AUDIT COMMITTEE PERFORMANCE AND FINANCIAL REPORTING QUALITY IN

CROSS BORDER BANKS IN NIGERIA

Victoria Abiodun AKINTOYE

MATRIC NO: 170601217

A PROJECT SUBMITTED TO THE DEPARTMENT OF ACCOUNTING, FACULTY

OF ADMINISTRATION AND MANAGEMENT SCIENCES, ADEKUNLE AJASIN
UNIVERSITY, AKUNGBA-AKOKO, ONDO STATE, IN PARTIAL FULFILMENT OF
THE REQUIREMENTS FOR THE AWARD OF BARCHELOR OF SCIENCE (B.Sc.)
IN ACCOUNTING.

MARCH, 2023.
 DECLARATION

I, Victoria Abiodun Akintoye with matriculation number 170601217 , declare that this
research was carried out under the supervision of the Department of Accounting, Adekunle
Ajasin University, Akungba Akoko, Ondo State. I attest that this dissertation has not been
presented either wholly or partly for the award of any degree elsewhere.

____________________________
VICTORIA ABIODUN AKINTOYE Signature & Date

ii
 CERTIFICATION

This is to certify that Victoria Abiodun Akintoye with matriculation number 170601217
carried out this dissertation under our supervision in the Department of Accounting, Faculty of
Administration and Management Sciences, Adekunle Ajasin University, Akungba – Akoko,
Ondo State, Nigeria.

_______________________________ ___________________
Dr. Igbekoyi O. E Date
Supervisor

_________________________ ____________________

Dr. Alade M. E Date

Head of Department

iii
 DEDICATION

This project work is dedicated to God Almighty, who in his love and grace gave me the

opportunity to complete this research work.

iv
 ACKNOWLEDGEMENTS

I give all glory to God almighty for making this journey a possible and achievable one
for me in Adekunle Ajasin University,Akungba Akoko, Ondo State despite all odds, I am
eternally grateful Lord and I will worship you forever.

My sincere gratitude goes to my supervisor, Dr. Igbekoyi O.E. for her motherly love,

guidance, assistance and tolerance throughout the course of this research work. God bless her

and her family more abundantly. I also appreciate Dr. Alade, M.E., the head of department of

accounting, Prof. Felix Olurankinse, Dean faculty of management sciences, Dr. Agbaje W.H, Dr.

Oladutire E.O, Dr. Adegbayibi A.T, Dr. Adeusi S.A, Dr. Ayesan O.O, Dr. O.V Ologun,, Mr.

Olabisi O.S., Mrs. Gbemigun C.O, Mr. Adegboyegun A.E, Mr. Oluruntoba S.R, and Mrs.

Odugbemi O.M for their support and advice throughout my academic program and during the

course of this research work.

I want to sincerely appreciate my parents Mr. & Mrs. Akintoye, Mr Alfred Akintoye Mr.
Onatunde Gbenga, Mr. Kareem Olawale, Femi Micheal, Moses Ayomide, Miss Dammy, Miss
Shola, I am grateful for your love and support.

To my friends, Elizabeth, Boluwatife, Olamide, Faith, Precious, Opeyemi, Shola, also

extend my gratitude to my colleagues that I could not mention their names, I appreciate
everybody.

Thank you all.

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 TABLE OF CONTENT

Title Page i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table of Content vi
List of Tables
List of Abbreviation
Abstract ix
CHAPTER ONE: INTRODUCTION
1
1.1 Background to the Study
1.2 Statement of the Problem 2
1.3 Research Questions 3
1.4 Objectives of the study 4
1.5 Research Hypothesis 4
1.6 Significance of the Study 4
1.7 Scope of the Study 5
1.8 Operational Definition of Terms 6

CHAPTER TWO: LITERATURE REVIEW

2.1 Conceptual Framework 6

2.1.1 Audit Committee Performance 6

2.1.2 Audit Committee Size 7

2.1.3 Audit Committee Gender Diversity 7

2.1.4 Audit Committee Expertise 7

2.1.5 Board Attributes and Market Performance 8

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2.1.6 Board size 8

2.1.7 Board Shareholding 9

2.1.8 Financial Performance 10

2.1.9 Cross Border Banking 11

2.2. Theoretical Framework 11

2.2.1 Agency Theory

12

2.2.2 Stewardship Theory 13

2.2.3 Stakeholders Theory 14

2.3 Empirical Review 14

2.4 Gap in literature 18

CHAPTER THREE: METHODOLOGY

3.1 Research Design 20

3.2 Sources of Data 20

3.3 Population of the Study 20

3.4 Sample Size and Sample technique 20

3.5 Model Specification 20

3.6 Measurement of Variables 22

3.7 Data Analysis Technique 22

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND DISCUSSION OF
FINDINGS

4.1 Descriptive statistics 23

4.2 Test of Variables 24

4.2.1 Correlation Matrix of Dependent and Independent Variables 24

4.2.2 Correlation Analysis of Study Variables 25

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4.2.2 Normality Test 26

4.2.3 Multicollinearity Test 26

4.2.4 Test for Heteroscedasticity and Auto-Correlation 27

4.2.5 Panel Unit Root Test of the Variables 28

4.2.6 Hausman Specification Test 29

4.3 Audit Committee Performance on Financial Reporting Quality of Listed Cross-Border

Banks in Nigeria 30

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary 32
5.2 Conclusion 33
5.3 Recommendations 34
REFERENCES 35
APPENDIX 52

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LIST OF TABLES

Pages
Tables
3.6 Measurement of Variables 22
4.1 Descriptive Statistics 25
4.2 Correlation Analysis of Study Variables 25
4.3 Tolerance and VIF Value 27
4.4 Summary of Post Estimation Test Result 28
4.5 Panel Unit Root Test 29
4.6 Regression Results 31

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LIST OF ABBREVIATIONS

ACI Audit Committee Independence

ACS Audit Committee Size
ACM Audit Committee Meeting
FRQ Financial Reporting Quality
CBB Cross Border Bank

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 ABSTRACT

The recent corporate financial crises in different jurisdiction have necessitated the need for a
sound corporate governance system. Thus, audit committee is one of the major corporate
governance mechanisms designed to ensure the effectiveness and efficiency of the board in
monitoring and controlling the management and the operations of the banks with an eye of
achieving the desired level of performance. This paper assessed the effect of audit committee
performances and financial reporting quality in cross banks in Nigeria

This study adopt the ex-post facto research design. Data collected were analyzed using the
descriptive statistics, panel unit root test, hausman specification test and regression results was
used in the sample of (8) banks for a period of 10 years (2012-2022), using secondary data. The
paper after controlling for firm size found a significant positive relationship between financial
performance (ROA) and the characteristics of the audit committee That is, the attributes of the
audit committee of the deposit money banks (especially, independence and financial expertise)
have significantly improved the financial performance of the banks during the period of the
study. The paper also found that the size of the audit committee and the frequency of the
committee's meetings have not significantly influence the financial performance of the banks.

The findings of the study revealed that audit committee independence, audit committee size and
audit committee financial expertise all have positive and significant relation with financial
performance while audit committee meeting has no negative and no significant relationship with
financial performance. The study concluded that the firm complexity, profitability and liquidity
has significant impact on tax aggressiveness in deposit money bank.

Based on the findings, the study concluded that the impact of audit committee characteristics on
the financial performance of listed deposit money banks in Nigeria and the specific objectives of
the study are to investigate the effect of audit committee independence, audit committee size,
audit committee financial expertise and audit committee meeting on the financial performance
and the study recommends that the regulators should encourage the independence and the
inclusion of the financial experts in the audit committees of the deposit money banks in Nigeria.
Moreover, the members of the audit committee and the board of directors of the banks should
increase efforts towards improving those operational aspects that could maximize profitability.

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 CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Auditing plays an important role in developing and enhancing the global economy and

business firms of a nation. Auditors express an opinion on the fairness of financial statements

prepared by the management of an organization which have an implication on user’s judgment

based on information gathered from the financial statements in making investing decisions that

also have an effect on the nation as a whole (Husam, Rana, &Abdulhadi, 2013). This therefore

makes it important for the users of financial statements to gain assurance that the data are being

reported, properly measured, and fairly presented. Audit is a key contributor to business

enterprises and to re-establish trust and market confidence. Auditors are entrusted by law with

conducting statutory audits and fulfill an important role in offering an opinion on whether the

financial statements are stated truly and fairly (Quick 2012). This assurance should reduce the

risk of misstatement, subsequently, reduce the costs of business failures. The external audit

exercise is a governance procedure that reviews and analyses a company's internal audits and

control the fiscal reports to avoid material misstatements.

According to Wallace (2000), he opined that shareholders demand audited fiscal reports

as these reports offer details that are beneficial for their decisions on investments; hence, the

external audit would act as a tracking device that decreases managers’ interests in misstating the

earnings. Thus, the audit is used as a method of enhancing the top quality of the fiscal

information; hence, it is expected that a better audit engagement will be linked with reduced cost

xii
of capital by companies, as well as the government in all levels. In essence, auditing stabilizes

the country. An example could be identified when reported cases of the misappropriation of

funds in the Nigerian National Petroleum Corporation(NNPC) was revealed by the former

Governor of the Central Bank of Nigeria (CBN), now the Emir of Kano Alhaji Lamido Sanusi

discloses the unremitted income acquired from the shipped crude oil that was yet to be in the

Federation Account. In order to stabilize the economic turmoil of the nation that was overheated

by the revelation, the Federal Government contacted renowned and recognized auditors. The

financial reports of the auditors to some extent stabilized the Nation.

Accounting standards is defined as an information system through which financial and

monetized information is generated for economic, social and political decisions (Izedonmi,

2001). Statements of accounting standards are developed to ensure high degree of

standardization in publishing financial statements. They provide necessary guides on how

accounting information should be prepared and presented in order enhance the value of its

contents and facilitate thorough understanding. Nigeria Accounting Standards Board Act No 22,

2003 was repealed and Financial Reporting Council of Nigeria Act 2011 Enacted. More and

more commercial entities continue to engage in cross-border capital investments as globalization

advances at a breakneck speed (Napier, 2009). The conversion of financial statements prepared

under different accounting principles into a comparable form might come at a significant

expense in these kinds of transactions. Because accounting is a business language that society

developed to offer information about an entity's economic health, there are numerous accounting

systems that contribute to these differences. Similar to any other language, distinct varieties of

"accounting language" are employed in various parts of the world to communicate this

information.

