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40 International Journal of Management Vol. 30 No. 1 March 2013 The Impact of Bank Board Composition, Top Management Equity Interest and Audit Committee Effectiveness on Top Management Transparency Udoayang Joseph Offiong University of Calabar, Nigeria Uket Eko Ewa Cross River University of Technology, Nigeria The aim of this study was to determine the impact of bank board composition, top management equity interest and audit committee effectiveness on top management transparency on the performance of Banks in Nigeria.Data were collected from thirteen Nigerian banks using a Four Point Scale Likert questionnaire and analyses using percentages and ratios. Multiple regressions were used in testing the hypotheses. The study revealed that top management equity interest influences the level of correct financial disclosures and transparency that Audit Committees are not effective and independent of management and members’ appointments are not based on integrity, competence and expert ise of individuals.The study concluded that forensic accounting practice if incorporated in the banking operations will improve top management transparency and good corporate governance in the Nigerian banking sector which ultimately will improve the performances of Nigerian Banks. Based on the findings, we recommend independence of bank’s audit committees as well as integrity, competence and expertise as pre-requisite for appointment as Audit Committee membership. IntroductionBusiness failures have an economic implication which is disastrous to the economy of any nation. In fact big investment frauds and trading scams have resulted in the loss of billions of dollars from gullible people. Nigeria is not an exception. There are various advanced fee frauds in Nigeria and other investment frauds that have bedeviled the Nigerian economy and the world. Bernard Ma doff, a former chairman of Nasdaq Exchange was arrested for running a $50 billion Ponzi scheme.It is alleged that his o peration is the largest ponzi scheme in history. (Nikhil, 2009). In Nigeria, we have experienced many failed banks and finance houses in the late 1980s and 1990s. Many of the banks chief Executives absconded abroad while some were tried due to their involvements in employee related frauds and money laundering scams. Nigeria has witnessed corruption in all facets of her polity and economy which includes the banking sector.Ajayi, (2005) as cited in Adegbaju and Olokoyo, (2008) maintained that banking sector reforms in Nigeria are driven by the need to deepen the financial sector and reposition the Nigerian economy for growth; to become integrated into the global financial structural design and evolve a banking sector that is consistent with regional integration requirements and international best practices. It also aimed at International Journal of ManagementVol. 30 No. 1 March 2013 41 addressing issues such as governance, risk management and operational inefficiencies which forensic accounting practices is geared towards achieving. After the appointment of Sanusi Lamido as Governor of the Central Bank of Nigeria, the Nigerian banking sector experienced turbulent crises as a result of the reforms introduced by him. Most banks that hitherto were adjudged liquid were declared insolvent.The management boards of many quoted banks were dissolved by the Central Bank of Nigeria and some top management staff were reported to the Economic and Financial Crime Commission for prosecution for fraud and mismanagement of funds and so constituting economic crimes. The Banks’ overall risk management was questionable. Against this background, the research is geared towards ascertaining the impact of bank board composition, top management equity interest and audit committee effectiveness on top management transparency.Theoretical Framework Fraud or intentional deception is a strategy to achieve a personal or organizational goal or satisfy a human need. A threat to survival or satisfy a need may cause one to choose either dishonest or honest means. The fraud triangle theory propounded by Donald Cressey states that every fraud has three things in common: (1) Pressure sometimes referred to as motivation and usually a â€Å"un-shareable need†; (2) Rationalization of personal ethics; and (3) Knowledge and opportunity to commit the crime.Pressure according to Singleton et al (2006) in their work on the fraud triangle theory stated that pressure or incentive or motivation refers to something that has happened in the fraudster’s personal life that creates a stressful need for funds and thus motivates him to steal. This motivation centers on some financial strain but it could be the symptoms of other types of pressures. Other types of pressures or motivations include; social and political survival (egocentric and ideological motives) and psychotic.Kenyon and Tilton (2006), Management or other employees may find themselves offered incentives or pl aced under pressure to commit fraud. They sighted as an example that when remuneration or advancement is significantly affected by individual, divisional or company performance, individuals may have an incentive to manipulate results or to put pressure on others to do so. Likewise, pressure may come from the unrealistic expectations from investors, banks or other sources of finance.They therefore stated that incentives or pressures may take a variety of forms within an organization. These include; bonuses or incentive pay representing a large portion of an employee or group’s compensation, triggers built into debt covenants tied to share price targets and levels, significant stock option awards throughout the organization but particularly to top management, and aggressive earnings-per-share and revenue targets set by top management and communicated to analysts, investment bankers, and other market participants, ith resultant pressure from these groups. Rationalization and att itude according to Kenyon and Tilton, (2006) in their write up on Potential Red Flags and Fraud Detection Techniques stated that some individuals are more prone than others to commit fraud. That all things being equal, the propensity to commit fraud depend on people ethical values as well as on their personal circumstances. 