RELATIONSHIP BETWEEN CORPORATE GOVERNANCE AND CREATIVE ACCOUNTING PRACTICES OF NIGERIAN BANKS
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Date
2017
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Publisher
Ilorin Journal of Accounting
Abstract
Corporate collapse in the Nigerian banking sector and the associated crisis of confidenceportends an agonizing danger for the growth of other sectorsas these banks employdifferent creative accounting methods with a view to surmounting the intensecompetition, reduce cost and lessen the burden of global economic meltdown. Literaturereveals that efforts geared towards performance enhancement/cost control are notunconnected with corporate governance breakdown; as such, this study evaluates therelationship between corporate governance CG (Internal control system/ ICS; auditcommittee experience/ ACE; board independence/BDI; external auditorsindependence/EXI) and creative accounting (CA) practices in Nigerian banks. Secondarydata were obtained from audited financial reports of all the 15 quoted commercial bankson the Nigeria Stock Exchange (NSE) between 2008 to 2014 and were analysed usingpanel regression technique while error Composite Model estimation technique (Hausmanspecification test) lend credence to the supremacy of Random Effect Model (REM) overFixed Effect Model (FEM) for interpretation purpose. The study finds that ICS and ACEhave negative/inverse relationship(cotf=-03645&-0.2956 respectively) with CA whileBDI and EXI have positive relationship(coeff=0.5789 & 2.8976 respectively) with CA.The study concludes that CG has statistically significant relationship with CA: F-stat(9.0323) and prob(F-stat) 0.0000 at 5% significance level and recommends featuring ofmore non-executive directors with less substantial portion of shares than the executiveones while ICS and ACE should adequately addressed to enlist compliance with good CGpractices and eradicate CA practices. This will enhance bank performance, reduceconfidence crisis and improve Nigeria's economic growth.
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Keywords
Creative Accounting, Corporate governance, Auditors, Earnings Management