Moderating Effect of Audit Committee Independence on the Relationship Between Risk Management Practices and Financial Stability of Listed Deposit Money Banks in Nigeria

The study examined the moderating effect of audit committee independence on the relationship between risk management practices and financial stability of listed deposit money banks in Nigeria. Employing an ex post facto research design, the study focuses on the 13 quoted deposit money banks operating in Nigeria, utilizing panel data from 2015 to 2024. Data analysis was conducted using the Generalized Method of Moments (GMM) estimation technique to account for potential endogeneity and dynamic effects. Dynamic panel results show that lagged financial stability positively influences current stability, suggesting performance persistence. Audit committee independence moderates the relationship between specific risk management practices and financial stability: it strengthens operational risk management and mitigates excessive market risk exposure, while its effect on liquidity and credit risk management is less pronounced. The findings showed the importance of strong governance structures in enhancing the effectiveness of risk management practices, thereby promoting financial resilience. Practically, the study highlights the need for banks to ensure genuinely independent audit committees, robust risk monitoring systems, and continuous capacity building to maintain stability in a volatile economic environment. Theoretically, the study extends the financial intermediation and credit risk frameworks by incorporating internal governance as a moderating factor. The study contributes to banking literature by providing empirical evidence from Nigeria, emphasizing the interplay between risk management and governance in maintaining financial stability.