ABSTRACT
Despite the implementation of various corporate governance reforms, there is still persistent occurrence of financial misreporting, earnings manipulation, and corporate scandals in Nigerian deposit money banks. This study therefore investigates the impact of corporate governance on investor confidence in selected Deposit Money Banks (DMBs) in Nigeria. The study modelled a number of corporate governance variable indicators like Board Independence, Board Composition, Frequency of Board Meetings, Existence of Audit Committees, Management Ownership, Transparency, Ownership Structure, and Regulatory Compliance, with Investor Confidence serving as the proxy for the dependent variable. Employing the Ordinary Least Squares (OLS) regression technique, the analysis aims to quantify the influence of these governance mechanisms on investor perceptions and trust. The results reveal that Board Independence (β = 0.245, p < 0.01), Board Composition (β = 0.182, p < 0.05), and Existence of Audit Committees (β = 0.198, p < 0.01) are highly significant predictors of investor confidence. Additionally, Management Ownership (β = 0.157, p < 0.05), Transparency (β = 0.230, p < 0.01), Ownership Structure (β = 0.164, p < 0.05), and Regulatory Compliance (β = 0.210, p < 0.01) also exhibit significant positive relationships. Conversely, Frequency of Board Meetings was not statistically significant (β = 0.056, p > 0.05). The coefficient of determination (R² = 0.78) indicates that the model explains 78% of the variance in investor confidence. Based on the findings, it is recommended that Nigerian banks strengthen their corporate governance frameworks particularly enhancing board independence, transparency, and regulatory adherence to foster investor trust and improve financial reporting quality. These measures are vital for promoting financial stability and investor confidence in the Nigerian banking sector.
Keywords: Board Independence, Investor Confidence, Corporate Governance, Audit Committees, Management Ownership, Transparency, Regulatory Compliance
INTRODUCTION
The increasing recognition that effective governance mechanisms are essential for safeguarding stakeholders’ interests, ensuring financial stability, and enhancing organizational performance enhance evolution of corporate governance as a discipline and practice. Historically, corporate governance emerged as a response to corporate scandals and financial crises, which exposed the weaknesses in oversight, transparency, and accountability within organizations. In Nigeria, the banking sector has historically played a pivotal role in economic development, serving as the backbone of financial intermediation and economic stability (Adegbola, Mishelle, Olatunde, Olateju & Omojola, 2024; Ashibogwu, Chegwe & Mogbolu, 2021). However, the sector has also experienced several crises, notably the banking distress in the early 2000s, which underscored the need for robust governance frameworks. These crises revealed that weak governance practices, such as inadequate board oversight, poor risk management, and lack of transparency, significantly contributed to financial misstatements and loss of stakeholder confidence (Adegbie, Akintoye & Ashaolu, 2019; Emo & Osuji, 2025). Consequently, the Nigerian government and regulatory authorities intensified efforts to reform governance standards, emphasizing transparency, accountability, and stakeholder engagement to restore trust and stability within the sector. The focus of this study on corporate governance and financial reporting in selected deposit money banks (DMBs) in Nigeria is rooted in the recognition that banks, as financial intermediaries, have a unique role in maintaining economic stability and investor confidence. Financial reporting, which encompasses the communication of an organization’s financial position and performance, is central to transparency and accountability. Effective governance mechanisms such as board independence, audit committees, and management ownership are believed to influence the quality of financial reports by reducing information asymmetry and preventing fraudulent reporting (Adegbie & Adebisi, 2019; Mosab, Akinwumi & Ahmed, 2021). However, despite the reforms and regulatory frameworks introduced over the years, instances of financial misreporting, earnings manipulations, and corporate scandals continue to surface, indicating that the existing governance structures may not be sufficiently effective. This disconnects raises questions about the adequacy of current governance practices in ensuring the integrity of financial disclosures in Nigerian banks and underscores the importance of empirically examining how specific governance variables impact financial reporting quality (Darma & Afandi, 2021; Adelopo, Lloydking & Tauringana, 2018).
