The Impact of Bank Board Composition, Top Management Equity Interest and Audit Committee Effectiveness on Top Management Transparency

The aim of this study was to determine the impact of bank board composition, top management equity interest and audit committee effectiveness on top management transparency on the performance of Banks in Nigeria. Data were collected from thirteen Nigerian banks using a Four Point Scale Likert questionnaire and analyses using percentages and ratios. Multiple regressions were used in testing the hypotheses. The study revealed that top management equity interest influences the level of correct financial disclosures and transparency that Audit Committees are not effective and independent of management and members' appointments are not based on integrity, competence and expertise of individuals. The study concluded that forensic accounting practice if incorporated in the banking operations will improve top management transparency and good corporate governance in the Nigerian banking sector which ultimately will improve the performances of Nigerian Banks. Based on the findings, we recommend independence of bank's audit committees as well as integrity, competence and expertise as pre-requisite for appointment as Audit Committee membership.(ProQuest: ... denotes formulae omitted.)IntroductionBusiness failures have an economic implication which is disastrous to the economy of any nation. In fact big investment frauds and trading scams have resulted in the loss of billions of dollars from gullible people. Nigeria is not an exception. There are various advanced fee frauds in Nigeria and other investment frauds that have bedeviled the Nigerian economy and the world.Bernard Ma doff, a former chairman of Nasdaq Exchange was arrested for running a $50 billion Ponzi scheme. It is alleged that his operation is the largest ponzi scheme in history. (Nikhil, 2009).In Nigeria, we have experienced many failed banks and finance houses in the late 1980s and 1990s. Many of the banks chief Executives absconded abroad while some were tried due to their involvements in employee related frauds and money laundering scams. Nigeria has witnessed corruption in all facets of her polity and economy which includes the banking sector. Ajayi, (2005) as cited in Adegbaju and Olokoyo, (2008) maintained that banking sector reforms in Nigeria are driven by the need to deepen the financial sector and reposition the Nigerian economy for growth; to become integrated into the global financial structural design and evolve a banking sector that is consistent with regional integration requirements and international best practices. It also aimed at addressing issues such as governance, risk management and operational inefficiencies which forensic accounting practices is geared towards achieving.After the appointment of Sanusi Lamido as Governor of the Central Bank of Nigeria, the Nigerian banking sector experienced turbulent crises as a result of the reforms introduced by him. Most banks that hitherto were adjudged liquid were declared insolvent. The management boards of many quoted banks were dissolved by the Central Bank of Nigeria and some top management staff were reported to the Economic and Financial Crime Commission for prosecution for fraud and mismanagement of funds and so constituting economic crimes. The Banks' overall risk management was questionable. Against this background, the research is geared towards ascertaining the impact of bank board composition, top management equity interest and audit committee effectiveness on top management transparency.Theoretical FrameworkFraud or intentional deception is a strategy to achieve a personal or organizational goal or satisfy a human need. A threat to survival or satisfy a need may cause one to choose either dishonest or honest means. The fraud triangle theory propounded by Donald Cressey states that every fraud has three things in common: (1) Pressure sometimes referred to as motivation and usually a un-shareable need; (2) Rationalization of personal ethics; and (3) Knowledge and opportunity to commit the crime. …