42 International Journal of Management Vol. 30 No. 1 March 2013 They asserted that ethical behavior is motivated both by a person’s character and by external factors.External factors include job insecurity such as during a downsizing or redundancy or a work environment that inspires resentment such as being passed over for promotion. Also external environment includes the tone at the top – the attitude of management toward fraud risk and management’s response to actual instances of fraud. They posited that when fraud has occurred in the past and management has not responded appropriately, others may conclude that the issue is not taken seriou sly and they can get away with it.Instances may exist that create opportunities for management or other staff to commit fraud. When such opportunities arise, according to Kenyon and Tilton, (2006), those who might not otherwise be inclined to behave dishonestly may be tempted to do so. They stated that absent or ineffective controls, lack of supervision or inadequate segregation of duties may provide such opportunities. Also according to Cressey’s research (i. e. , the Fraud Triangle), fraudsters always had the knowledge and opportunity to commit the fraud.Tommie and Singleton et al stated that the ‘Report To The Nation (RTTN) (2004) research carried out by Association of Certified Fraud Examiners showed that most employees and managers who commits fraud tend to have a long tenure with a company. A simple explanation deduced by the scholars is that employees and managers who have been around for years know quite well where the weaknesses are in the internal controls and have gained sufficient knowledge of how to commit the crime successfully.Skalak, Alas, Sellitto (2006) in their contribution ‘Fraud: An introduction’ in the book â€Å"A Guide to Forensic Accounting and Investigation† stated that, the increased size and impact of financial reporting scandals and the related loss of billion of dollars of shareholder value have rightly focused both public and regulatory attention on all aspects of financial reporting fraud and corporate governance.They postulated that some of the issues upsetting investors and regulators – for example, executive pay that could be considered by some to be excessive are in the nature of questionable judgments, but do not necessarily constitute fraud. On the other hand, there have been more than a few examples of willful deception directed toward the investing community via fabricated financial statements, and many of these actions are gradually being identified and punished.They stated that t he investing public may not always make a fine distinction between the outrageous and the fraudulent – between bad judgment and wrongdoing. However, they stated that professionals charged with the deterrence, discovery, investigation and remediation of these situations, a systematic and rigorous approach is essential. They therefore formulated what they called ‘Fraud Deterrence Cycle’ which they opined without an effective regimen of it, fraud is much likely to occur.They acknowledged that even with fraud deterrence regimen effectively in place, there remains a chance that fraud will occur. Thus absolute fraud prevention is a laudable but unobtainable goal. Fraud deterrence elements include establishment of corporate governance, implementation of transaction-level control processes often referred to as the system of internal accounting controls, retrospective examination of governance and control processes through audit examinations and International Journal of M anagement Vol. 30 No. 1 March 2013 43 investigation and remediation of suspected or alleged problems.Corporate governance is an entire culture that sets and monitors behavioral expectations intended to deter the fraudster. In order to execute effective governance, boards and management must effectively oversee a number of key business processes including strategy and operation planning, risk management, ethics and compliance, performance measurement and monitoring, mergers, acquisitions, and other transformational t ransactions, management evaluation, compensation, and succession planning, communication and reporting, governance dynamics.Transaction-level controls or system of internal accounting Controls: They are accounting and financial controls designed to help ensure that only valid, authorized, and legitimate transactions occur and to safeguard corporate assets from loss due to theft or other fraudulent activity.These procedures the authors stated are preventive because they m ay actively block or prevent a fraudulent transaction from occurring. Retrospective Examination: According to Skalak, Alas, Sellitto (2006), the first two elements of the Fraud Deterrence Cycle are the first line of defense against fraud and are designed to deter fraud from occurring in the first place.Oyejide, and Soyibo, (2001) in their paper â€Å"Corporate Governance in Nigeria† cited (Rwegasira, 2000) stated that Corporate governance, as a concept, can be viewed from at least two perspectives: a narrow one in which it is viewed merely as being concerned with the structures within which a corporate entity or enterprise receives its basic orientation and direction; and a broad perspective in which it is regarded as being the heart of both a market economy and a democratic society (Sullivan, 2000).The narrow view perceives corporate governance in terms of issues relating to shareholder protection, management control and the popular principal-agency problems of economic theo ry. In contrast, Sullivan (2000), a proponent of the broader perspective uses the examples of the resultant problems of the privatization crusade that has been sweeping through developing countries since the 1980s, and the transition economies of the former communist countries in the 1990s, that issues of institutional, legal and capacity building as well as the rule of law, are at the very heart of corporate governance.Hamid, (2009) in his article ‘The impact of the