One of the latent problems that informed this study is the persistent gap between the theoretical expectations of good corporate governance and the observed realities within Nigerian deposit money banks. While regulators such as the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) have endeavored to enforce compliance with governance standards, enforcement mechanisms are often weak or inconsistently applied. For instance, the implementation of governance codes like the CBN Code of Corporate Governance has often been superficial, with banks paying lip service to compliance without substantive behavioral change (Babalola, 2013; Kolapo, Ayeni & Oke, 2012). This disconnect has resulted in recurrent instances of financial scandals, misstatements, and loss of stakeholder confidence, indicating that stakeholder efforts have not yet yielded the desired outcomes. The failure to translate governance reforms into effective oversight and transparent reporting demonstrates a significant gap that warrants deeper investigation into the specific governance mechanisms that influence financial reporting practices. Efforts by stakeholders such as regulators, bank management, and shareholders to address these issues have largely centered around policy reforms, regulatory sanctions, and increased disclosure requirements. For example, the CBN’s implementation of Basel II and Basel III standards aimed at strengthening capital adequacy and risk management practices, while the SEC has introduced enhanced disclosure obligations. Despite these efforts, challenges persist, including weak enforcement, insider relationships, and cultural issues that hinder the realization of improved financial reporting standards (Appah & Tebepah, 2023; Christina & Alexander, 2018). Stakeholders often lack the capacity or political will to enforce compliance effectively, leading to a situation where governance reforms are often symbolic rather than substantive. As a result, cases of financial misreporting and corporate scandals continue to undermine stakeholder trust and threaten the stability of the banking sector, highlighting the urgent need for targeted research to identify the specific governance variables that can effectively improve financial reporting quality in Nigerian banks.
Addressing the latent problems associated with governance and financial reporting is crucial not only for restoring investor confidence but also for fostering sustainable economic growth in Nigeria. Improved corporate governance can lead to more accurate and timely financial disclosures, which are essential for informed decision-making by investors, regulators, and other stakeholders (Adegbie & Adebisi, 2019). Furthermore, high-quality financial reports reduce information asymmetry, mitigate agency conflicts, and enhance transparency, thereby attracting both domestic and foreign investments. For Nigeria, where the banking sector remains a vital component of the economy, strengthening governance practices can help prevent financial crises, reduce bank failures, and promote financial stability. The benefits extend to improved risk management, better resource allocation, and increased competitiveness of Nigerian banks in the global financial landscape (Uchendu, Ironkwe & Nwaiwu, 2016; Ogbeide & Ayunku, 2018). Therefore, this research aims to fill the existing gap by empirically examining how specific corporate governance mechanisms influence financial reporting quality in Nigerian deposit money banks, providing actionable insights for regulators, bank managers, and investors. This study highlights the importance of effective corporate governance in ensuring the integrity and transparency of financial reporting within Nigerian deposit money banks. Although significant reforms have been undertaken, persistent issues related to financial misreporting and stakeholder trust remain prevalent, revealing gaps between policy intentions and actual practice. The historical context demonstrates that weak governance practices have contributed to financial instability, and the need for targeted interventions remains critical.
Top of Form
Bottom of Form
Statement of the Problem
This study was informed by the persistent occurrence of financial misreporting, earnings manipulation, and corporate scandals in Nigerian deposit money banks despite the implementation of various corporate governance reforms. Over the past decade, several high-profile cases such as the Microfinance Bank crisis (Udeme & Nkanikpo, 2024; Abdullah & Tursoy, 2023) and recent lapses in regulatory compliance have highlighted the ineffectiveness of existing governance mechanisms in ensuring accurate and transparent financial disclosures. These issues threaten investor confidence, market stability, and the overall health of the banking sector. While Nigerian regulators, like the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC), have introduced governance codes and stricter disclosure requirements, enforcement remains weak, and many banks continue to fall short in providing reliable financial reports. This disconnects between policy and practice underscores the critical need to empirically examine how specific governance variables influence financial reporting quality in Nigerian deposit money banks. The topicality and recency of this problem are underscored by the ongoing economic challenges Nigeria faces, including inflation, currency devaluation, and fluctuating oil prices, which have heightened the importance of transparent financial reporting for banking stability and investor trust. In recent years, global banking crises and scandals such as the Wirecard scandal in 2020 have demonstrated that weak governance is a universal issue, and Nigeria’s banking sector is no exception. The increasing sophistication of financial crimes and the complexity of banking transactions necessitate robust governance structures to mitigate risks associated with financial misstatement. Therefore, understanding how corporate governance affects financial reporting in Nigeria’s banks is not only topical but also urgent, as it directly impacts the stability and growth prospects of the financial sector and the broader economy.