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 There is a need for an international set of accounting standards due to the rising

frequency of the resulting costs. The adoption and implementation of as well as the convergence

of standards have thus been made possible by the desire to have comparable standards (Gray,

2011). Despite efforts to have various accounting standards converge, there is still a lot of

variance (IAS, 2011). Discussions that follow about how to achieve global accounting

convergence frequently focus solely on the discrepancies between certain accounting standards

and how to get rid of them. But, one must first thoroughly comprehend why distinctions exist in

order to know how to eliminate them. Culture is a key factor in these inequalities. However,

despite the fact that culture plays a significant influence in many of the distinctions across

accounting systems, it is typically left out of these discussions.

Differences in culture may affect a country’s desire to join a globalized economy

(Ramanna and Sletten, 2019, among others). Prior studies on the adoption of IFRS consider a

country’s culture, the barriers to adoption, and the impact of the adoption of IFRS on financial

reporting. Armstrong, Barth, Jagolinzer, and Riedl (2019) examine the degree of convergence or

adoption of IFRS in Europe, the European Union (E.U.) and the United States (U.S.),

respectively.This study will present an overview through an audit committee performance and

financial reporting quality in cross border banks in Nigeria.

1.2 Statement of the Problem

The largest hurdle facing the implementation of a single set of high-quality international

accounting standards is the vast array of audit committee performance in different cross border

banks in Nigeria. These values are inherently interconnected with many defining aspects of

society such as: language, religion, education, and economy. Therefore, differences in values are

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accompanied by differences in crucial aspects of society, and it is these numerous differences

that can make it incredibly difficult to apply one set of standards to the entire world.

The causes of the recent global financial crises have been traced to global imbalances in

trade and financial sector as well as wealth and income inequalities. Bank supervision and

corporate governance reforms to ensure that deliberate transparency reductions and risk

mispricing are acted upon. The series of widely publicized cases of accounting improprieties

recorded in the Nigerian banking industry in 2009 (for example, Oceanic Bank, Intercontinental

Bank, Union Bank, Afri Bank, Fin Bank and Spring Bank) were related to the lack of vigilant

oversight functions by the boards of directors, the board relinquishing control to corporate

managers who pursue their own self-interests and the board being remiss in its accountability to

stakeholders. In some cases, these bank directors’ equity ownership is low in other to avoid

signing blank share transfer forms to transfer share ownership to the bank for debts owed banks.

The purpose of this study is to examine the effectiveness of the audit committee and the

caliber of the financial reporting in Nigerian cross-border banks. Nigeria has accepted the

principle-based regime and its accounting standards have considerably converged with the

international accounting standards. The IASB is working to create a single set of principle-based

global accounting standards. Yet, research demonstrates that the social, cultural, and political

environment have an impact on accounting. So, it is uncertain if the principle-based standards

can be successfully implemented in a different social and cultural setting. To function within a

regime based on principles, professional judgment must be applied. The issue is therefore how

well professional judgment can be used in Nigeria. Because professional judgment is involved,

accounting practitioners with diverse backgrounds may arrive at differing conclusions.

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 There is some evidence that audit committee strengthen the credibility of financial

information as its principal mission is to supervise the preparation of financial reports, the

effectiveness of internal control procedures (Bouaine & Hrichi, 2019). In the view of Qeshta,

Alsoud, Hezabr, Ali & Oudat (2021), audit committee plays an imperative oversight role in

monitoring corporate entities (Zraiq & Fadzil, 2018) by assisting corporate board of directors in

ensuring that firm’s financial information is reliable, transparent, and meets the highest

accountability level. The reason is because board having the member as part of the audit

committee member will have their interest and operation covered by the selected member of the

board present in the audit committee and this will affect the enactment of the organization.

Studies reveal that existence of external executives in the audit committee can lessen the

unscrupulous behavior of directors, enhance corporate openness together with the quality of

information by mitigating the misstatement in the financial reports (Vlaminck & Sarens, 2015;

Sultana, Singh, Mitchell and Zahn, 2015) and improving the performance (Nedelcu & Dinu,

2015; Kallamu & Saat, 2015).

1.3 Research Questions

As a result, to help focus the research, the study offers the following research questions in

accordance with its purpose and particular objectives;

i. What is the effect of audit committee independence on financial reporting quality in cross

border banks in Nigeria?

ii. To what extent does audit committee size affect the financial reporting quality in cross

border banks in Nigeria?

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 iii. How does audit committee financial reporting affect financial reporting quality in cross

border banks in Nigeria?

1.4 Objective of the Study

The broad objective of this study is to examine audit committee performance and

financial reporting quality in cross border banks in Nigeria. Specific objectives are to;

i. investigate the effect of audit committee independence and financial reporting quality in

cross border banks in Nigeria

ii. determine what extent of does the audit committee size affect the financial reporting

quality of cross border banks in Nigeria.

iii. examine how does the audit committee financial expertise affect financial reporting

quality in cross border banks in Nigeria.

1.5 Research Hypotheses

H01: audit committee independence has no impact on the financial reporting quality in cross

border banks in Nigeria.

H02: Audit committee size has no impact on the effect of financial reporting quality in cross

border banks in Nigeria.

H03: Audit committee financial reporting has no impact on the affect expertise affect financial

reporting quality in cross border banks in Nigeria

1.6 Significance of the Study

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 Research on the impact of audit committee performance and financial reporting quality in

cross border banks in Nigeria is worth conducting as financial reporting quality differs in

different country of the work. This study would serve as a contribution to knowledge and also to

other studies done by other researchers. This study would enlighten the public on the usefulness

and benefits to be derived from employee involvement, it would also gather help gather

information on why cross border bank’s owners should promote audit committee performances

in their organization. The study will be would benefit to three (3) categories of people namely;

internal and external parties of an organization, government and academic researchers.

The results of this study is envisaged to enlighten the stakeholders in the business sector,

entrepreneurs, government and the general public on the impact of audit committee performance

and financial reporting quality in cross border banks in Nigeria. This study will also educate

business men and women on the need for harmonization of financial accounting.This research

will also serve as a resource base to other scholars and researchers interested in carrying out

further research in this field subsequently, if applied will go to an extent to provide new

explanation to the topic.

1.7 Scope of the Study

This study is within the area of audit committee performance and financial reporting

quality with specific focus on audit committee independence, audit committee size, and audit

committee expertise. This study focused on cross border banks in Nigeria that are listed on the

Nigeria exchange group as at 31st December 2021 (NEG). The study covers ten (10) years

period spanning from 2012 to 2021. Base period represents the commence of uniform accounting

period by all international banks in the country, era of global financial crisis, downsizing in the

xviii
banking sector, there are evidence of financial distress, decline in profitability of banks and a

great volume of many occurrences which posed and still posing threats to the financial status of

cross border banks. This study will cover the audit committee performance and financial

reporting quality in cross border banks in Nigeria.

1.8 Operational Definition of Terms

Audit Committee Independence: Audit committee independence is regarded as the most

significant factor to ensure the overall effectiveness of an audit committee and lead to better

monitoring of the company’s financial reporting practices (Salloum et al., 2014; Tusek, 2015).

Audit Committee Performance: The audit committee performance evaluate questionnaire is

based on emerging and leading practices to assist in the self-assessment of an audit committee’s

performance.

Financial Reporting Quality: financial reporting quality, which pertains to the quality of

information in financial reports, including disclosures in notes. High-quality reporting provides

decision-useful information, which is relevant and faithfully represents the economic reality of

the company’s activities during the reporting period as well as the company’s financial condition

at the end of the period.

Cross Border Bank: A cross border bank is a bank with a commercial presence outside its home

country, by way of at least one branch or subsidiary.

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Audit Committee Size: Audit committee size have 3-4 members and are usually chaired by

persons with experience as a CFO, external auditor or CEO.

CHAPTER TWO

LITERATURE REVIEW

This chapter discussed the conceptual review of literature, the theoretical review of

theories and empirical review of existing literatures. The gap in the literature was discussed

thereafter.

2.1 Conceptual framework

This section discussed further on defining various concepts on audit committee

performance, audit committee size, audit committee gender diversity, audit committee expertise

2.1.1. Audit Committee Performance

In achieving good governance, an Audit committee (AC) has a crucial responsibility of

overseeing reporting processes and ensuring credibility and transparency in the reports. The

major goal is to immunize the quality of presented financial reports (Oliver & Grace, 2017), and

other roles and functions include ensuring that financial statements are prepared according to

xx
implemented standards, overseeing the interactions among the management, employees and

external auditors, facilitating principles and managing risk management processes (Zraiq &

Fadzil, 2018a). Studies show that the audit committee effectiveness construct is dimensional and

subjective to diverse features such as independence, size, diversity, membership mix, meetings

and financial expertise (Mohiuddin & Karbhari, 2010). Despite various previous studies on the

features of an audit committee, there has been little or no recent literature on some important

features, including gender diversity of the audit committee members (Ibrahim & Al harasees,

2019). For this work, the following indicators of audit committees are used (see the next

subsection).

2.1.2. Audit Committee Size

The success of an audit committee is often attributed to the resources available, that is,

the number of members in the committee. Audit committee size is an important element for the

committee to properly oversee governance activities. The number of available members will

probably assist in overcoming issues in the course of corporate reporting (Li et al., 2012).

According to the regulatory bodies in Nigeria, the maximum number of committee memberships

should be six (6), and regardless of the membership size, the committee must consist of

representatives of directors, as well as shareholders. To foster effectiveness in guaranteeing that

actions of the firm are in the interest of shareholders, the audit committee must have sufficient

membership size to perform its responsibilities appropriately. Zraiq and Fadzil (2018) studied the

effect of an audit committee on firm performance and found that smaller committees with more

exposure and knowledge are positively significant to firm performance, and the size of the audit

committee has an important correlation with performance. Although, Afza and Nazir (2014)

showed that there is a significant negative relationship between the size of an audit committee

xxi
and firm performance because there is little room for flexibility in a larger committee. Theories

suggest that organizations should set up a committee not so large as to be unfavorable, but

reasonably large to guarantee successful monitoring (Allegrini & Greco, 2011).

