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This work examined corporate governance and financial reporting in Nigerian banking industry with the objective of establishing whether there is a relationship that exist between corporate governance and financial reporting.  The survey research Design was used, and data were obtained using questionnaires. The hypotheses were tested using the chi-square (c2).  The study found out that there is a significant relationship between corporate governance and financial reporting; Corporate governance ensures transparency and accountability of firms; and financial reports are used for decision-making. The study recommends that board of directors, managers, auditors and accountants, should work together to create a financial reporting process of unparalleled integrity, and a proper system of corporate governance, so as to reduce opportunities for malpractice.





For so many years banks in Nigeria operated ignoring the basic duties of banking which are high degree of professionalism, transparency, and accountability.  These duties or roles of the banking sector are very essential for building strong public confidence in the banking industry. (Imeokparia, 2003).

In late 1990s, the issue of corporate governance has been the subject of significant interest and debate around the globe due to increasing globalization, financial reporting and disclosure issues, the different treatment of domestic and foreign investor, the current financial meltdown, the increasing number of high profile corporate scandals and the collapse of some entities like the BCCI in the UK, Enron, Worldcom and Lehman Brothers in the US.  Nigeria has also experience its own corporate governance challenges.  In 2008, the commission sanctioned the former Board and External Auditors of Cadbury Nigeria Plc. Due to misleading financial reporting in the company’s 2006 audited accounts

and only recently, the Central Bank of Nigeria sacked the Chief Executive Officers of five Banks due to excessive high level of non-performing loan,  To address some of the issues mentioned above, code of best practice were developed in many jurisdictions, Notably, the Cadbury report issued in the UK in 1992 laid the foundations of corporate governance not only in the UK but also in other countries around the globe.(Imeokparia, 2013). 

Within the context of  globalization, almost all organizations around the World are currently undergoing significant changes. One of the major dimensions of these changes within these organizations is corporate governance. Corporate governance has indeed become the focus of increase attention of not only directors. Investors and stakeholders, but also regulation who are all watching more, and more carefully whether organizations are “governed” efficiently, effectively and ethically (Gancsan, 2007) cited in “Karani, (2013).

The manner in which chief executives of companies manage the affairs  of their firms has been a subject of considerable concern in recent times (CBN 2009). These widespread cases of rules of conduct breaches amongst top management staff of corporate organizations.

In 2006, the Central Bank of Nigeria (CBN) issued a code of corporate governance for the banks. The code, among others directed / ordered every bank to put in place acceptable division of responsibilities management succession plan and culture of compliance with rules and regulations (CBN 2006). Reasons adduced for their action included the bank’s observation of some weaknesses in the managerial attitude of top bank officials in the country and widespread financial scandals noticed around the world.

Oluyemi, (2007) as cited in Obeten and Ocheni, (2014); noted that bad corporate governance such as fraud and forgeries, unprofessional conduct and customer’s disloyalty tends to reduce shareholder’s wealth, leading to a weak and unreliable banking sector. Many owners and directors, abuse or misuse their privileged position by engaging in self – serving activities.

Corporate governance in the banking industry has been complex, when the new generation banks streamlined corporate governance issue as their main policy thrust, other banks have generally ignored the issue of bringing it to the fore strategic corporate governance philosophies, making clear understanding of the issue at stake to be vague. Moreover, several banks in Nigeria have relied on profitability, liquidity, asset quality and capital adequacy as criteria for measuring performance.

In the case of the financial industry, the retention of public confidence through the enthronement of corporate governance is of utmost importance given the role of the industry in the mobilization of funds, the allocation of credit to the needy sectors of the economy, the payment and settlement system and the implementation of monetary policy.

Corporate governance involves a system by which governing institutions and other organizations relate to their communities and stakeholders to improve their quality of life (Ato, 2002). It is therefore pertinent to note that corporate governance ensure transparency, accountability and fairness in reporting.

According to Shelly (2005) “corporate governance is the framework within which companies are directed and controlled. It basically shows the tine at the top, how management wants to control the affairs of the company corporate governance is therefore, concerned with issues such as the effectiveness and efficiency of operations, reliability of the financial reporting (disclosure of norms and practices), compliance with the laws and regulations and safeguarding of assets”.

Corporate governance scholars have come to the conclusion that companies across the world need to adopt commonly accepted corporate governance standards to be able to attract foreign capital, to become internationally more competitive and the deal with corporate governance problems in todays economy.

This brings up the need to examine the role of financial reporting in the more general concern of corporate governance, and also the extent to which financial reporting serves the and of corporate governance for the benefit of a wide range of stakeholders and the society in general.

Financial reporting is an important service that is so unique which the accounting profession provides to the society. Financial reporting can be seen as a summary of a company’s performance, or capacity, in raising, handling and using shareholders money. Another way of using expressing the role of financial reporting is to view it as stewardship accounting.