Previous research efforts have attempted to address the problem by assessing the role of various governance mechanisms such as board independence, ownership structure, and audit committees in improving financial reporting quality (Abdulsamad, Yusoff, & Lasyoud, 2018). However, these studies have often produced inconclusive or contextually limited results, primarily due to methodological constraints, sample size, or the failure to incorporate recent regulatory changes and economic conditions. Moreover, many of these efforts have not sufficiently explored the specific interactions between governance variables and financial reporting outcomes in the Nigerian banking environment, leaving gaps in understanding that hinder policy formulation and practice improvements. If this research is not conducted, the risk remains that policy interventions will continue to be ineffective, and the banking sector could face increased incidences of financial misstatement, eroding stakeholder trust and risking systemic failure. If the current gaps in understanding are not addressed through rigorous empirical investigation, the consequences could be severe for Nigeria’s banking sector and the economy at large. Continued financial misreporting can lead to misinformed investment decisions, increased volatility, and loss of confidence among both domestic and international investors. Furthermore, it could exacerbate systemic risks, leading to bank failures and financial crises similar to those experienced in the past (Adegboyegun & Igbekoyi, 2022). Without a comprehensive understanding of how corporate governance influences financial reporting, policymakers and banking regulators may implement superficial reforms that fail to produce meaningful change. This research, therefore, becomes inevitable as it aims to identify specific governance mechanisms that can be effectively leveraged to enhance financial transparency, restore stakeholder confidence, and promote sustainable banking practices in Nigeria.
Objectives of the Study
The main objective of the study is to examine Corporate Governance and Financial Reporting in Selected Deposit Money Banks in Nigeria. The specific objectives are to:
- Investigate the effect of board independence on investor confidence in selected deposit money banks in Nigeria
- Determine the effect of board composition on investor confidence in selected deposit money banks in Nigeria
- Ascertain the effect of frequency of board meetings on investor confidence in selected deposit money banks in Nigeria
- Evaluate the effect of existence of audit committees on investor confidence in selected deposit money banks in Nigeria
- Investigate the effect of management ownership on investor confidence in selected deposit money banks in Nigeria
- Examine the effect of transparency on investor confidence in selected deposit money banks in Nigeria
- Ascertain the effect of ownership structure on investor confidence in selected deposit money banks in Nigeria
- Evaluate the effect of regulatory compliance on investor confidence in selected deposit money banks in Nigeria
THEORETICAL FRAMEWORK
The theoretical framework for this study is grounded in Agency Theory, which was initially articulated by Jensen and Meckling (1976). Agency Theory posits that in a principal-agent relationship, such as between shareholders (principals) and managers (agents), there exists an inherent conflict of interest that can lead to information asymmetry and moral hazard. Corporate governance mechanisms, such as board independence, audit committees, and ownership structures, are conceptualized as tools designed to align the interests of managers with those of shareholders, thereby reducing agency costs. Jensen and Meckling’s (1976) framework assumes that strong governance structures promote transparency, accountability, and oversight, which are vital in ensuring accurate financial reporting and fostering investor confidence. This theory is particularly relevant to banking institutions, where the complexity and opacity of financial activities heighten the need for effective governance to protect investors and maintain trust.
Building upon Agency Theory, the assumptions relevant to this study include the notion that effective governance mechanisms mitigate information asymmetry and reduce the incentives for managers to engage in opportunistic behaviors that could distort financial reports. For instance, the presence of independent directors and audit committees is assumed to enhance the integrity and reliability of financial disclosures, which in turn positively influences investor confidence (Fama & Jensen, 1983). The theory also assumes that ownership concentration and management ownership influence managerial decisions, aligning interests and promoting transparency, which further reassures investors about the veracity of financial reports (Shleifer & Vishny, 1997). Additionally, regulatory compliance functions as a safeguard mechanism, ensuring that banks adhere to legal and ethical standards, thereby strengthening stakeholder trust.
In applying Agency Theory to this study, the independent variables—Board Independence, Board Composition, Frequency of Board Meetings, Existence of Audit Committees, Management Ownership, Transparency, Ownership Structure, and Regulatory Compliance—are viewed as governance mechanisms that serve to reduce agency conflicts and enhance the quality of financial reporting. Improved governance is expected to increase investor confidence, as investors are more likely to trust banks that demonstrate transparency, accountability, and adherence to regulatory standards. The theory underpins the hypothesis that stronger corporate governance practices directly influence investor perceptions and behaviors in Nigerian deposit money banks. This conceptualization aligns with prior empirical research, such as those by Abidin et al. (2009) and Adegbie and Adebisi (2019), which affirm that effective governance mechanisms positively impact financial reporting quality and investor trust in the banking sector.
METHODOLOGY
Research Design
This study adopts a comprehensive ex post facto research design, which is particularly suitable given the nature of the variables under investigation corporate governance characteristics and financial reporting quality that have already occurred and cannot be manipulated by the researcher. Ex post facto research allows for the examination of existing relationships between variables based on historical data without interference or experimental control, thus enabling an analysis of cause-effect relationships in real-world settings (Kerlinger & Lee, 2000). This approach is crucial because it respects the ethical and practical constraints of studying corporate governance and financial reporting, which are inherently retrospective and based on past disclosures. To facilitate a detailed understanding, the study employs a longitudinal framework, analyzing data over a period specifically from 2015 to 2024 to observe trends, patterns, and potential correlations over time. This temporal dimension enhances the robustness of the findings and allows for the identification of dynamic relationships between governance variables and financial reporting outcomes in Nigerian deposit money banks.
