the mature legal system, statutory embedding of governance requirement, independent regulatory oversight (IRBA) and culture of accountability. Interestingly, Marais et al. (2024) show that ethical leadership (“tone at the top”) – as facilitated by institutional norms reflected in King IV – has a significant positive effect on audit committee effectiveness in the context of financial statement manipulation in South Africa. This institutional ceiling is therefore raised in South Africa, which would lead to better consistency in translation of governance-FRQ and less opportunity to engage in impression management, though as Mpungose and Nzama (2024) show, impression management is not eliminated even in this relatively good institutional context.

The example of India demonstrates that institutional quality enhancement can affect the paths of FRQ. The governance changes introduced after 2013 and proactive enforcement action by the SEBI significantly curbed earnings management ( Shinde & Bhalerao, 2021) and creative accounting ( Debbarma & Roy, 2023; Aslam et al., 2026a; Fahamsyah et al. 2025). But the uneven regulatory oversight, focused on the large-cap, internationally publicized firms, results in institutional quality heterogeneity in the economy. This within-country variation reflects the cross-country results, showing that firms subject to stricter regulation have characteristics closer to those of firms in South Africa, whereas firms subject to less strict regulation have characteristics closer to those of firms in Nigeria, where governance-FRQ decoupling is the rule.

As part of this theme, this course examines how integrated reporting can serve as an institutional innovation. One significant cross-country difference is the integrated reporting’s connection to FRQ. The statutory integrated reporting requirement (IRR) for JSE-listed companies has had tangible benefits for South African FRQs, which have been achieved both directly (increased reporting discipline) and indirectly (increased effectiveness of audit committee engagement). Overall, the voluntary integrated reporting ecosystem in India has some positive progress on FRQ metrics, especially among firms that are exposed to international markets ( Makri et al., 2024), whereas the small number of firms that reported in Nigeria is indicative of institutional barriers and firm-level resource constraints. The cross-country pattern indicates that there are positive FRQ externalities, beyond the firm-level governance decision, arising from institutional requirements that mandate increased disclosure and from credible enforcement of those requirements. On the other hand, the results of voluntary initiatives without institutional support are non-uniform and clustered in already advanced companies.

This is supported by the cross-country evidence that governance mechanisms are not the sole drivers of FRQ, but rather a necessary precondition. They are effective when there are three institutional elements: (1) regulatory capability and credibility of enforcement, (2) formal institutionalization of governance norms, and (3) cultural-normative environments that facilitate accountability. South Africa has the highest ratings on all three dimensions and has strong governance-FRQ relationships. Development of institutions is uneven in India with different effects. The low level of institutional environment in Nigeria significantly dampens the effectiveness of the governance, resulting in a two-tiered effect such that formally governed companies in international capital markets attain governance-FRQ standards in the vicinity of South Africa companies, while the other companies in Nigeria, which are not involved in the international capital markets, remain trapped in governance-FRQ ‘decoupling’.

Important refinements to the agency theory/institutional theory frameworks result from the empirical synthesis. The governance-FRQ relationship is not uniform across institutional contexts: Agency costs created by information paradoxes between managers and stakeholders can only be managed by governance arrangements if there is an institutional capacity to enforce. This is an extension of the institutional theory because it shows that the effect of the formal institution (legal code and regulatory structure) and the effect of the informal institution (norm of accountability and reputation concerns) can be determined together and together they determine the quality of governance. Second, the evidence suggests a multi-level causation model with the firm-level governance occurring as a function of the institutional foundations. This is in contrast to previous approaches that focus on either governance or institutions as key factors in shaping FRQ.

The evidence suggests that for regulatory authorities in emerging economies, such as those in Nigeria, the adoption of governance codes without corresponding institutional strengthening is associated with little FRQ improvement. Better capacity building in regulating agencies, better clarifying of regulatory requirements between various authorities and setting up credible sanctioning procedures should be prioritised. The concept of “embedding” governance requirements in statutes and monitoring with independent regulators, as implemented in South Africa, may be a good institutional model for other emerging markets environments.

The cross-country heterogeneity in governance-FRQ relationships means the differential strategies: In strong institutional environments (South Africa), governance reforms directly lead to the gains in FRQ and investor confidence; in weak institutional environments (Nigeria), the gains in governance come with the complementary institutional signalling, such as voluntary enhanced disclosure, international auditor appointment etc. The evidence highlights that external institutional scaffolding is part of the conditions necessary for a governance system to be effective for audit committees and boards. For weak institutional environments, there is a need for governance bodies to add external checks to their internal oversight, and also to increase transparency measures that provide credible signals of the quality of reporting beyond the regulatory minimum.

This empirical review from Nigeria, South Africa and India concludes that the quality of governance mechanisms and institutional quality are both important factors in explaining financial reporting quality in emerging economies. The strength and consistency of the association of governance mechanisms with FRQ differ significantly depending on the institutional context: board independence shows a positive association in all three jurisdictions, audit committee effectiveness shows a positive association in all three jurisdictions, and CEO non-duality reducing earnings manipulation and enhancing reporting reliability shows a positive association in two of the three jurisdictions. South Africa has a fairly developed institutional framework, which allows for institutional mechanisms to consistently reflect governance improvements in FRQs; in India, the institutional framework is in an intermediate state and the economy is heterogeneous in its institutions; Nigeria’s weak institutional framework significantly weakens governance-FRQ links, resulting in a governance-FRQ gap in which it is easier to adopt governance formally than to enforce it.

The evidence also confirms that the quality of institutions does not just act as a standalone predictor of FRQ but that it also acts as a key moderator of the effectiveness of governance. Whether governance improvements yield tangible FRQ improvements, or are mostly ceremonial, is dependent on combined formal institutional features and informal institutions (norms of accountability, enforcement credibility). This contingent relationship has important implications for emerging economies that seek to improve their governance: otherwise, the adoption of governance code may be an unproductive formal exercise, without commensurate strengthening of the capability of institutions to enforce the code.

In terms of future, the process of FRQ development in emerging economies relies on institutional-governance reform trajectories rather than governance development initiatives that are undertaken in isolation. Additional evidence indicates that institutional innovations, like the integrated reporting requirement in South Africa, can create positive FRQ spillovers that extend beyond the firm-level governance decision and offer a complementary policy path in addition to governance regulation.