Macroeconomic factors, corporate governance and financial malpractices in Nigerian banks
| DOI | https://doi.org/10.1108/JMLC-05-2020-0059 |
| Published date | 24 July 2020 |
| Date | 24 July 2020 |
| Pages | 647-658 |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Alexander Ehimare Omankhanlen,Ediomi Abasi-Favor Tometi,Ese Urhie |
Macroeconomic factors, corporate
governance and financial
malpractices in Nigerian banks
Alexander Ehimare Omankhanlen and Ediomi Abasi-Favor Tometi
Department of Banking and Finance, Covenant University, Ota, Nigeria, and
Ese Urhie
Department of Economics and Development Studies,
Covenant University, Ota, Nigeria
Abstract
Purpose –Many studies have traced thecollapse of most banks in the past to weak corporate governance.
In response to this, theCentral Bank of Nigeria established a Code of Corporate Governancewhich was made
mandatory for all banks in Nigeria since 2003. Fifteenyears after this provision the amount of actual loss
attributed to financial malpracticesin banks is still substantial. Available statistics show that the number of
fraud cases has beenon the increasein recent times.
Design/methodology/approach –This study examined the extent to whichcorporate governance has
mitigated or moderatedthe effect of two macroeconomic factors –unemploymentand inflation –on fraud in
Nigerian banks. An interactive model was specified and estimated with PROCESS –a computational tool
developedby Andrew Hayes.
Findings –The result revealed that while the structure of corporate governance by banks in Nigeria
moderatesthe effect of unemployment, the reverse is the case for inflation.
Practical implications –This goes to show that the motivation factor stipulated by the fraud triangle
theory holdssway in Nigeria.
Originality/value –It is recommended that effortsto bring a lasting solution to the challenge of financial
malpracticesin Nigerian banks must adopt a holistic approach.
Keywords Unemployment, Inflation, Corporate governance, Fraud, Bank
Paper type Research paper
1. Introduction
Financial malpractices in banks generally and frauds and forgeries in particular have
several adverse consequences for all banks’stakeholders and the economy in general.
These include large financial losses to bank and other stakeholders; inadequate
liquidity, banks’inability to satisfy the demand of their customers and other
obligations, poor asset base, excess liability, insolvency as well as the depletion of
shareholders’capital base (Owolabi, 2010;Clementina and Isu, 2016;Kawugana and
Faruna, 2018). In addition, Clementina and Isu maintains that the failure of banks will
eventually render the workers jobless. The intermediation role of the bank will cease,
and investors will suffer loss of investment. All these may eventually lead to reduction
in the standard of living of the nation as a whole. Poor corporate governance has been
The authors appreciate the financial support of Covenant University Centre for Research, Innovation,
and Discovery (CUCRID) for the conduct and publication of this research paper.
Financial
malpractices in
Nigerian
banks
647
Journalof Money Laundering
Control
Vol.24 No. 3, 2021
pp. 647-658
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2020-0059
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