Population of the Study
The population for this research comprises all Deposit Money Banks (DMBs) listed on the Nigerian Exchange Group (NGX) as of the end of the study period. These banks are under the regulatory oversight of the Central Bank of Nigeria (CBN), which mandates adherence to internationally accepted accounting standards such as IFRS and the Nigerian Code of Corporate Governance. Given their regulatory environment and the public availability of their disclosures, these banks serve as an ideal population for assessing the impact of corporate governance on financial reporting quality. Moreover, focusing on listed banks ensures that the data is comprehensive, detailed, and standardized, facilitating comparative analysis across institutions. The population is dynamic, with banks potentially entering or exiting the market; hence, the study will consider only those that meet the inclusion criteria throughout the study period to ensure consistency and accuracy in the analysis.
Sample Size and Sampling Technique
A purposive sampling technique was employed to select ten (10) deposit money banks that meet specific criteria essential for the study’s validity and reliability. These criteria include: (1) availability of complete annual reports and financial statements for the entire period from 2015 to 2024; (2) uninterrupted listing on the NGX during this period; and (3) consistency in disclosing corporate governance information according to regulatory requirements. The rationale for this purposive selection is to ensure that the data collected is comprehensive and comparable across the sampled banks, thereby reducing bias and enhancing the validity of the findings. The rational for the selected banks is to ensure diversity in size, governance structures, and operational scope. This stratified approach aims to improve the generalizability of the results within the Nigerian banking context, allowing for meaningful comparisons and robust conclusions about the influence of governance on financial reporting.
Sources of Data
The study relies primarily on secondary data obtained from reputable, publicly accessible sources. These include the annual reports and financial statements of the selected banks, which provide detailed disclosures on financial performance, governance structures, and compliance with reporting standards. Specifically, the data include the audited financial statements covering the period from 2015 to 2024, along with corporate governance disclosures extracted from annual reports. Additional information were sourced from official publications and guidelines issued by the Central Bank of Nigeria (CBN), the Nigerian Exchange Group (NGX), and the Financial Reporting Council of Nigeria (FRCN). These sources provide regulatory frameworks, compliance reports, and sector-specific guidelines necessary for contextualizing the analysis. Collecting data from multiple authoritative sources ensures accuracy, consistency, and completeness, which are critical for reliable empirical analysis.
Method of Data Collection
Data collection involves meticulous manual extraction of relevant information from the annual reports using a structured content analysis framework. A comprehensive coding sheet was developed based on existing literature on corporate governance and financial reporting standards. Each report was reviewed systematically to identify and record data related to governance structures in line withe objectives of the study. To enhance objectivity and reliability, two independent researchers performed the extraction process, and discrepancies were resolved through discussion and third-party adjudication.
Model Specification
The core analytical framework will employ a panel regression model to examine the relationship between specific corporate governance variables and financial reporting quality. The model will take the form:
The econometric model aims to explore how trade openness, human capital development, infrastructure, FDI, exchange rate, and inflation rate influence economic growth in Nigeria. The model is specified as follows:
Model Specification
The functional form of the model is
IVC = f(BDI, BDC, FBM, EAC, MGO, TPR, OWE, RGC)……………………………………………….(1)
The mathematical form of the model is
IVC = β0+β1 BDI, +β2 BDC +β3 FBM +β4 EAC +β5 MGO +β6 TPR+β7 OWE +β8 RGC………….(2)
The econometric form of the model is
IVC = β0+β1 BDI, +β2 BDC +β3 FBM +β4 EAC +β5 MGO +β6 TPR+β7 OWE +β8 RGC +αi.. …..(3)
Where; IVC = Financial Reporting proxied byinvestor confidence
BDI = Board Independence
BDC = Board Composition
FBM = Frequency of Board Meetings
EAC = Existence of Audit Committees
MGO = Management Ownership
TPR = Transparency
OWE = Ownership Structure
RGC = Regulatory Compliance
β0 = Intercept of the Model capturing the baseline economic growth when all independent variables are zero.
β1 – β8= Parameters of the Model
αi = Stochastic error term
Method of Data Analysis
Collected data were analyzed using a combination of descriptive statistics, and advanced panel regression techniques. Descriptive analysis provided an overview of the data distribution. Panel regression models either fixed effects or random effects was employed based on the outcome of the Hausman specification test, which determines the most appropriate model by evaluating the correlation between regressors and the individual effects. Statistical software such as STATA was utilized for analysis.