2.1.3. Audit Committee Gender Diversity

In the performance of their duties, the attitude and ethical conducts of the male and

female gender are said to be different. Previous studies show that the audit committee gender

diversity and the involvement of a female member in committees has an impression on the

corporation’s decisions (Ibrahim & Al harasees, 2019). Studies show that company teams with

an equal gender representation perform significantly better when it comes to both sales and

profits than male-dominated teams (Aldamen et al., 2018). The selection of a female audit

committee member may be seen as critical information for market participants. According to

previous literature, female members are capable of improving firm governance through their

conservative and ethical qualities (Ibrahim & Al harasees, 2019). Studies show indications that

firms with female representation reduce the inherent risk of misstatements and are associated

with lower audit fees (Mwangi et al., 2017). But, there are also arguments to support the idea that

greater gender diversity may have a negative effect on the company’s management and thus may

not enhance its information environment. Several studies suggest that greater gender diversity

produces more viewpoints and critical issues or can lead to obstacles within the company,

possible discrimination, increase in the likelihood of conflict, and reduction in cooperation,

satisfaction, and engagement (Abad et al., 2017).

2.1.4. Audit Committee Expertise

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 The expertise criteria of an audit committee were included in Nigeria by the 2011 SEC

Code and the 2006 Post consolidation CBN code, amongst other codes. Such codes require that

an audit committee member must have at least financial management and accounting expertise

(Asiriuwa et al., 2018). Juhmani (2017) stated that the presence of financial expertise would

improve proficiency and capacity to detect and prevent earnings management. Kibiya et al.

(2016) also stressed that the participation of a financially literate or competent member in

financial management would improve the firm’s performance. Li et al. (2012) stated that an audit

committee with members who possess the required financial expertise is more equipped with the

knowledge of necessary capital market consequences of financial statement disclosures that are

expected to improve the quality of reporting and reduce the asymmetry of information.

Therefore, in accordance with regulations of the corporate governance codes in Nigeria, the

financial statement must be read and interpreted by not less than a single member of an audit

committee.

2.1.5 Board Attributes and Market Performance

The company’s decision to adopt a specific corporate governance mechanism is

controlled by numerous factors, including the entity’s fundamental characteristics, board

attributes and other corporative variables (Hay et al., 2017; Osundina et al., 2016). Governance

mechanisms adopted by banks are used for improving organizational performance, contributing

to new and existing market shares and improving the knowledge of business roles and obligation.

Zabri et al. (2016) stated that the board is a very important corporate governance framework. The

board performs important and critical roles in each company. Board based criteria are believed to

be a substitute for a company’s corporate governance, the company’s board is obligated to

control performance by reconciling the interests of the shareholders and stakeholders. They set

xxiii
strategic directions and monitor compliance with decrees and guidelines. The board will equally

be obligated to guarantee external auditor’s integrity, professional skepticism and ethical

consideration (Zabri et al., 2016). Previous research suggested that bank governance was directly

correlated with market performance (Elmagrhi et al., 2017; Detthamrong et al., 2017; Andreou et

al., 2016). In this paper, indicators of the board include the following (see the next subsection).

2.1.6. Board Size

The size of the board of directors is a vital corporate governance structure, which is

crucial to the management of any organization and essential in monitoring corporate governance

effectiveness (Ntim & Soobaroyen, 2013). Board size is the overall number of directors, non-

executive and executive, in the firm. Since the directors of companies are alleged to affect

organizational performance, it is very essential to ascertain the appropriate board size of a

company. Although there is no standard board size, the Central Bank code prescribes a minimum

of five and a maximum of twenty directors. Some businesses choose a small board size with the

expectation that control will be effective and decision-making will be quicker, while some prefer

the larger board size with the belief that it will lead to an expansion of expertise because more

knowledge as well as skills are available (Hussainey & Wang, 2010). Agency theory suggests

that better organizational performance might be correlated with smaller board sizes because they

are not likely to have as much problems in organizing and communication, and are likely to be

more successful in controlling the activities of management (Isik & Ince, 2016). While the

resource dependency approach favors larger boards, it states that they could be helpful in

limiting reliance on external resources and may give better opportunities for greater connections

than smaller boards. According to Pathan and Faff (2013), whether small or large, the size of the

board can negatively affect bank performance.

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2.1.7. Board Shareholding

In literature, the impact of board ownership/ director ownership has received considerable

attention (Desoky & Mousa, 2012). Separating control from ownership gives rise to conflicts of

172 Banks and Bank Systems, Volume 16, Issue 1, 2021 http://dx.doi.org/ 10.21511/bbs.

16(1).2021.15 interest between investors and the board. Board ownership influences the degree

to which owners’ interests are congruent with the board or management. If directors have large

stakes in a company’s stock, their actions have an effect on their own wealth and they are

probably less likely to take action that might decrease shareholders’ wealth irrespective of how

independent they are (Bhagat & Bolton, 2013). Consequently, when ownership and management

interests are combined through ownership concentration, performance might improve. Stock

ownership by executives and members of the board gives them an incentive to improve

performance. The output influence of board control is considered to be complex and uncertain

(Scholtz & Engelbrecht, 2015). Prior works have shown inconclusive results, the first claims

imply that board ownership produces a balance of ownership and managerial interests, which

positively influences performance. If the percentage of stocks owned by the board is high, they

are more likely to make decisions compatible with maximizing the wealth of stockholders, since

that will increase their own wealth (Jensen & Meckling, 1976). The second claim suggests that

high proportions of board ownership affect performance adversely, this argument suggests the

possibility of absence in the connection between board ownership and performance.

2.1.8 Financial Performance

Financial performance(s) irrespective of its sector has drawn wide attention from all and

sundry. The definition of (firm) financial performance could vary, depending on the context of

xxv
its use (Marimuthu, Arokiasamy & Ismail 2009 in Osemwegie-ero & Eneh, 2016). For the sake

of presentation, further on, we will drop the prefix firm where possible. A wide variety of 44

financial performance definitions have been introduced in different literature (Barney 2007).

Financial performance is generally defined as a measure of the extent to which a firm uses its

assets to run the business activities to earn revenues. It also examines the overall financial health

of a business over a given period of time and can be used to contrast how well a company

performed with another in an identical and similar industries or between industries in general

(Atrill, Mclaney, Harvey & Jenner, 2009).

Financial performance can also be described as profitability growth level that is, the

ability of a business entity to earn a reasonable amount of profit and maximize it sustainably.

According to Pandey, 2008; Osamwonyi and Ogbeide, 2015, profit maximization causes the

efficient allocation of resources under competitive market conditions and it is considered as the

most appropriate measure of performance. It focuses on how an entity has been able to utilize its

capital to earn returns within a given time frame. It also includes liquidity growth potentials and

solvency of such entity. In assessing banks financial performance, Kumbirai and Webb (2009)

opines that the Accounting approach which employs financial ratios and the econometrics

technique can be used. The other variants that tend to see ratios as financial performance

measure believes that the main source of data for determining financial performance is the

financial statements, the product of accounting. It consists of the statement of financial position

(balance sheet) which shows the assets, liabilities and equities of a business, the income

statement that records the revenues, expenses and profits in a particular period, the cash flow

statement which exhibits the sources and uses of cash in a period, and the statement of changes

in the owners’ equity that represents the changes in owner‘s wealth.

xxvi
 Financial performance is commonly reflected in the calculation of financial ratios that

show the link between numbers in the financial statements. The financial ratios may include the

computation of the profitability, efficiency, liquidity, gearing, and investment of a particular

firm. Moreover, financial performance generally may also be reflected in market-based (investor

returns) and accounting-based (accounting returns) measures (Griffin & Mahon 1997). Examples

of market-based indicators to measure financial performance are price per share and Tobin‘s Q

which indicate the market value or the share value of the company as well as the financial

prospects of it in the future. Additionally, what the shareholders have perceived from the returns

distributed by the firm is also the driver of the share price. This price may lead to the market

value of the firm. Alternatively, accounting-based measures, including profitability,

efficiency, liquidity, gearing, and investment ratios, are calculated using thes figures from the

financial reports and may represent financial performance. According to Atrill et al. (2009), the

ratios that may be utilized (as proxies) to calculate a company‘s profitability are the return on

assets (ROA), return on equity (ROE) and return on investments (ROI). These ratios express the

success of a firm in generating profits or returns from the resources owned. In contrast, the

market-based measure is believed to be more objective because it relies on market responses to

particular decision made by a firm (Griffin &Mahon 1997). The choice of whether to use

accounting or market-based calculations for measuring financial performance depends upon the

specific aims of the research. This is affirmed by the literature of Adebayo and Olalekan, (2012)

which reveals that the use of the accounting ratios is high as compared to other approaches but it

all depends on the exact motive that drives the research.

Cross Border Banking in Nigeria is relatively new and different literature assign meaning

as it suits their operational usage to it. Reiche (2016) sees it as a consequence of globalization, to

xxvii
Twarowska and Kakol (2013) it is a (business) strategy, while Drogendijk and Hadjikhani 13

(2008); Massand and Gopalakrishna (2016) sees it as the internationalization of banks. Massand

and Gopalakrishna (2016) gives (accepted) reasons for such as the liberalization of financial

systems and formation of international organizations like World Trade Organization (WTO) and

International Monetary Fund (IMF) that have contributed towards the establishment of foreign

banks (Kim & Pant, 2010; Gormely, 2010 in Massand & Gopalakrishna, 2016). According to

Ajayi 2014, cross border banking involves the operation of banking activities across the borders

of countries. This may be said to exist when there are financial transactions or arrangements

across national borders such as: cross border financing through bank mergers, letters of Credit,

cross border loan arrangements and bankers’ acceptances and so on. Cross border banking refers

to a deposit money bank with a commercial presence outside its home country by way of at least

one branch or subsidiary (Beck et al, 2014). This may or not include the listing of the stocks of

such banks in the countries of their cross border activities or the integration of the bank‘s

financial activities across national borders (Ajayi, 2014).

Though literature on cross border banking define such activity differently – ranging from

such concepts as international banking, cross-border mergers and acquisition, multinational

banking, global banking and so on, they all seem to agree on one thing – that it is a strategy for

expansion with the aim of revenue maximization, cost minimization with the ultimate goal of

maximizing shareholders wealth. With the relentless march of globalization of commercial

activities, cross border banking phenomenon is taking an increasingly important front row

position with African banks since the last decade. African banks have not just noticeably

increased their geographic footprints on the continent; they have also become economically

significant outside their own home countries and 14 of systemic relevance in different

xxviii
jurisdictions. This growth and expansion of African banks has, in recent years almost completely

undermined the relative relevance of traditional, mostly European, banks operating on the

continent and has redefined the burden of managing and handling both risks and accrued benefits

of cross-border banking from the traditional home countries in Europe to African policymakers.

