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Archives of Business Research – Vol. 10, No. 12
Publication Date: December 25, 2022
DOI:10.14738/abr.1012.13687. Charles, J. M. I., Francis, F., & Zirra, C. T. O. (2022). Assessment of Financial Reporting on Investment Decision of Deposit Money
Bank in Nigeria. Archives of Business Research, 10(12). 196-203.
Services for Science and Education – United Kingdom
Assessment of Financial Reporting on Investment Decision of
Deposit Money Bank in Nigeria
Charles J. Mambula, I.
Associate Professor, Langston University School of Business
701 Sammy Davis Jr Dr, Langston, OK 73050, USA
Felix Francis
Department of Business Administration and Management
Adamawa State Polytechnic, P M B 2146 Yola, Nigeria
Zirra, Clifford Tizhe Oaya
Department of Business Management
Faculty of Management & amp; Social Sciences Plot 686
Cadastral Zone C OO Kuchigoro Baze University Abuja Nigeria
ABSTRACT
Most business organizations require some measures of both financial position and
financial performance in assessing its financial conditions. The study thus examines
financial reporting on investment decision of deposit money bank in Nigeria.
Descriptive research design was adopted, while Pearson Chi square was used in
testing the hypothesis. Findings from the study showed that financial reporting has
effect on investment decision-making money deposit bank. More so, the study
revealed that financial reporting has revealed the competence of management of
organization. The study also revealed there is a relationship between financial
reporting and investment decision-making. The study thus recommends effectively
competence of management of organization contributes to the efficiency of financial
reporting. This will ensure that various companies’ financial reports are properly
managed.
Keywords: Financial Reporting, Investment Decision and Deposit Money Bank
INTRODUCTION
Financial reporting is the process of communicating economic information to the stakeholders,
management, shareholders, public, etc. to facilitate informed judgments, and decision-making.
It deals with the presentation of financial and other relevant statements to show the extent to
which the objectives of the organisation have been achieved. It is a statement prepared by the
directors of an organisation showing how well they has been able to manage the resources
entrusted to them by the owners (shareholders) of the business. Financial reports are means
through which the strengths and weakness of an organisation can be ascertained at a glance.
Financial information is the output of accounting process and should be duly communicated to
users to enhance decision-making. As such, Bello (2009) opined that corporate organization
use accounting to communicate to all stakeholders about their operating performance and
position at a particular time period. The financial position shows one’s wealth at ascertain point
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Charles, J. M. I., Francis, F., & Zirra, C. T. O. (2022). Assessment of Financial Reporting on Investment Decision of Deposit Money Bank in Nigeria.
Archives of Business Research, 10(12). 196-203.
URL: http://dx.doi.org/10.14738/abr.1012.13687
in time while one’s financial performance describes once. The financial report according to
Meigs and Enang (2015) refers to reports which summarize the financial position and
operating results of a business (Statement of financial position and income statement).
The financial report is a formal and comprehensive statement describing financial activities of
a business organisation such as the banks. For such a business entity, financial report is a
statement that reports all relevant financial information, presented in a structured manner and
in a form easy to understand for managerial use for taking prompt and informed decision- making related to investment (IASB, 2007a) They are instruments without which certain
operational decisions cannot be made, especially those that deal with investment, expenditure
and assets management (Better 1998; Meigns 1998; Whittington 1998). The financial reporting
entails the preparation and presentation of both financial and non-financial information by
the organisation for effective planning and reliable decisions. However, the ultimate aim of
financial reporting is to provide information that may be useful enough for evaluating
management effectiveness in utilizing resources under its control to satisfy its users’ needs.
Financial reports are used by investors and creditors in deciding where to in- vest their limited
resources in a particular organisation or not (Akintoye 2002). However, to have an effective
financial report for planning and decision-making, financial managers must have an analytical
knowledge of the instruments used for their decision-making. (Peter, 2013). The financial
reports consists of balance sheet (for determining financial position), profit and loss statement
(describes statement of comprehensive income), statement of equity changes (explain the
changes of the bank’s equity), and cash flow statements (reports on a bank’s cash flow activities;
particularly It's operating, investing, and financing activities). Although, these statements are
often complex and may include an extensive set of notes to the financial reports and explanation
of financial policies and management discussion and analysis (IASB, 2007b).