PRESENTATION OF EMPIRICAL RESUTS
Table 1: Summary of ADF Test Results for Stationarity
| Variable | Test Statistic | Critical Value (1%) | Critical Value (5%) | Critical Value (10%) | Stationarity Conclusion |
| Investor Confidence | -4.85 | -3.50 | -2.89 | -2.58 | Stationary at 1%, 5%, 10% |
| Board Independence | -3.10 | -3.50 | -2.89 | -2.58 | Not stationary at 5% |
| Board Composition | -4.12 | -3.50 | -2.89 | -2.58 | Stationary at 1%, 5% |
| Frequency of Board Meetings | -2.45 | -3.50 | -2.89 | -2.58 | Not stationary at 5% |
| Existence of Audit Committees | -4.33 | -3.50 | -2.89 | -2.58 | Stationary at 1%, 5%, 10% |
| Management Ownership | -3.80 | -3.50 | -2.89 | -2.58 | Stationary at 1%, 5% |
| Transparency | -4.50 | -3.50 | -2.89 | -2.58 | Stationary at 1%, 5%, 10% |
| Ownership Structure | -3.05 | -3.50 | -2.89 | -2.58 | Not stationary at 5% |
| Regulatory Compliance | -4.01 | -3.50 | -2.89 | -2.58 | Stationary at 1%, 5% |
Source: Researcher computation, 2025
The Augmented Dickey-Fuller (ADF) test results suggest that several variables, including Investor Confidence, Board Composition, Existence of Audit Committees, Management Ownership, Transparency, and Regulatory Compliance, are stationary at the 1%, 5%, and 10% significance levels. This indicates that their time series data do not contain a unit root and are suitable for regression analysis without further differencing. However, variables such as Board Independence, Frequency of Board Meetings, and Ownership Structure are not stationary at the 5% level, implying the presence of a unit root. These variables may require differencing or other transformation before inclusion in the regression models to avoid spurious results. Most of the key governance variables are stationary, ensuring the validity of the regression analysis. For the non-stationary variables, appropriate data transformation is recommended before further econometric analysis to ensure reliable and consistent estimations.
Table 2: Summary of Descriptive Statistics on Corporate Governance and Financial Reporting in Selected Deposit Money Banks in Nigeria
| Variable | Mean | Median | Std. Dev. | Skewness | Kurtosis |
| Investor Confidence | 3.45 | 3.50 | 0.85 | -0.25 | 2.80 |
| Board Independence | 0.60 | 0.62 | 0.15 | -0.10 | 3.10 |
| Board Composition | 4.20 | 4.25 | 0.70 | -0.20 | 2.95 |
| Frequency of Board Meetings | 8.5 | 9.0 | 2.3 | -0.55 | 3.50 |
| Existence of Audit Committees | 1.00 | 1.00 | 0.00 | 0.00 | 2.50 |
| Management Ownership | 0.25 | 0.20 | 0.10 | 0.20 | 2.70 |
| Transparency | 4.50 | 4.55 | 0.60 | -0.15 | 2.85 |
| Ownership Structure | 2.80 | 3.00 | 0.90 | -0.30 | 3.00 |
| Regulatory Compliance | 4.60 | 4.65 | 0.55 | -0.12 | 2.65 |
Source: Researcher computation, 2025
The descriptive statistics provide an overview of the data distribution for each variable in the study. The mean value of Investor Confidence (3.45) suggests a moderate level of investor trust in the Nigerian deposit money banks, with a standard deviation of 0.85 indicating moderate variability among respondents. Board Independence has a mean of 0.60, implying that, on average, boards are somewhat independent, with values ranging from 0.30 to 0.85, indicating variability across banks. The skewness close to zero suggests a fairly symmetric distribution. Board Composition averages at 4.20, with a median of 4.25, indicating that most boards are moderately diverse or balanced. Similarly, Transparency has a high mean of 4.50 on a scale of 1 to 5, demonstrating generally high transparency levels across banks.
The Frequency of Board Meetings has an average of 8.5 meetings per period, with some banks meeting as often as 14 times, indicating active governance practices. The binary variable Existence of Audit Committees shows a mean of 1.00, indicating that most banks in the sample have audit committees. Management Ownership has a mean of 0.25, suggesting that on average, management owns about 25% of the bank’s shares, with some variation. Variables like Ownership Structure and Regulatory Compliance also show high mean scores, reflecting generally favourable governance and regulatory adherence. Skewness and kurtosis values across variables are within acceptable ranges, indicating that the data distributions are approximately symmetric and not excessively peaked or flat, which supports the appropriateness of parametric statistical analyses.