Fig. 2.1: Conceptual framework on pre and post CBB The above figure 2.1 depicts an enhanced

performance position for a cross bordered bank. A situation where a bank goes outside her

national boundaries, the tendency her increased customer base to attract more deposits is certain,

and this will improve her liquidity performance prior to her cross border situation. Also is the

performance of her stock price which will probably swing in the upward direction compared to

her pre CB status performance. Similarly, all of the aforementioned variable performance will

translate into a profit performance of such a bank as against the pre CB profit status

2.1.9 Cross Border Banking (CBB)

CBB has become an important financial concept in global banking of which Africa

continent has aligned herself with in order to be a part of current practices. The literature dealt

with several sections in which the works of different authors related to the research study was

examined. Concept and meaning of CBB is examined, an overview, its benefits and challenges

of deposit money banks going CB. Other areas include: forms of CBB, factors influencing CBB

decision generally. Also, CBB as it relates to financial and stock performance alongside their

different measures were discussed as examined by previous researchers. Furthermore, is the

review of related theories: franchise value, follow the customer and the portfolio theory. The

study adopts both follow the customer and portfolio theories as the most relevant for the work.

The justification lies in the fact that CBB activities are usually built around these theoretical

footings. But, it was observed that some certain areas were not given sufficient attention to and

xxix
as a result, left certain gaps which the researcher majored on as part of the strength in her

research work. This includes: focusing on the Africa continent as against developed countries,

thereby increasing available evidence specifically for the Nigeria case by creating empirically

grounded data upon which further research can be based. Also is the use of secondary data which

has the advantage of high authenticity and reliability as against some theoretical works in this

area.

2.2 Theoretical Review

Theoretical review to be used for this study is anchored on Agency theory, and other

supporting theories are Stewardship Theory and stake holders theory.

2.2.1 Agency Theory

The agency theory can be traced back to (Berle & Means, 1932) some authors are of the

opinion that this can be traced back to Adam Smith in 1776 and his renowned book, “The Wealth

of Nations.” Letza Sun & Kirkbride (2004) point out that the agency problem was effectively

identified by Adam Smith when he argued that company directors were not likely to be careful

with other people’s money as they would with their own. This has ultimately led to consequent

review of a set of contradicting relationships amongst individuals. The most essential among

these was the agency relationship, defined as a contract in which one or more persons (the

Principal(s) engage another person the (agent) to carry out some service on their behalf that

involve delegating some decision making authority to the agents the agency relationship can be a

problem because the agent may not always act in the best interest of the principal(s).

Agency costs are then incurred by the principal, which consist of monitoring costs

incurred by the principal, bonding costs incurred by the agent and decrease in welfare resulting

xxx
from decisions taken by the agent which are not in line with the maximization of the principal’s

welfare moreover, Jenson & Meekling were fully aware that it was costly, if not possible, to

write up contracts which would clearly define the rights of principles for all possible

contingencies. The assumption of the agency theory is that the role of the organization is to

maximize the wealth of shareholders or owners of the firm (Ujunwa, et al, 2012). The agency

theory is concerned with analyzing and resolving the conflicts of interest that occur between the

shareholders or owners and the agents or the management (Mulili & Wong, 2011). The conflict

originated from the separation of ownership from control in which the shareholders or owners

perceive that the manager’s actions are based on self-interest (Achchuthan & Kajananthan, 2013;

Ujunwa et al., 2012).

2.2.2 Stewardship Theory

The stewardship theory, according to Mulili and Wong (2011), suggests that,

“organizations serve a broader social purpose than just maximizing the wealth of the

shareholders”. Stewardship Theory Maybe the most important organizational theory building on

Theory Y is stewardship theory (Davis, Schoorman, and Donaldson 1997; Donaldson and Davis

1991), which in opposite to agency theory presume that “stewards are motivated to operate in the

best interest of their principals” (Davis, Schoorman, and Donaldson 1997, 24). Stewardship

theory assumes a model whose behavior is structured in a way “such that pro-organizational,

collectivistic behaviors have higher utility than individualistic, self-serving behaviors” (Davis,

Schoorman, and Donaldson 1997, 24).

The main entrance of Stewardship Theory into the mainstream standard of organizational

theory was the article by Davis, Schoorman and Donaldson 7 (1997) who were able to

xxxi
differentiate stewardship from agency theory (Eisenhardt 1989; Jensen and Meckling 1976) and

to elaborate the psychological and situational mechanisms and assumptions intrinsic in

stewardship theory. It was the paper in 1997 that has proven to start the research stream on

stewardship, arguing its implication for the whole of organization research. Stewardship assumes

a convergence in the goals between principal and agent, since the collective behavior and

orientation of the agent will generally benefit principals such as company owners. The

orientation works as well intra-organizationally, where for instance middle managers will profit

from the steward-like behavior of their subordinates since they will foster the common goal.

The best interest of the group is mostly seen as a “viable, successful enterprise” (Davis,

Schoorman, and Donaldson 1997,). Since the steward in the entity will work towards the

organizational goals, the individual can and should be trusted and therefore given more liberty to

act pro-organizationally. As such, stewardship theory especially differs from agency theory,

which assumes that the agents cannot be trusted and accordingly need to be controlled

(Eisenhardt 1989). According to Davis and colleagues (1997), control can even be

counterproductive since it may lower the motivation of the steward. Since the principal does not

necessarily need to control the steward, also the costs of monitoring are reduced. Donaldson and

Davis (1991) in their study on the positive effect of stewardship in boards and CEOs show that

stewardship leads to higher corporate performance. They point out it would ultimately lead to the

question why not all companies are structured according to stewardship theory. Davis et al.’s

answer seems to be very much grounded in game theory since they argue that if either principal

or agent defects from their steward stance, the other party will lose out in the relationship.

Especially in case the principal enters the relationship as a steward while the agent acts

self-interested, the organizational outcome can be dramatic. From a game theory argument, the

xxxii
principal might therefore choose the strategy that would make huge losses unlikely, hence, an

agency stance. Not long ago, one of the authors had a conversation with a fellow researcher

about agency and stewardship theory, and the colleague mentioned that he did not ‘believe’ in

stewardship theory, despite the fact that he was well aware that agency theory does not cover all

aspect of human interaction. Looking at the reality in organizations, we can see both types of

behavior (e.g. Chrisman et al. 2007). Already Donaldson argued, reflecting on the fundamental

model, that to explain behavior, “some more complex and contingent admixture of the two

approaches” will be required (1990, 372). In the explanation or accounting for benevolent

behavior however, Stewardship theory at first glance seem to be more prone due to its

assumption of the collectivistic orientation of actors.

Stewardship theory has a little, but impactful history in the area of family business. It is

argued to have a natural application to family businesses (Blumentritt, Keyt, and Astrachan,

2007) and has been extensively used and regarded. Taking a look at stewardship in different

organizations, Corbetta and Salvato argue that it may “differ between family and non-family

firms” (2004, 356), with family businesses rather relying on trust and intra-familial altruism.

Family businesses follow family goals, both financial and non-financial in nature (Tagiuri and

Davis 1996), an argument that relates back to Granovetter’s (1985) point of rationality of action

not being located only in economic reasoning. Hall explains this out by arguing that family

business are “not irrational but multi-rational” (2002, 43). Also, Corbetta and Salvato (2004)

pointed out that self-actualizing traits in family business is not irrational, but that the complex

rationality of family firms cannot be captured sufficiently by the self-interested rationality

underlying agency theory. Recently, Madison, Holt, Kellermanns and Ranft followed a similar

argument by combining agency and stewardship in their review of family business articles,

xxxiii
arguing that both theories offer “mutually enabling explanations of the family firm” (2015).

Relying on a thorough review of the literature, they show how managers, both family and non-

family, act as stewards as well as agents. Therefore, the stewardship theory is inferring that

governance has both a service and strategic role that oil and gas sector can utilize to improve

growth, development and value creation.

2.2.3 Stakeholders Theory

The stakeholder theory of modern corporations was propounded by Edward Freeman in

1984. The theory states that the purpose of a business is to create value for stakeholders not just

for shareholders (Freeman, 1984). Stakeholder theory is based on the notion that companies have

several stakeholders defined as groups and individuals who benefit from or are harmed by, and

whose rights are violated or respected by corporate actions. Stakeholders mean any entity

(person, group, or possibly non-human entity) directly connected with the achievements of the

organization's objectives. It is a bi-directional relationship. Each stakeholder group has a

different expectation about its wants and different claims upon the organization (Hung, 1998). It

is essential to recognize the stakeholders' claims because they can positively and negatively

influence the organization. So, it is important to understand the areas of conflict and tension

between stakeholders that may arise.

2.3 Empirical Framework

Hassan (2010) studied the corporate governance and performance structures of nine

licensed deposit money banks in Nigeria for the period of 2013 to 2017. The paper utilized

multiple regression techniques and found no correlation between board size, board composition,

directors’ shareholding, dividend policy, audit quality and financial performance (return on

xxxiv
assets, net interest margin, Tobin’s Q and earnings ratio). The research concluded that regulators

should leave specific concerns of board size and board composition to the preference of banks.

Maxwell and Kehinde (2012) considered a relationship between corporate governance and bank

performance by utilizing two governance metrics, board composition and ownership structure,

and using market value to measure bank performance. The study utilized cross-sectional survey

research design in analyzing data from a sample of 14 Nigerian banks quoted on the NSE. The

authors found no association between indices of governance used in the analysis and

performance. The results propose that board size should be limited to boost performance by

reducing costs, since the board composition is not significantly associated with performance. Al-

Saidi and Al-Shammari (2013) obtained perspectives on the interaction between board

composition and bank performance by sampling nine listed banks in Kuwait. To check this

relationship, the analysis used zordinary least squares (OLS) and 2SLS.