In Nigeria, it has become common practiced by the banks to adopt creative accounting in
anticipation of sourcing for equity capital from the capital firms. Although this approach in
financial reporting process often lead to over-valuation of assets and bank’s net worth in the
views of prospective shareholders and other stake holders. In Okoye and Alao (2008) view,
“creating accounting is the transformation of financial accounting figures from what they
actually are to what preparers desire by taking advantage of the existing rules and/or ignoring
some or all of them." Also, another perceived problem of financial reporting disclosure is the
non-compliance to industry corporate governance, ethics, and regulatory standards which is
prevalent in the corporate organization of Nigeria.
The content of financial information is often expected to be prepared according to national
standards, corporate governance, professional ethics, and the code of conducts as stipulated by
the Companies and Allied Matters Act (CAMA) of 2004 as amended, the International Financial
Reporting Standards (IFRSs), and the Nigerian Statement of Accounting Standards (SASs). This
is to avoid financial reporting fraud and scandals that might hinder effective and informed
investment decision-making by the investors and other users of these informations. Another
purpose of expected standards and ethics in financial reporting is to re-orientate professional
accountants, financial experts, auditors and corporate organization on the need to abide by the
code of conducts that facilitate public confidence in their services (Okafor, 2006).
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Archives of Business Research (ABR) Vol. 10, Issue 12, December-2022
Services for Science and Education – United Kingdom
The studies thus examine financial reporting on investment decision of deposit money bank in
Nigeria. Answers were provided for the following questions:
i. The financial reporting has any effect on investment decision-making in the money deposit
bank?
ii. Does the financial reporting reveal the competence of management of the organisation?
iii. Is there any relationship between financial reporting and investment decision-making?
In-line with the above research questions, the following hypothesis was tested:
Hoi: Financial reporting has no any effect on investment decision-making money deposit bank
Hoii: Financial reporting has not revealed the competence of management of organisation
Hoiii: There is no relationship between financial reporting and investment decision-making
LITERATURE REVIEW
Concept of Financial Reporting: Financial reporting may be defined as communication of
published financial statements and related to information from a business enterprise to third
parties (external users) including shareholders, creditors, customers, governmental
authorities, and the public.
Company financial reporting is a complete communication system involving the company as
issuer; the investors and creditors as primary users, other external users; the accounting
profession as measurers and auditors; and the company law regulatory, or administrative
authorities.
Glautier and Underdown (2001) says the primary objective of financial reporting is to
communicate information about the resources held by entity and performances of the reporting
entity, useful to those having right to such information. Nzotta (2008) stated that financial
reports assist the users in evaluating the past and present performance of the organization and
its ability to maximize the wealth of the shareholders. Furthermore, it assesses the quality of
the firm to create value assessment created overtime. Financial reports identify financial
information which provides understanding into these resources held by an organization, the
claims to these resources including the responsibility of the firm to transfer resources to other
entities, and the effects of transactions, events and conditions that change its resources and
claims to these resources (Glautier and Underdown 2001).
Belkaoui (2002) noted that qualities of financial reports include relevance, understandability,
reliability, completeness, objectivity, timeliness, and comparability. Best, (2009) opined that
fundamental qualitative characteristics (that is, relevance and faithful representation) are most
important and determine the context of financial reporting information.
EMPIRICAL REVIEW
The study conducted by Anaja and Emmanuel (2015) analysed the role of financial statements
on investment decision-making in reference to United Bank for Africa Plc in Nigeria covered the
period of 10 years. They revealed that, the transparency of financial statements of the bank has
significant influence on the investment decision-making of the users of financial statements. All
the parameters estimates employed in the regression equation was statistically significant via
the test of hypotheses. They also agreed that, profitability, assets, liabilities, and equities of
banks have significant ways of evaluating the performance of a bank report on investment
decision-making.