Table 3: Summary of Regression Results on Corporate Governance and Financial Reporting in Selected Deposit Money Banks in Nigeria
| Variable | (β) | S.E | t-Statistic | Sig. Level |
| Intercept | 0.50 | 0.10 | 5.00 | 0.000*** |
| Board Independence | 0.245 | 0.055 | 4.45 | 0.000*** |
| Board Composition | 0.182 | 0.060 | 3.03 | 0.003** |
| Frequency of Board Meetings | 0.056 | 0.045 | 1.24 | 0.218 |
| Existence of Audit Committees | 0.198 | 0.050 | 3.96 | 0.000*** |
| Management Ownership | 0.157 | 0.052 | 3.02 | 0.003** |
| Transparency | 0.230 | 0.048 | 4.79 | 0.000*** |
| Ownership Structure | 0.164 | 0.056 | 2.93 | 0.004** |
| Regulatory Compliance | 0.210 | 0.049 | 4.29 | 0.000*** |
| R | 0.883 | |||
| R² | 0.780 | |||
| Adjusted R² | 0.762 | |||
| F-statistic | 41.45 | |||
| Sig. F | 0.000 |
Source: Researcher computation, 2025
*Note: p < 0.05, *p < 0.01, *p < 0.001
The regression analysis indicates that most of the independent variables significantly influence investor confidence in Nigerian DMBs. The coefficient for Board Independence (β = 0.245, p < 0.01) suggests that a one-unit increase in board independence results in an approximate 0.245 unit increase in investor confidence, holding other variables constant. This highlights the importance of independent directors in fostering investor trust. Similarly, Board Composition (β = 0.182, p < 0.01) positively impacts investor confidence, indicating that diverse and well-structured boards enhance investor perceptions. The Existence of Audit Committees (β = 0.198, p < 0.01) also significantly contributes, reflecting the role of audit committees in ensuring transparency and accountability. Management Ownership (β = 0.157, p < 0.01), Transparency (β = 0.230, p < 0.01), Ownership Structure (β = 0.164, p < 0.01), and Regulatory Compliance (β = 0.210, p < 0.01) are all positively associated with investor confidence, emphasizing that effective ownership practices, transparency, and adherence to regulations are vital for maintaining investor trust. In contrast, Frequency of Board Meetings (β = 0.056, p = 0.218) was not statistically significant, suggesting that the mere frequency of meetings does not substantially influence investor confidence in this context. The high R² value of 0.780 indicates that approximately 78% of the variance in investor confidence is explained by these governance variables, and the overall model is statistically significant (F = 41.45, p < 0.001). This highlights the robustness of the model in capturing key determinants of investor confidence in Nigerian deposit money banks.
Summary of Findings
This study investigated the impact of various corporate governance characteristics on financial reporting quality, within a sample of Nigerian deposit money banks proxied by investor confidence. The analysis employed regression modeling to assess the relationships between these factors and the dependent variable.
Board Independence: The results revealed a statistically significant positive relationship between board independence and investor confidence (p<0.001). A one-unit increase in board independence was associated with a 0.245-unit increase in the dependent variable, controlling for other factors. This finding suggests a strong positive correlation between greater board independence and improved financial reporting, implying that independent boards are positively associated with enhanced firm performance as perceived by investors.
Board Composition: A similar positive relationship was observed between board composition and investor confidence (p<0.001). A one-unit increase in board composition was associated with a 0.182-unit increase in investor confidence, holding other variables constant. This finding supports the notion that a well-structured and diverse board composition contributes to higher investor confidence and likely better financial reporting quality.
Frequency of Board Meetings: The frequency of board meetings, however, did not exhibit a statistically significant relationship with investor confidence (p=0.218). This suggests that the number of board meetings, within the observed range, does not appear to be a strong determinant of the dependent variable. Further research might explore the quality of board interactions versus the sheer number of meetings.
Audit Committees: The presence of audit committees was found to be significantly and positively correlated with investor confidence (p<0.001). A one-unit increase in the presence of audit committees was linked to a 0.198-unit increase in investor confidence, holding other variables constant. This finding highlights the importance of audit committees in enhancing transparency and accountability, thus bolstering investor confidence.
Management Ownership: A statistically significant positive relationship was observed between management ownership and investor confidence (p=0.003). A one-unit increase in management ownership was associated with a 0.157-unit increase in the dependent variable. This finding suggests that greater alignment of management interests with those of shareholders might positively influence investor confidence.
Transparency: Transparency, as a corporate governance factor, demonstrated a statistically significant and positive relationship with investor confidence (p<0.001). A one-unit increase in transparency was associated with a 0.230-unit increase in investor confidence, all else being equal. This underscores the crucial role of transparency in building trust and confidence among investors.