According to the findings of the OLS, only board size and the proportion of non-

executive directors adversely influence the performance of the banks. The 2SLS findings showed

that role duality has a positive effect on the performance of a bank, while board size has a

negative influence on the performance of a bank. The study indicated their main drawbacks were

smaller sample size and length of time. Bebeji et al. (2015) assessed the extent to which board

size and composition influence the performance of listed banks in Nigeria. The researchers

adopted a multivariate regression analysis technique on five banks for a span of nine years. The

research recorded the effect of board size on ROA and ROE to be negative, and the influence on

bank performance by board composition to be significantly positive. The work suggested that

firms possess sufficient board members and complexity and should be structured to ensure

diverse levels of experience without losing independence. Jadah and Adzis (2016) evaluated the

xxxv
link between board characteristics and bank performance for 20 Iraqi banks over a 10-year

period from 2005– 2014. The results showed that board characteristics significantly and

positively impacted bank performance (proxied by return on equity). Shukla et al. (2018)

researched the effects of board characteristics on the market performance of 29 Indian banks

listed on the National Stock Exchange from 2009 to 2016. Ten board features reflected the

independent variables, and the dependent variable was proxied by Tobin Q. The results showed

that only three of the features (CEO duality, average number of boards served and number of

meetings) were positively linked with market performance.

Boehren and Oedegaard (2017) examine the impact of corporate governance on the

financial performance of 15 banks quoted on the Amman Stock Exchange (ASE), Jordan for the

period 2010-2016 was investigated. Board size, board composition, chief executive officer

(CEO) status and foreign ownership serve as indicators of CG, ROA, ROE, NPM and EPS were

used as financial performance indicators, while bank size was used as control variable.

Descriptive statistics and multiple regression analysis were used as techniques for data analysis.

The results reveal a positive relationship between the number of outside board members and

foreign ownership and banks’ performance in Jordan. Joshua, & Tauhid, (2017) examined the

relationship between CG and financial performance of twenty-one (21) Deposit Money Banks

(DMBs) listed on the Nigerian Stock Exchange following the 2016 bank consolidation in Nigeria

for the period 2012-2017 was investigated. Tenure of chief executives, intensity of board

meetings and risk management were employed as measures of CG, while ROA, non-performing

loans and market capitalization were used as measures of financial performance. Multiple

regressions were employed for the analysis and the study reveals that CG has a positive and

significant impact on the financial performance of DMBs in Nigeria.

xxxvi
 Lasisi,(2017) examined the impact of CG on the financial performance of 3 Deposit

Money Banks in Nigeria for the period 2009-2016 was assessed. Board size, board composition

and audit quality were used as proxies for CG, while gross earnings, profits after tax and net

assets were employed as proxies for financial performance. T-test was used as the technique for

data analysis and the finding reveals that there is no significant relationship between CG and

banks’ financial performance. Dinsmore,(2018) examined the effect of board size, board

composition and board Meetings on the financial performance of listed consumer goods in

Nigeria for the period 2012-2018 was examined. The data was analyzed by means of descriptive

statistics, correlation and regression analysis and the results show that board size and board

meetings were found to have negative and significant effect on financial performance. However,

board composition has positive and significant effect on financial performance.

Sabatier,(2015) examined the relationship between application level of CG principles and

financial performance of the companies listed on the Istanbul Stock Exchange (ISE) National

100 Index, Turkey for 2015 financial year was investigated. CG rating represents the application

level of CG principles; ROA, ROE and stock return were used as proxies of financial

performance, while firm size, firm age and leverage ratio were employed as control variables.

Multiple hierarchical regressions analysis was used and the result reveals that there is a

significant and positive relationship between CG and financial performance. Kabir, & Thai,

(2020) The effect of board characteristics on financial performance of 40 Egyptian listed firms

using panel data for the period 20018-2020 was investigated. Board composition (BCO) and

CEO duality (DUL) were used as CG variables; ROE and Tobin’s Q were used as indicators of

financial performance, while firm size, firm age, financial leverage and capital intensity were

used as control variables. The generalized least squares method was used as technique for data

xxxvii
analysis and the study result demonstrates that CG has a negative and significant impact on

financial performance.

Osisioma, Nzewi, & Paul, (2021) The relationship between CG and financial performance of 61

companies traded at Muscat Securities Market, Oman for the period 2015-2020 was investigated.

CG score was used as proxy for CG, Tobin’s Q, return on asset, profit margin, EBIT margin and

net profit margin were used to measure financial performance, while size gearing and firm

growth were used as control variables. Descriptive statistics and multiple regressions were used

as techniques for data analysis and the result shows that there is a positive and significant

relationship between CG and financial performance of companies in Oman. There is emerging

empirical research analyzing the determinants, cost and benefits of cross-border banking,

especially in the European markets, but a few studies exist for the African continent. A growing

number of papers using cross country and bank-level data have investigated the effects of foreign

bank entry in the local banking system and its competitive effect on the local banking system

(Hermes and Lensink (2002)).

The entry of foreign banks has intensified competition in many African countries’

banking systems as new financial products such as the use of ATMs, internet banking and mobile

banking are being introduced. In some countries in the study, foreign banks are pushing the

regulators to help deepen the market through the development of Treasury bill markets,

suggesting that the banking system on the continent is becoming more competitive and

innovative and that countries are strengthening the regulatory system. Most country-level studies

point to a positive effect of foreign bank entry on the banking sector. Denizer (2000) investigates

foreign bank entry in Turkey’s banking sector, showing that the net interest margin, overhead

expenses and returns on assets are related to foreign ownership. Denizer also indicates that

xxxviii
foreign bank entry has a strong competitive effect on the banking sector: it lowers the return on

assets and overhead expenses. Hasan and Marton (2000) investigate the Hungarian banking

sector during the transitional process, and conclude that banks with higher foreign bank

ownership involvement are associated with higher efficiency. Goldberg et al (2000) study the

role of foreign banks in determining the health of domestic financial systems in Argentina and

Mexico. They find that the health of banks, and not their ownership, is the critical determinant in

the growth, volatility and cyclicality of bank credit. But diversity in ownership tends to

contribute to greater stability of credit in times of crisis and domestic financial system weakness.

Banks that expand internationally are typically more efficient, better capitalized and come from

countries with a more developed banking system.

Based on this, it is expected that the efficiency of a less developed host country banking

system should improve as a result of the entry of foreign banks. Recent empirical evidence

counters the traditional view that argues against giving access to foreign banks as they might

worsen the allocation of credit and increase the risk to financial crisis and business cycle

sensitivity of lending. Studies by Focarelli and Pozzolo (2005) and Goldberg (2002), looking at

the European economy, found evidence that foreign bank entry is beneficial for host countries’

economies. They argue that because of the drive for market share, foreign banks help to increase

the amount of credit available and improve the efficiency of local banks, thus reducing interest

margin, as new entrants charge lower interest to gain market share. Additionally, foreign bank

entry has been found to improve overall welfare in the host country through the inflow of foreign

investment (Bayraktar and Wang (2005)). A growing number of studies have reviewed the

effects of cross-border banking on financial intermediation and efficiency, and have found the

existence of a positive relationship. Improvement in the ability of households and firms in a

xxxix
country to access finance and the actual usage of banking services, one way in which the

intermediation functions of banks are measured, is enhanced by bank entry (Claessens et al

(2001), Berger and Hannan (1998)).

Banks are in a better position to lend if they are able to mobilize deposits and increase

their asset base. The entry of banks also should increase total banking sector assets and the

number of products the system is able to provide to customers. On the efficiency front,

improvements in cost ratios and a decrease in profitability are considered good indicators of

competition and increased efficiency. Thus the analysis of foreign bank entry focuses on whether

the banking sector is more developed and able to perform the function of channeling mobilized

deposits to borrowers for economic development. Empirical evidence has shown that foreign

bank presence causes higher per capita GDP growth in some host countries. A study by Macias

et al (2009) finds that cross-border bank lending exerts a significant positive effect on economic

growth in the African region as a whole, but a significant and negative impact in oil exporters

where weak institutions leave these countries exposed to international banking risks. In a

theoretical model, Besanko and Thakor (1992) analyze the allocation consequences of relaxing

entry barriers and find that equilibrium loan rates decline and deposit interest rates increase, even

when allowing for differentiated competition. In turn, by lowering the cost of financial

intermediation, and thus lowering the cost of capital for non-financial firms, more competitive

banking systems lead to higher growth rates. Additionally, Giannetti and Ongena (2005) find that

the presence of foreign banks led to more entrepreneurial activities; however, access to finance

by “connected” firms may be reduced, and therefore could lower the probability of “insider

lending” and strengthen the stability of the system. Berger et al (2001) also suggest that foreign

xl
banks rely on hard information to initiate lending as they study their new and unfamiliar

environment. Thus, insider lending is reduced due to better screening of borrowers.

2.4 Gap in Literature

A careful review of the above literatures and other studies reveals that certain stones were

left unturned which this study intends to give attention to. Thus, observed gaps are filled and

contribution to literature made in three ways.

Firstly, there is paucity of research on CBB in developing countries mostly those in the

Africa continent. The major works that have been done have been on developed countries

particularly the Western World, For example, most studies: Clarke et al (2003) and others attest

to the obvious that most literatures have focused on the developed and not developing countries.

It is hoped that this work increases the literature base on the developing countries especially the

Nigeria context.

Secondly, careful look at few studies which have been conducted in emerging economies

are based more on old data and timing effect definitely do have implications on findings of such

researches. For instance, Besanko & Thakor, (1992) in Alade, (2014); DeYoung & Nolle,

(1996); Hasan & Hunter, (1996); Chang, Hasan &Hunter (1996) in Cull & Beck (2013); Denizer,

(2000); Berger, DeYoung, Genay & Udell (2000) in Clarke, Cull, Peria & Sanchez (2003);Peek,

Rosengren & Kasirye (1999) in Bos & Kool, (2014); thus, the study uses latest data from the

period 2001 to 2016. This, is a sufficient time to capture activities of the pre and post CBB, and

thereby give a present outlook and lift on CBB using evidence from the Nigeria country for the

Africa continent.

xli
 Thirdly, the study adopted the earnings per share (EPS) as one of the measures of stock

performances as against the popular opinion of the market price per share (MPS). The EPS

measure is one which most researchers had not explored for varied reasons. Accordingly, the

study has been able to provide evidence to the subject area by using the EPS measure to

substantiate our result findings.

Fourthly, the scanty evidence on CBB financial and stock performance generally is high

and relatively to Africa and the Nigeria situation in particular, is alarmingly high. The work

thereby fills a major gap in this wise by using secondary data as against the primary data used by

some of the studies. Thus, carrying out an assessment of the resultant effect CBB has on

financial and stock performance using the Paired t-test method, ANOVA and multiple binary

regression analysis as against the analytical method used by some of the various reviewed works.

