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Due to the study on corporate reports in the banking industry, the research took interest to study an empirical analysis on the quality of corporate financial disclosures in Nigeria banking industry.

Chapter one contained the introduction, statement of problem, objective of the study, statement of hypothesis, scope of the study, summary of research methodology, limitation of the study and the significance of the study.

Chapter two dealt with annual report and corporate disclosure demands for financial information. It entails the review of the related literature.

Chapter three dealt with research methodology, research design, population and sample size, sample and sampling techniques, data sources, description of research instrument, hypotheses and data analysis.

Chapter four dealt with the data presentation, analysis and interpretation.

The four hypotheses were analyzed and tested with the aid of data analyzed.

Chapter five is a summary of the research findings, conclusion and recommendations.




Approval Page                                                 ii

Declaration                                                     iii

Dedication                                                      iv

Acknowledgement                                            v

Table of Contents                                            vii

Abstract                                                         x


1.1  Background of Study                                 1

1.2  Statement of Problem                               5

1.3  Objective of Study                                    6

1.4  Scope of Study                                                8

1.5  Significance of Study                                 9

1.6  Statement of Hypothesis                            10

1.7  Limitation of Study                                   12

       References                                             14



2.0  Introduction                                             15

2.1  Principles of Corporate Governance              22

2.2  Disclosures and Corporate Governance         27

2.3  Disclosures in Corporate Governance:

Empirical Analysis                                            33

  • Why Disclosures Philosophies Differ

Across Countries                                       37

  • Approaches to International Disclosures Diversity 41
  • Disclosure Benefits and Cost 46

References                                             60


  • Theoretical Framework 62
  • Model Specification 62
  • Method of Analysis 63
  • Population 64
  • Data Sources 64
  • Sample and Sampling Technique 65

Reference                                              67



  • Introduction 68

4.1  Presentation and Interpretation of Result     74

  • Findings of the Study 77
  • Test of Hypothesis 78



5.1  Summary of Finding                                  80

5.2  Conclusion                                               81

5.3  Recommendation                                      82

Bibliography                                          83

Appendix                                               86






In any Business entity, whether profit or non-profit making, has sets of objectives. It mobilizes resources from various sources to achieve the set goal at the end of the period. This is necessary to determine how well these resources have been utilized.

Where there is separation of ownership from management, the owners will want to know how judiciously these resources have been used. This is the stewardship function of accounting. This function is discharged by the presentation of a report of the activities to owners by management. Such reports are usually conveyed by means of financial statements. Statement of Accounting. Standard 2 (Information to be disclosed in Financial Statement) and Section 334 (2) of Companies and Allied Matters Acts provide that financial statement shall include the following:

  • Profit and loss account,
  • Statement of account policies,
  • Balance sheet,
  • Notes to the accounts,
  • Auditors report,
  • Directors report,
  • Value added statement and
  • Five year financial summary.

The financial statements must accurately represent the underlying economic activities of the organization. It is possible to have a discontinuity between the activities of an organization. When this occurs, the credibility of such statement induces doubt and uncertainty in the minds of the various users of the statement. This therefore means that, the information asymmetry (i.e. lack of uniformity) between information available to management and information available to the investing public.

There are two sources of information asymmetry as regards to financial statements.

  1. Management’s understanding of underlying activities may not be accurately represented in financial statements.
  2. Investing publics understanding or perception of information represented in financial statement may be different from that which has been documented.

Financial statements more or less make a case for reporting entity in their quest for invisible funds.       Where a reporting unit creates uncertainty in the minds of investors, it is perceived as risky. The effect is that investors demand a compensation for a perceived level of risk. This result to an increase in cost of capital of such economic unit. This is known as “Capital Need Hypothesis”. Choi (1973) suggest that a prime motive for disclosure is to raise capital at the lowest cost. Cooke (1991) posits that “a number of explanations can be advanced for this hypothesis”. In order to raise capital from the market, he says that companies must increase their voluntary disclosure and increase their compliance with mandatory disclosure.

Disclosures in financial statement determine the level of transparency of such entities. Hitherto, prior response of international investors has been adduced to lack of transparency not only of government, but also of private economic Sectors. Regulatory agencies such as Central Bank of Nigeria (CBN) and (SEC), have been perceived as ineffective. This perception has been accentuated especially in the banking industry, but the increases in the value of distress especially in situations where such banks have been given a clear bill of health by auditors. What this translates to is an economic environment characterized by lack of trust.