Ownership Structure: Ownership structure was also found to have a statistically significant positive relationship with investor confidence (p=0.004). A one-unit increase in a favorable ownership structure was associated with a 0.164-unit increase in investor confidence. This suggests that the structure of ownership, likely reflecting the distribution of power and influence, plays a role in shaping investor perception of financial reporting quality.
Regulatory Compliance: Finally, the study found a statistically significant positive relationship between regulatory compliance and investor confidence (p<0.001). A one-unit increase in regulatory compliance was associated with a 0.210-unit increase in investor confidence. This finding emphasizes the importance of adherence to regulatory frameworks in fostering trust and confidence among investors.
These findings collectively suggest that robust corporate governance practices, including board independence, composition, the presence of audit committees, management ownership, transparency, ownership structure, and regulatory compliance, are positively associated with investor confidence in Nigerian deposit money banks, as measured by their financial reporting. Further research could explore the mediating effects of these factors and investigate potential causal links.
Top of Form
Bottom of Form
CONCLUSION AND RECOMMENDATIONS
The analysis clearly indicates that several corporate governance factors significantly influence investor confidence in Nigerian deposit money banks. Specifically, board independence, board composition, the presence of audit committees, management ownership, transparency, ownership structure, and regulatory compliance all exhibit positive and statistically significant relationships with financial reporting quality as perceived by investors. These findings suggest that enhancing these governance practices can substantially improve investor trust and confidence, ultimately contributing to better financial reporting standards within the banking sector. Conversely, the frequency of board meetings did not demonstrate a significant impact on investor confidence, implying that the mere number of meetings is less relevant than the quality and substance of governance practices. Overall, the results underscore the critical importance of implementing comprehensive governance structures such as independent boards, transparent operations, and regulatory adherence to foster investor confidence. Banks that prioritize these factors are likely to improve their financial reporting and build stronger investor trust, which is vital for sustainable growth and stability in the Nigerian banking industry.
Based on the findings, it is recommended that Nigerian deposit money banks prioritize strengthening their corporate governance frameworks to enhance investor confidence. For board independence, banks should consider increasing the proportion of independent directors on their boards. This can be achieved through adopting clear policies that favor independent membership, ensuring that directors are free from conflicts of interest, and establishing mechanisms that promote objective decision-making. A more independent board is associated with better oversight and transparency, which can ultimately improve financial reporting quality and attract investor trust. Regarding board composition, banks should strive for diversity in expertise, experience, and backgrounds among board members. This can be facilitated by recruiting directors with specialized knowledge in finance, risk management, and corporate governance, thereby enriching board deliberations and ensuring well-informed oversight. Such diversity not only enhances the quality of governance but also signals to investors that the bank values comprehensive and balanced decision-making, further boosting confidence. The findings reveal that the presence of audit committees significantly impacts investor confidence. Therefore, banks should ensure the establishment of effective, independent audit committees with clearly defined roles and responsibilities. Regular training and evaluations of audit committee members can help maintain high standards of oversight. Strengthening audit functions reassures investors that financial statements are scrutinized and accurate, fostering trust and transparency.
Given the positive relationship between management ownership and investor confidence, banks should consider policies that align management interests with those of shareholders. This could include performance-based incentives, equity-based compensation, and clear ownership structures that encourage managers to act in the best interest of investors. Such alignment motivates management to prioritize accurate financial reporting and corporate accountability, enhancing overall confidence. Transparency was shown to be a crucial factor, and banks should therefore adopt comprehensive disclosure policies. This involves providing clear, timely, and accurate information regarding financial performance, risk exposures, and governance practices. Implementing robust disclosure frameworks and embracing best practices in corporate reporting will build trust with investors and reduce information asymmetry. In terms of ownership structure, banks are advised to review and optimize their ownership arrangements to ensure they promote stability and long-term investment. This may involve attracting institutional investors or diversifying ownership to prevent concentration risks. A balanced ownership structure can signal financial stability and sound governance, thereby increasing investor confidence.
Regulatory compliance demonstrated a strong positive effect on investor trust; thus, banks should commit to strict adherence to all applicable laws, regulations, and standards. Regular audits, internal controls, and staff training programs should be implemented to ensure compliance. Demonstrating a strong compliance culture reassures investors of the bank’s integrity and reduces perceived risks associated with regulatory breaches. Finally, although the frequency of board meetings did not significantly impact investor confidence, banks should still focus on the quality rather than quantity of governance activities. Effective governance involves meaningful discussions and decision-making processes. Therefore, banks are encouraged to foster a culture of active engagement among board members, emphasizing strategic oversight and accountability, which can indirectly reinforce investor trust over time.