As is observed, most works have used the regression analysis but in addition to this, the Paired

test and ANOVA were used perhaps a different finding may emerge. This is to say that the study

examines the performances of quoted Nigeria cross border banks together with that of her

domestic counterparts for differences in their corporate performances. It also ascertains if the

CBB activities has a possible relationship effect on the stock of such deposit money banks

xlii
 CHAPTER THREE

METHODOLOGY

This chapter presents the methods and procedure it employed in carrying out this study.

The approaches are presented in the following headings: Research Design, Population, sampling

technique, types and sources of data, data analysis plan, analytical framework and Diagnostics

test model specification.

3.1 Research Design

The study adopts the ex-post-facto design because the performances of CBB the

researcher investigates have already taken place. The study covers a 10year period (2012-2021)

as mentioned earlier in the scope of the study. Years 2012 to 2017 represent the pre CBB

xliii
activities, while years 2017 to 2021 captures the post CBB periods where the African continent

witnessed a significant increase in CBB.

3.2 Sources of Data

During this research study, secondary data was used. They were gathered from the

published bank specific reports as well as their annual reports downloaded from the various

official websites as well as share performance history were retrieved from the NEG, the NEG

Fact book, CBN publications. Thus, the hiccup of data challenges or the inaccessibility to data

and organizational institutions were brought to a minimum as the researcher mostly made use of

internet facilities with exception to a few data. The choice of secondary data lies in the fact that it

is easily accessible, enhances comparability and reliable.

3.3 Population of the study

The population of this study consists of all (23)Foreign-owned banks quoted on the

Nigerian Exchange Group (NEG), of which cross border expansion has taken place through the

setup of subsidiaries, thus adding to the numbers of banks in host country, namely, Citibank, Eco

bank, Stanbic IBTC, Standard Chartered and Ned bank.

3.4 Sample and Sampling Technique

The census method was employed by sampling the entire (23) foreign-owned banks

however, only five (5) of these banks are into the activities that relate to CBB activities, While

for the overall performance of the banks, (CBB and DB‘s) the entire quoted deposit money banks

were used.

3.5 Model Specification

xliv
 The researcher employed a multiple regression equation approach in testing the

hypothesized relationship between the cross boarder banking (CBB) and financial/stock

performance of Nigeria deposit money banks. To this effect, below are the 106 following

econometric models specified taking cognizance‘s of the three earlier stated control variables:

1 Model Specification

The model for this study is:

FRQ = F(AC) which is further expressed in the form of a linear equation as:

FRQ = F(ACIND, ACMEE, ACFEP, ACFD, FSIZE, FAGE)

That is:

FRQit=α 0+ β 1ACINDit + β 2ACFREGit + β 3ACFEPit + β 4ACFDit + β 5FSIZEit + β 6FAGEit

+eit

Where;

FRQit = Financial Reporting Quality for firm i in time t.

ACINDit = Audit Committee independence for firm i in time t.

ACFREGit =Audit committee frequency of meeting for firm i in time t.

ACFEPit =Audit committee financial expertise for firm i in time t.

ACFDit =Audit committee female members for firm i in time t.

xlv
FSIZEit = Firm size for firm i in time t α0 =Intercept.

α1, α2, α3, α4, α5, α6 = Model coefficients.

Eit =Error term

3.6 Measurement of Variables

The theory underpinning this study is the agency theory, because the board of directors

appoint the auditors for the independent appraisal of the financial statements prepared by the

management to give a true and fair view of this financial statement and to ensure necessary

compliance with general acceptable rules and regulations governing the preparation of financial

statements To analyze the data gathered for this study, descriptive and inferential statistics will

be used.

Table 3.1; Definition of Variables

S/ Explanatory Descriptions Sources

N variables

1. Financial Dichotomous Alrazi et al.,

Reporting variable if in the 2009;

Quality (FRQ) list 1 otherwise 0 Elijidoten,

2009]

2. (AUDIT Total numbers of [Ahmed&

COMMITTEE audit committee Duellman,

xlvi
 SIZE) ACSIZE board director to 2006; Ismail

numbers of et al., 2008]

directors

3. Profitability Earnings per Barako,

(PROF share Hancock, &

Izan, [2006].

4. Firm Size natural log of [Wan Hussin,

(FSIZE total assets CheAdam,

Lode, &

Kamardin,

2005]

3.7 Data Analysis

Descriptive and inferential statistics alongside different graphs are employed in

analyzing the data collected. The former consists of mean, median, range, standard deviation and

Jacque Beta test. The latter includes the Pearson movement correlation and regression analysis.

xlvii
 CHAPTER FOUR

This chapter contains the presentation, analysis and interpretation of the data collected for

this study which focused on audit committee performance and financial reporting quality in cross

border banks in Nigeria. The data were analyzed using descriptive statistics and inferential

statistics. The chapter also discussed the implication of the findings on the study.

4.1 Descriptive statistics

Descriptive statistics where the interaction of the data are described is presented in table

4.1. It shows the mean, standard deviation, coefficient of variation, minimum and maximum

values, skeweness and kurtosis for both outcome and explanatory variables. From table 4.1

xlviii
financial reporting quality have an average value of -.0587 with standard deviation of .0951,

implying a wide spread as the coefficient of variation stood at 1.62 percent. The minimum

financial reporting quality is -.37 to a maximum of 0.12. The skewedness and kurtosis value for

financial reporting quality is -.53557 and 3.7123. For audit committee independence (ACI), the

average value is 53.968 percent with standard deviation of 7.167 implying a moderate variation

in audit committee independence across the firms and coefficient of variation establish this as it

shows 13.2 percent variation in ACI across the group. The minimum ACI is 50 percent and the

maximum independence is 80 percent. Audit committee independence have a skewedness of

2.011 and Kurtosis value of 7.0994 indicating that the data is abnormally distributed.

Furthermore, audit committee size (ACS) has a mean value of 5.925 and standard

deviation of .6319 with coefficient of variation of .1066 percent. The statistics imply that on the

average the cross border banks firms have audit committee size of 5.925. The minimum size is 4

and the maximum is 8 percent. The variable have skewedness value of -.24566 and kurtosis

value of 7.1908 indicating abnormal distribution. Also, for audit committee meeting (ACM), the

mean shows a value of 4.2375 and standard deviation of 1.2038 with a minimum no of meetings

to be 2 and maximum meetings of 7. The skewedness of data for the variable is to the tune

of .323861 kurtosis shows that the data is not normally distributed across the firms with values of

3.1607 respectively.

Table 4.1: Descriptive Statistics

Statistics OBS FRQ ACI ACS ACM

Mean 80 -.05875 53.96875 5.925 4.2375

Standard Dev. 80 .095193 7.167677 .631955 1.203831

xlix
Coeff. Variation 80 -1.620307 .1328116 .1066591 .2840899

Minimum 80 -.37 50 4 2

Maximum 80 .12 80 8 7

Skewness 80 -.5355759 2.011836 -.2456699 .3238617

Kurtosis 80 3.712359 7.099458 7.190852 3.160724

Researcher’s Computation (2023)

4.2 Test of Variables

4.2.1 Correlation Matrix of Dependent and Independent Variables

The correlation co-efficient represents the linear association or relationship between

the dependent and explanatory variables. The results in table 4.2 showing the relationship

between financial reporting quality (FRQ) and Audit committee measures. The relationship

financial reporting Quality (FRQ) and audit committee independence (ACI) shows that an

increase in audit committee independence will cause a decrease in financial reporting quality by

21.42 percent and the relationship is not significant showing p-value of 0.0564. This implies that

the more non-executive director we have in the committee the lesser the financial reporting

quality. Also from table 4.2 the relationship between financial reporting quality (FRQ) and audit

committee size (ACS) is positive as an increase in the size of the audit committee will increase

financial reporting quality by 40.95 percent and the relationship is significant at 5 percent having

p-value of 0.0002.

.Likewise, the relationship between financial reporting quality (FRQ) and audit committee

meetings (ACM) is negative and one time increase in the number of meetings held by the audit

l
committee will lead to a decrease of 29.70 percent in FRQ and the relationships is significant at 5

percent indicating p-value of 0.0075.

Furthermore, the relationship between the audit committee size and audit committee

independence is negative implying that they both move in opposite direction when there is an

increase audit committee size, audit committee independence will decrease by 36.66 percent.

Also, audit committee independence (ACI) and audit committee meeting have a positive

relationship as they move in the same direction showing a coefficient of 0.2463percent. Table

4.2 also shows that the relationship between audit committee size and audit committee meetings

have a coefficient value of -0.0761 implying that an increase in audit committee independence, it

will lead to decrease in number of meetings.

Table 4.2: Correlation Analysis of Study Variables

Audit Committee Performance and Financial Reporting Quality

OBS FRQ ACI ACS ACM

FRQ 80 1.0000

ACI 80 -0.2142 1.0000

0.0564

ACS 80 0.4095* -0.3666* 1.0000

li
 0.0002 0.0008

ACM 80 -0.2970* 0.2463* -0.0761 1.0000

0.0075 0.0276 0.5024

Source: Researchers’ Computation (2023)

4.2.2 Normality Test

The normality of data distribution is an assumption of running a linear model which

assures that the p-values for the t-test and F-test will be valid. The assumption merely requires

that the residuals be identically and independently distributed. However, from the descriptive

statistics the data across some of the variables shows that most of the data obtained for this study

are not normally distributed and as such, the normality of residuals will be conducted using

Shapiro Wilks test of normality and the result is presented in table 4.4. From table 4.4, the result

indicate that for the variables explaining audit committee performance and financial reporting

quality are normally distributed with a p-value of 0.31619 which is higher than the threshold of

null hypothesis that the data is normally distributed

4.2.3 Multicollinearity Test

Multicollinearity test are part of post estimation test to confirm the validity of the

assumption of the regression model. In a situation where two or more explanatory variable are

highly correlated, meaning that one can linearly predict the other variable with a certain degree

of accuracy, then there is problem of multicollinearity. The Variance Inflation Factor (VIF) value

is used to investigate the relationship between the variables themselves to determine their

lii
independence. Based on the evidence presented in table 4.3, it can be concluded that there is no

multi-collinearity problem. This is because the VIF values for all the variables are less than 10

and the tolerance values for all the variables are greater than 0.10 (rule of thumb). Therefore, the

study can rely on regression co-efficient to predict the level of impact of independent variables

on dependent variables and the outcome of the findings can be considered valid.