It is a medium of communicating information about the financial affairs of both profit and non-profit making organization. Financial reporting is synonymous with financial statement.

Oxford (2005) defined financial statements as the annual statements summarizing a company’s activities over the last year. They consist of the profit and loss account, balance sheet, statement of total recognized gains and losses and if required the cash flow statement, together with supporting notes.

The main users of financial statements are the shareholders, employees, banks, governments, analysts, management, would be investors and the public. In order to promote the integrity of financial reporting, the accounting concepts, and also recommended some basic principles for the preparation of financial reports.

Since financial reports provide information for various stakeholders in the society, they serve as “oil” that keeps organizations (businesses) running smoothly. Therefore, good financial reporting is the bedrock of efficient management.

Financial reporting forms part of the corporate governance and its credibility depends on the quality of the accounting practices used to produce the numbers and narratives contained in the reported financial statements. Any attempt to manipulate these numbers by creating accounting runs counter to the aims of corporate governance (Lee 2006).

In a nutshell, effective corporate governance system requires on effective financial reporting system. Therefore, the researcher intends to investigate corporate governance and financial reporting in the Nigeria banking industry.

In the course of this work, financial reports and financial statement will be used interchangeably. 


         With the increasing dynamism and complexity of modern business operations, coupled with the ever-present accounting scandals of high profits companies such as Cadbury plc and Enronlinc have questioned the effectiveness of corporate governance mechanism and the quality of financial reports and the credibility of audit functions.

         Since ownership is separated from in their own interest, rather than the interest of shareholders whom they represent. They could manipulate financial statements, giving investors misleading impression about the financial position of the corporation. As a result, financial reports in most cases, do not reflect the true and fair position of the corporation.

Therefore. The need for accurate, reliable, timely and accessible financial reports is imperative in order to maintain corporate accountability so as to achieve organizational goals and quick decision making.


The followings are the purpose of the study:

  1. To establish the relationship that exist between corporate governance and financial reporting
  2. To establish the relationship between management and shareholders’ interests.
  3. To ensure that the financial reports in most cases reflect the true and fair position of the corporate.
  4. To enhance the need for accurate, reliable, timely and accessible financial reports necessary for corporate accountability so as to achieve organizational goals and quick decision making.


         Olannye, (2006) defined research questions as the major questions to which the researcher seeks to provide answers to, in the course of the investigation. It is for this reason that this research is being designed to provide answers to the following research questions:

  1. What are the relationship that exist between corporate governance and financial reporting?
  2. What are the relationship between directors’ and shareholders’ interests?
  3. How does corporate governance influence financial reporting?
  4. Does accurate corporate accountability affects organizational goals and quick decision making 


         Hypotheses are tentative statement about expected relationship(s) between independent and dependent variables (Olannye, 2006). In order to successfully find solution to the problem of the study, some tentative statements known as research hypothesis had been formulated. They include the following:

1.            Ho1:   There is no significant relationship between corporate governance and financial reporting.

2.      Ho2:   Corporate governance does not enhance management and shareholders relationship through transparency and accountability.

3.            Ho3:   Financial reports are not used for quick decision making


         The scope of this research work on corporate governance and financial reporting in the Nigerian Banking Industry is to provide the reader with a detailed understanding of the relationship between corporate governance and financial reporting.

         In the same vein, in attempting to resolve the statement of research problems, I shall deal with the relationship that exist between the management of corporations and their shareholders. In a bid to ensure that the financial statement prepared by the directors reflects a true and fair view of the financial position of the corporation, so as to achieve maximum organizational goals and quick decision making.


         It is believe that the findings of this study would be useful to the following categories of persons:

Management, staff and shareholders of banking industry. Another categories are the stakeholders such as customers, business partners, government (including the authorities), would be investors and the community where business operate. Finally, the study would be of immense importance to future researchers who wish to carry out research on a related o similar topic.


         Every research work in Nigeria is fraught with several problems. As a result, therefore in the conduct of this research, the following constraints where experienced but where not significant enough to distort the out-come of the results of the study.

i.       Time Factor: The duration allowed for the conduct of this research work by the authorities concerned, did not allow the researcher cover as much grounds he would have wished, due to his bid of wanting to meet the deadline of submitting the study / research work. Therefore, the available time was shared between the research work and normal semester activities.

ii.      Finance: In conduct of the study, the researcher was restricted to a self loan budget which do not allow him to have carried out the study expansively, as he would have wished, thereby causing him to have carried out the study expansively, as he would restrict his study to only five (5) banks.

iii.     Data Availability and Accessibility: The researcher faced a great constraint trying too access relevant data needed for the study from its custodians. Some respondents were suspicious and mis-constructed the purpose of the study. While, some were in most eases unreceptive and conservative in giving the needed primary and secondary data required.