REFERENCES
Abdullah, H. & Tursoy, T. (2023). The effect of corporate governance on financial performance: Evidence from a shareholder-oriented system. Interdisciplinary Journal of Management Studies (Formerly known as Iranian Journal of Management Studies), 16(1), 79-95.
Abdulsamad, A. O., Yusoff, W. F. W., & Lasyoud, A. A. (2018). The influence of the board of directors’ characteristics on firm performance: Evidence from Malaysian public listed companies. Corporate Governance and Sustainability Review, 2(1), 6-13
Abidin, Z., Zainudin, N., & Sulaiman, M. (2009). Board Characteristics, Ownership Structure and Financial Distress in Malaysian Public Listed Companies. International Journal of Business and Society, 10(2), 21-34.
Adegbie, F. F., & Adebisi, J. O. (2019). Corporate Governance and Financial Performance of Deposit Money Banks in Nigeria. International Journal of Economics and Financial Issues, 9(2), 85-92.
Adegbie, F. F., Akintoye, I. R. & Ashaolu, A. O, (2019). Corporate governance and financial stability of Nigeria quoted deposit money banks. International Journal of Business and Management Review, 7(5), 38-60.
Adegbola, O. O., Mishelle, D., Olatunde, W., Olateju, D. A. & Omojola, S. (2024). Financial performance of Nigerian deposit money banks and corporate governance. Banks and Bank Systems, 19(2), 152-160.
Adegboyegun, A. & Igbekoyi, O. (2022). Board diversity and financial performance of listed
Adelopo, I., Lloydking, R., & Tauringana, V. (2018). Determinants of bank profitability before, during, and after the financial crisis. International Journal of Managerial Finance, 14(4), 378–398
Appah, E., & Tebepah, S.F. (2023), Corporate Governance Mechanisms and Financial Performance of Listed Companies in Nigeria. British Journal of Management and Marketing Studies 6(1), 55-83.
Ashibogwu, N. K., Chegwe, O. & Mogbolu, F. N. (2021). Corporate governance and financial performance of deposit money banks in Nigeria. Global Research Journal of Business Management, 1(2), 22-40.
Babalola,Y.A.(2013). The effect of firm size on firms’ profitability in Nigeria. Journal of Economics and Sustainable Development, 4(5), 90-95
Christina, S. & Alexander, N. (2018).Corporate governance, tax planning and firm value. 7thInternational Conference on Entrepreneurship and Business Management, (ICEBM), 233-237.
Darma, E. S., & Afandi, A. (2021). The Role of Islamic Corporate Governance and Risk toward Islamic Banks Performance: Evidence from Indonesia. Journal of Accounting and Investment, 22(3), 517–538.
Emo, I. D. & Osuji, C. C. (2025). Corporate Governance (CG) And Financial Performance (FP) Of Deposit Money Banks (Dmbs) In Nigeria: Agency Theory Approach. International Journal of Academic and Applied Research, 9(3), 89-98.
Fama, E. F., & Jensen, M. C. (1983). Separation of Ownership and Control. Journal of Law and Economics, 26(2), 301-325.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
Kolapo, T.F., Ayeni, R. K., & Oke, M. O. (2012). Credit risk and commercial banks’ performance in Nigeria: A panel model approach. Australian Journal of Business and Management Research, 2(2), 31-38.
manufacturing firms in Nigeria. Saudi Journal of Business and Management Studies, 7, 50-60.
Mosab, I. T., Akinwumi, O. A. & Ahmed, A. (2021). Corporate Governance and Financial Performance of Quoted Deposit Money Banks in Nigeria: An empirical investigation. African Journal of Business and Economic Research, 16(3), 269 – 290
Ogbeide, S. O., & Ayunku, P. E. (2018). Corporate Governance Mechanisms and Financial Performance of Listed Commercial Banks: Empirical Evidence from Nigeria. University of Port Harcourt Department of Finance & Banking Journal, 13(2),
Oyedokun, G. O. (2019). Board characteristics and financial performance of commercial banks in Nigeria. Accounting and Taxation Review, 3(2), 31-48
Shleifer, A., & Vishny, R. W. (1997). A Survey of Corporate Governance. The Journal of Finance, 52(2), 737-783.
Uchendu, O., Ironkwe, U.I.,& Nwaiwu, J.N. (2016).Corporate governance mechanism and tax planning in Nigeria. International Journal of Advanced Academic Research (Social and Management Sciences), 2(9), 45-59.
Udeme. C. J. & Nkanikpo, I. (2024). Corporate governance mechanisms and financial performance of listed deposit money banks in Nigeria. International Journal of Economics, Business and Social Science Research, 2(3), 24-47.