Table 4.3: Tolerance and VIF Value

Variable VIF 1/VIF

Audit Committee Performance

ACI 1.22 0.817609

ACS 1.16 0.865384

ACM 1.06 0.939091

Mean VIF 1.15

Source: Researchers’ Computation (2023)

4.2.4 Test for Heteroscedasticity and Auto-Correlation

The heteroscedasticity test was conducted to check the validity of homoscedasticity

assumption that variance in the residuals are constant as the absence of homoscedasticity violate

the assumption and may lead to wrong inference. Heteroscedasticity test was conducted using

Breusch-Pagan/Cook-Weisberg test and data for the study revealed the presence of

heteroskedascity given the probability value of 0.0000 which is lesser than 0.05. Data for the

study was also tested for auto-correlation using Wooldridge test for autocorrelation in panel data,

the result shows the probability of 0.4446 which is insignificant indicating that there is no

problem of Auto-correlation

liii
Table 4.4: Summary of Post Estimation Test Results

Shapiro -Wilk Test

Null Hypothesis Statistics Probability

Distribution of the residuals is normal (P>0.05) 0.478 0.31619

Tolerance and VIF Value

Null Hypothesis VIF 1/VIF

There is no multicollinearity among the variables 1.15

(1/VIF >0.10)

Breusch-Pagan / Cook-Weisberg test for Heteroscedasticity

Null Hypothesis Statistics Probability

Constant variance across the variables residuals (P>0.05) 0.51 0.4734

Wooldridge test for autocorrelation

Null Hypothesis Statistics Probability

No first-order autocorrelation (P>0.05) 0.852 0.3867

Hausman Test

Null Hypothesis Statistics Probability

Difference in coefficients not systematic (P≤0.05) 3.24 0.3555

liv
 Researcher’s Computation (2022)

4.2.5 Panel Unit Root Test of the Variables

Panel variables have the tendency of been non-stationary at level which may likely affect

the parameter stability and consistency of the model. However, in order to identify the stationary

conditions of the variables, the study uses Levin, Lin & Chu t* and Harris-Tzavalis unit-root test.

The null hypothesis assumption of the unit root test is that all panels contain unit roots while the

alternate hypothesis implies that some panels are stationary. The results of unit root tests were

displayed in table 4.6. It shows that all the variables are integrated of order zero that is 1(0).

Therefore, it is not necessary to conduct the co-integration test in order to determine the long run

relationship among the variables. The panel least square is capable of estimating an efficient

model and that is less spurious.

Table 4.5: Panel Unit Root Test

Variable Levin, Lin & Chu t* Harris-Tzavalis unit-root test

test-statistics P-value Statistics P-value

Financial Reporting Quality -4.8137 0.0000 -6.7693 0.0000

Audit committee independence -4.6120 0.0000 -3.7710 0.0000

Audit committee size -3.4457 0.0003 -5.0288 0.0000

Audit committee meetings -6.8359 0.0008 -4.6641 0.0000

lv
Source: Researchers’ Computations (2023)

4.2.6 Hausman Specification Test

The result of the Hausman specification test conducted for the study objective is shown in

table 4.4. The result to know the model interpretation for the four objectives showed p-value that

is significant at 5 percent implying that the variation across entities is assumed to be fixed and

correlated with the independent variables included in the models. This indicate that the best

model for interpretation is fixed effect model.

4.3. Audit Committee Performance on Financial Reporting Quality of Listed Cross-

Border Banks in Nigeria

The regressed result showing how measures of Audit committee performances in terms of

audit committee size, audit committee independence, and audit committee meetings affect firm

financial reporting quality after meeting the basis for a Best Linear Un-bias Estimate (BLUE) is

shown in table 4.6. The Hausman specification test conducted produced p-value of 0.3555,

which is insignificant at 5%. This implies that the variation across entities is assumed to be

systematic with the independent variables included in the model hence the fixed effect model is

the most suitable for interpretation.

The result obtained R-square of 24.85 percent and probability of the model to be 0.0002

which shows that the model is statistically significant at 5%. This implies that the independent

variables in the model jointly explains 24.85 percent of the variation in the dependent variable

with other variables captured by the error term. The implication is that the audit committee

performance can affect the quality of the financial reports of listed cross-border banks in Nigeria.

The overall result shows that the measures of audit committee performance in terms of audit

lvi
committee size have positive effect on the financial report quality and negative effect in terms of

number of meetings held by the audit committee of listed cross-border firms in Nigeria.

The individual results for the variables as shown in table 4.6 showed that audit committee

independence (ACI) have a co-efficient value of .0006,z statistics of -1.02 which is statistically

insignificant at 5 percent with p-value of 0.311. This implies that audit committee independence

have a negative and insignificant effect on the financial reporting quality. The implication is that

it is necessary for the committee to be independent for them to be able identify issues in auditing

and evaluate and address it with their judgment not beclouded by conflict of interest and this will

help them to improve the financial reporting quality of these companies through their activities.

Audit committee size (ACS) has a coefficient of .02331 with the z-statistics of 3.37 which

is statistically insignificant at 5 percent with p-value of 0.001. This implies that ACS has a

positive and significant effect on financial reporting quality of cross-border banks in Nigeria.

The implication is that the size of the audit committee is efficient in overseeing audit risk

exposures of the companies and devising appropriate means of managing them and this effect is

significant. Likewise from table 4.6, audit committee meetings (ACM) have a coefficient of

-.0066 with z-statistics of -2.67 and significant of p-value indicating 0.009. It then means that

Audit committee meetings have negative and significant effect on the returns on equity of the

DMBs in Nigeria and then simply implies that the number of meetings held by these committee

cannot translate to a meaningful decision on how to tackle audit issues in the company by

advising the board appropriately on proper appraisal of the company auditing practice.

Table 4.6 Regression Results

lvii
 Variables Fixed Effect Random Effect Pooled OLS Regression

Regression Regression

FRQ Coef. Z P>|z| Coef. Z P>|z| Coef. Z P>|z|

ACI -.0006 -1.02 0.311 -.00010 -0.20 0.845 -.0000 -0.06 0.950

ACS .02331 3.37 0.001 .0202 3.55 0.000 .02001 3.60 0.001

ACM -.0066 -2.67 0.009 -.0063 -2.61 0.009 -.00626 -2.58 0.012

_Cons 1.0019 17.60 0.000 .99074 19.69 0.000 .98828 19.96 0.000

OBS 80 80 80

R-sq 0.2485 0.2387 0.2389

F(3,69) 7.61 - 7.95

Wald - 23.74 -

chi2(3)

Prob > F 0.0002 0.0000 0.0001

Researcher’s Computation (2023)

CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

This chapter discusses the summary of the study, followed by the conclusion of the

research findings in relation to the study, recommendations; contribution to knowledge was also

suggested by the researcher.

5.1 Summary

lviii
 The study examine audit committee performance and financial reporting quality in cross

border banks in Nigeria. It specifically investigate the effect of audit committee independence

and financial reporting quality in cross border banks in Nigeria; determine what extent does the

audit committee size affect the financial reporting quality of cross border banks in Nigeria;

examine how does the audit committee financial expertise affect financial reporting quality in

cross border banks in Nigeria.

The study explain relevant concepts in chapter two. The concept include audit committee,

board size, and financial reporting. Related empirical studies was reviewed and theoretical aspect

of the study. However, the study utilized a combination of three theories but the study was

anchored on Agency theory.

Secondary data was used to achieve the objective of the study. The population of the

study comprises 10 money deposit bank in Nigeria exchange group (NGX) as at 31 st of

December 2021 for the period of (10) years from 2012 to 2021. The judgmental sampling

technique was chosen being the fact that only 10 (DMB) was selected out of the 24 DMB in the

population studied. Data were collected for the period 2011-2021. These were obtained from the

annual reports of selected listed firms. The collected data were analyze using the mean, standard

deviation, skewness and kurtosis and inferential statistics and the result was presented in a table.

For the purpose of empirical analysis, the study used regression statistical tool to analyze each

specific objectives of the study using E-view as the statistical package for analysis.

The following findings were revealed in the study:

i. In references to the first objective, it was revealed that Firm complexity has significant

impact on tax aggressiveness in deposit money bank.

lix
 ii. Findings shows that firm profitability has significant impact on tax aggressiveness in

deposit money bank.

iii. Result showed that Firm liquidity has significant impact on tax aggressiveness in deposit

money bank.

5.2 Conclusion

The focus of this study is on the relationship between firm complexity and tax

aggressiveness on deposit money bank. From the findings of this study, it was observed that that

a significant relationship existed between firm complexity and tax aggressiveness in Nigeria

DMBs. Based on the results firm profitability, leverage and liquidity are the major determinants

of tax aggressiveness in Nigeria because; they maintained statistical significance across the dual

measures of tax aggressiveness used and the interpretation and implication of their different

coefficients towards our variable of interest (tax aggressiveness) is exactly the same in both

countries. It may also be argued that the discretionary GAAP-ETR. Created a more fitting model

than the book tax difference (D BTD)

5.3 Recommendations

From the conclusion, the following recommendation was made:

i. The notion that older firms have higher reputational risks and would resort to less-risky

tax management practices did not hold in the context of this study as older firms were

found to be highly tax aggressive. Since the older firms have all the connections that can

lx
 be deployed to conceal sophisticated tax planning activities, regulators should increase

their monitoring of the older firms as a strategy of reducing potential tax evasions while

encouraging appropriate tax savings strategies to ensure greater tax compliance.

ii. Considering the finding of the study that highly profitable firms are highly tax aggressive,

the management should ensure they install strong corporate governance mechanisms in

order to ensure that the intended gains from tax avoidance activities are not

opportunistically misused by the managers.

iii. On the weak likelihood that liquid firm are likely less tax aggressive, there is need for

management to note that poor liquidity may not change swiftly based on tax

aggressiveness. Thus, banks facing liquidity issues show focus on seeking for fresh

capital and asset expansions as well as in creating more value for the banks.