Since lack of trust and unfaithfulness are variables that endanger investment, this study attempts to evaluate the quality of disclosure of annual reports within the banking industry using past model like: Buzby (1972), Lerf (1961), and Snighvi and Desai (1971) and Cooke (1993). The idea is to examine financial statements of selected banks and rank them according to these models.



Principally, management activities are conveyed by means of financial statements. Where these financial statements introduce elements of doubts in the minds of shareholders and potential investors, the effect is that the continued survival of the firm is threatened as it is starved of needed funds.

The presence of information asymmetry that produces uncertainty in the minds of investors can be minimized by meticulously prepared corporate reports that capture as much as possible the underlying economic activities of a firm.

This research work is aimed at using the develop model in solving the following problems:

What is quality of corporate disclosure in the banking industry using the model identified in above?

  • What is the gap identified in the quality of corporate reports in the Banking industry?
  • Is there any statistical differences in the quality of corporate reports between first generation and second generation banks?



The banking industry is strategic in any economy. The vital exchange of any modern economy is initiated by a strong banking sector. Banks like any other organization issue annual report of their activities. The credibility of these reports is essential for the proper functioning of the banking industry and economy. Where financial statements issued by banks lack credibility as exemplified by the recent distress phenomenon, within the banking industry in Nigeria, they have the negative effect of discouraging investment. Any effort aimed at improving corporate reporting activities in the banking industry will have effect of enhancing confidence of investors and it will increase economic activities. This study has its key objective of evaluating the quality of corporate reports within the banking industry. Other objective will include:

  • to identify the problem in the present corporate reports
  • to identify the gap in the quality of corporate reports in the banking industry.
  • to find out whether there is any statistical differences in the first generation and second generation banks.



This study focuses on corporate reports in the banking industry. Corporate reports of interest in this study will be those items listed in Section 334(2) of CAMA 2004.

Subject to sub section (3) of this section, the financial statements required under subsection (1) of this section shall include:

  • Statement of the accounting policies;
  • The balance sheet as at last ray of the year;
  • A profit and loss account a, in the case of a company not trading profit, an income and expeditor account for the year.
  • Notes the account,
  • The auditors’ report,
  • The director’s report,
  • A statement of the source and application of fund;
  • A value added statement for the year,
  • A five-year financial summary, and
  • In the case of a holding company, the group financial statements.

The study is limited to Nigeria and to banks quoted on Nigeria stock exchange. These banks comprise of two first generation banks viz., First Bank and United Bank for Africa (UBA) and two second generation banks: Guaranty Trust Bank, and Zenith Bank. Time frame for this study is year 1999-2004, before the merger.



This research work on its conclusion, together with whatever solutions or findings may arise, will prove useful to some particular groups of persons or otherwise for various reasons in accordance with their varying needs.

  • The Industry in General and Bank: It will help the financial manager in banks to focus their attention on some controversial items when formulating or revising their disclosure policy.
  • Investors and Interested Parties: Financial reports are considered useful by investors in making investment decisions. This research will serve as an indicator to investors for items to watch out for in order to identify banks that have adequately disclosed all important and necessary information. This will aid them in making wise decision.



For the purpose of simplicity, the hypotheses are stated in their alternative form. They includes:

H0:  The rate of return and earnings margin leverage are not significant variables to financial disclosures of banks.

H1:  The rate of return and earnings margin are number of shareholders are significant variables i.e. is very important in disclosure of banks.

Ho:  There is no relationship between the financial leverage of a corporation and its earnings per share (EPS).

H1:  There is a relationship between the financial leverage of a corporation and its earnings per share (EPS).

Ho:  There is no relationship between the financial leverage of company and its dividend per share (DPS).

Ho:  There is a relationship between the financial leverage of company and its dividend per share (DPS).


This study makes use of data extracted from corporate annual reports, accounting conventions and concepts underlie the preparation of some financial statement. They reflect the underlying limitations of accounting conventions. This study therefore inherits these limitations attributable to accounting conventions and concepts.

A compounding study research design is adopted for this study is the banking industry within the industry we have to limit ourselves to banks audited and quoted on the stock exchange and classified as first and second generation.


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