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board
audit Financia
committee audit l
Jones independenc committe expertis Audit committee
Companies Model e e size e meetings
2012 Guaranty Trust Holding -0.13 50 6 0 5
2013 Guaranty Trust Holding -0.07 50 6 0 4
2014 Guaranty Trust Holding -0.18 50 6 0 4
2015 Guaranty Trust Holding 0.03 50 6 0 4

lxiv
2016 Guaranty Trust Holding -0.02 50 6 0 4
2017 Guaranty Trust Holding -0.2 50 6 0 4
2018 Guaranty Trust Holding -0.11 42.8571 7 0 4
2019 Guaranty Trust Holding -0.05 50 6 0 4
2020 Guaranty Trust Holding -0.06 50 6 0 4
2021 Guaranty Trust Holding -0.09 50 6 0 4
2012 FBN Holding -0.08 50 6 0 4
2013 FBN Holding -0.03 50 6 0 3
2014 FBN Holding -0.06 50 6 0 3
2015 FBN Holding 0.11 50 6 0 2
2016 FBN Holding -0.14 50 6 0 4
2017 FBN Holding -0.07 50 6 0 4
2018 FBN Holding -0.11 50 6 0 4
2019 FBN Holding -0.1 50 6 0 4
2020 FBN Holding 0.05 50 6 0 4
2021 FBN Holding -0.06 50 6 0 4
2012 Access Holdings Plc -0.26 50 6 0 4
2013 Access Holdings Plc 0.03 50 6 0 6
2014 Access Holdings Plc 0.06 50 6 0 6
2015 Access Holdings Plc 0.12 50 6 0 6
2016 Access Holdings Plc 0.07 50 6 0 2
2017 Access Holdings Plc -0.03 50 6 0 7
2018 Access Holdings Plc -0.1 50 6 0 6
2019 Access Holdings Plc -0.15 50 6 0 6
2020 Access Holdings Plc -0.21 50 6 0 2
2021 Access Holdings Plc 0 50 6 0 6
2012 Zenith Bank 0 50 6 0 4
2013 Zenith Bank -0.07 50 6 0 4
2014 Zenith Bank -0.13 50 6 0 4
2015 Zenith Bank 0 50 6 0 4
2016 Zenith Bank 0.12 50 6 0 4
2017 Zenith Bank 0 62.5 8 0 5
2018 Zenith Bank -0.01 42.8571 7 0 4

lxv
2019 Zenith Bank 0 50 6 0 4
2020 Zenith Bank -0.05 50 6 0 4
2021 Zenith Bank -0.01 50 6 0 4
2012 United Bank For Africa -0.03 50 6 0 4
2013 United Bank For Africa -0.16 50 6 0 5
2014 United Bank For Africa 0 50 6 0 6
2015 United Bank For Africa 0.02 50 6 0 4
2016 United Bank For Africa -0.06 50 6 0 4
2017 United Bank For Africa -0.03 50 6 0 4
2018 United Bank For Africa -0.07 50 6 0 4
2019 United Bank For Africa -0.17 50 6 0 3
2020 United Bank For Africa 0.02 50 6 0 3
2021 United Bank For Africa -0.28 50 6 0 7
2012 Union Bank Of Nig 0.11 50 6 0 4
2013 Union Bank Of Nig -0.09 50 6 0 4
2014 Union Bank Of Nig 0.04 50 6 0 4
2015 Union Bank Of Nig 0.1 50 6 0 4
2016 Union Bank Of Nig -0.03 50 6 0 4
2017 Union Bank Of Nig -0.05 50 6 0 5
2018 Union Bank Of Nig -0.12 42.8571 7 0 6
2019 Union Bank Of Nig -0.02 50 6 0 3
2020 Union Bank Of Nig -0.12 50 6 0 6
2021 Union Bank Of Nig 0 50 6 0 6
First City Monumental
2012 Bank -0.28 50 6 0 6
First City Monumental
2013 Bank -0.37 50 6 0 5
First City Monumental
2014 Bank 0 50 6 0 3
First City Monumental
2015 Bank 0.09 50 6 0 5
First City Monumental
2016 Bank -0.03 50 6 0 4

lxvi
 First City Monumental
2017 Bank 0.05 50 6 0 4
First City Monumental
2018 Bank -0.14 80 4 0 4
First City Monumental
2019 Bank -0.18 50 6 0 4
First City Monumental
2020 Bank -0.04 50 6 0 4
First City Monumental
2021 Bank -0.11 50 6 0 4
2012 Fidelity Bank -0.12 50 6 0 5
2013 Fidelity Bank -0.12 50 6 0 3
2014 Fidelity Bank -0.06 50 6 0 2
2015 Fidelity Bank -0.08 50 6 0 3
2016 Fidelity Bank -0.13 50 6 0 4
2017 Fidelity Bank 0.02 50 6 0 4
2018 Fidelity Bank -0.03 50 6 0 6
2019 Fidelity Bank -0.12 50 6 0 7
2020 Fidelity Bank 0 50 6 0 5
2021 Fidelity Bank -0.12 40 5 0 11

lxvii
 APPENDIX
Shapiro-Wilk W test for normal data

Variable Obs W V z Prob>z

ACS 80 0.98188 1.244 0.478 0.31619

Variable VIF 1/VIF

ACI 1.22 0.817609

ACS 1.16 0.865384
ACM 1.06 0.939091

Mean VIF 1.15

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of FRQ

chi2(1) = 0.51
Prob > chi2 = 0.4734

Wooldridge test for autocorrelation in panel data

H0: no first-order autocorrelation
F( 1, 7) = 0.852
Prob > F = 0.3867

lxviii
Levin-Lin-Chu unit-root test for FRQ

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N/T -> 0

Panel means: Included
Time trend: Not included

ADF regressions: 1 lag

LR variance: Bartlett kernel, 6.00 lags average (chosen by LLC)

Statistic p-value

Unadjusted t -8.1619
Adjusted t* -4.8137 0.0000

. xtunitroot ht FRQ

Harris-Tzavalis unit-root test for FRQ

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N -> Infinity

Panel means: Included T Fixed
Time trend: Not included

Statistic z p-value

rho 0.0676 -6.7693 0.0000

lxix
Harris-Tzavalis unit-root test for ACI

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N -> Infinity

Panel means: Included T Fixed
Time trend: Not included

Statistic z p-value

rho 0.3598 -3.7710 0.0001

. xtunitroot llc ACI, trend demean

Levin-Lin-Chu unit-root test for ACI

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N/T -> 0

Panel means: Included
Time trend: Included Cross-sectional means removed

ADF regressions: 1 lag

LR variance: Bartlett kernel, 6.00 lags average (chosen by LLC)

Statistic p-value

Unadjusted t -8.8410
Adjusted t* -4.6120 0.0000

Harris-Tzavalis unit-root test for ACS

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N -> Infinity

Panel means: Included T Fixed
Time trend: Not included

Statistic z p-value

rho 0.2372 -5.0288 0.0000

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Levin-Lin-Chu unit-root test for ACS

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N/T -> 0

Panel means: Included
Time trend: Not included Cross-sectional means removed

ADF regressions: 1 lag

LR variance: Bartlett kernel, 6.00 lags average (chosen by LLC)

Statistic p-value

Unadjusted t -6.9022
Adjusted t* -3.4457 0.0003

Harris-Tzavalis unit-root test for ACM

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N -> Infinity

Panel means: Included T Fixed
Time trend: Not included

Statistic z p-value

rho 0.2727 -4.6641 0.0000

Levin-Lin-Chu unit-root test for ACM

Ho: Panels contain unit roots Number of panels = 8

Ha: Panels are stationary Number of periods = 10

AR parameter: Common Asymptotics: N/T -> 0

Panel means: Included
Time trend: Not included

ADF regressions: 1 lag

LR variance: Bartlett kernel, 6.00 lags average (chosen by LLC)

Statistic p-value

Unadjusted t -10.0461
Adjusted t* -6.8359 0.0000

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Fixed-effects (within) regression Number of obs = 80
Group variable: PanelID Number of groups = 8

R-sq: Obs per group:

within = 0.2485 min = 10
between = 0.3389 avg = 10.0
overall = 0.2302 max = 10

F(3,69) = 7.61
corr(u_i, Xb) = -0.4163 Prob > F = 0.0002

FRQ Coef. Std. Err. t P>|t| [95% Conf. Interval]

ACI -.0006207 .0006086 -1.02 0.311 -.0018348 .0005934

ACS .0233184 .0069237 3.37 0.001 .0095059 .0371308
ACM -.0066063 .0024753 -2.67 0.009 -.0115444 -.0016683
_cons 1.001973 .0569446 17.60 0.000 .8883718 1.115575

Random-effects GLS regression Number of obs = 80

Group variable: PanelID Number of groups = 8

R-sq: Obs per group:

within = 0.2407 min = 10
between = 0.3888 avg = 10.0
overall = 0.2387 max = 10

Wald chi2(3) = 23.74

corr(u_i, X) = 0 (assumed) Prob > chi2 = 0.0000

FRQ Coef. Std. Err. z P>|z| [95% Conf. Interval]

ACI -.0001008 .0005155 -0.20 0.845 -.0011112 .0009096

ACS .020267 .0057058 3.55 0.000 .0090838 .0314502
ACM -.006314 .0024222 -2.61 0.009 -.0110615 -.0015665
_cons .9907406 .0503254 19.69 0.000 .8921047 1.089377

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 Coefficients
(b) (B) (b-B) sqrt(diag(V_b-V_B))
fe re Difference S.E.

ACI -.0006207 -.0001008 -.0005199 .0003234

ACS .0233184 .020267 .0030514 .0039219
ACM -.0066063 -.006314 -.0002923 .0005096

b = consistent under Ho and Ha; obtained from xtreg

B = inconsistent under Ha, efficient under Ho; obtained from xtreg

Test: Ho: difference in coefficients not systematic

chi2(3) = (b-B)'[(V_b-V_B)^(-1)](b-B)
= 3.24
Prob>chi2 = 0.3555

Source SS df MS Number of obs = 80

F(3, 76) = 7.95
Model .020174329 3 .006724776 Prob > F = 0.0001
Residual .064286832 76 .000845879 R-squared = 0.2389
Adj R-squared = 0.2088
Total .084461161 79 .001069129 Root MSE = .02908

FRQ Coef. Std. Err. t P>|t| [95% Conf. Interval]

ACI -.0000315 .0005049 -0.06 0.950 -.001037 .0009741

ACS .0200114 .0055661 3.60 0.001 .0089256 .0310972
ACM -.0062605 .0024312 -2.58 0.012 -.0111027 -.0014183
_cons .9882832 .049514 19.96 0.000 .8896676 1.086899

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