Composition of Audit Committee on organizational and physical controls of Banks in Nigeria’ stated that there is no generally accepted definition of corporate governance which enjoys a consensus of opinion in all settings and countries of the world. That the concept is defined and understood differently in different parts of the world depending on the relative powers of the owners, managers and providers of capital.Klapper and Love (2002) as cited by Hamid, suggested four components of an effective Corporat e Governance; Board Composition, Board Size, Power Separation and Audit Committee composition. In its preface on the Code of Corporate Governance in Nigeria document, the Securities and Exchange Commission (SEC) in collaboration with the Corporate Affairs Commission stated as follows: †¦ Long before the highly publicized corporate scandals and failures worldwide, the global community has shown increasing concern on the issues of corporate 44International Journal of Management Vol. 30 No. 1 March 2013 governance. The reason for this trend is not far to seek. There is growing consensus that corporate governance, which has been defined as the way and manner in which the affairs of companies are conducted by those charged with the responsibility, has a positive link to national growth and development. The Commission further stated that the importance of effective corporate governance to corporate and economic performance cannot be over-emphasised in today’s global market pla ce.Sir Adrian Cadbury Committee set up in May 1991 in its report â€Å"Report of the Committee on the Financial Aspects of Corporate Governance† on 1 December 1992 in an effort to stem the financial scandals and generally improve corporate governance of United Kingdom companies gave rise to accompanying Code of Best Practice which was adopted by the London Stock Exchange on 30 June 1993 and proposed a system of self regulation by listed companies.Ramaswamy, (2005) further stated that the failure of the corporate communication structure has made the financial community realize that there is a great need for skilled professionals that can identify, expose and prevent weaknesses in three key areas: Poor corporate governance, flawed internal controls and fraudulent financial statements.The author further said the recent corporate scandals came as a shock not just because of the enormity of failures like the Enron, Adelphia communications, WorldCom, Lehman Brothers, Stamford Group and AIG in the US, Cadbury in Nigeria and Parmalat in Italy, but because of the discovery that questionable accounting practice was far more insidious and widespread than previously envisioned. A definite link between these accounting failures and poor corporate governance is thus beginning to emerge.According to Ramaswamy (2005), presently an increasing number of researchers are finding that poor corporate governance is a leading factor in poor performance, manipulated financial reports and unhappy stakeholder. In their research on corporate governance and bank performance in the US, Spong, and Sullivan, (2007) stated that individuals with much of their wealth concentrated in a bank are likely to have a strong incentive to put forth greater effort and also to be more careful in the risks they choose to take than managers with significant motivations and financial incentives.They asserted that the separation between management and ownership in financial theory is referred to as pri ncipal-agent problem which may lead hired managers to maximize their own utility rather than that of the firm. Glassman and Rhoades (1980) compared financial institutions controlled by their owners with those controlled by managers and found that the owner-controlled institutions had higher earnings. Allen and Cebenoyan (1991) found that banking holding companies were more likely to make acquisitions that added to firm value when they had high inside stock ownership and more concentrated ownership.Cole and Mehran (1996) discovered higher stock returns at thrifts that had either had a large inside shareholder or a large outside shareholder. In Nigeria in the contrary, Orogun, (2009) citing Adedeji stated that bank failures in Nigeria are attributed to inadequate capital base, fraudulent, self serving and corrupt practices of the owners and managers, meddlesome interference of board members in the day to day running of the institution and regulatory laxity. On the application of Audit Committees as components of good International Journal of Management Vol. 0 No. 1 March 2013 45 corporate governance in Nigeria, Hamid (2009) citing Wilson (2007) stated that Nigeria Deposit Insurance Corporation (NDIC) Act of 1988, the Central Bank of Nigeria (CBN) Act of 1991, the various prudential guidelines issued by the Central Bank of Nigeria, the listing requirements of the Nigeria Stock Exchange (NSE) and the Securities and Exchange Commission (SEC) rules and Securities and Exchange Commission code of corporate governance 2003, the Central Bank of Nigeria code of corporate governance for banks 2006 must be abided by banks.Hamid (2009) in his research published and titled, ‘The impact of the composition of audit committee on organizational and physical controls of banks in Nigeria’ observed that a number of banks did not adhere to the composition requirement for good corporate governance in the Banks and thus affects the quality of control mechanisms that are i nstituted to safeguard operations in the banking industry. Also the study revealed that unrestricted appointments of executive directors on audit committees decreased the monitoring provided by the committees and it’s effectiveness in checking management scandal and sustaining the effectiveness of ccounting and internal control systems. The study also revealed that the composition of audit committees have an impact on physical control of banks in Nigeria. This result is consistent with earlier findings by Uzun, Szewezyk and Varma (2004) which indicated that a higher degree of independence of the audit committee is associated with a higher control thus lower likelihood of corporate fraud. Transparency and accountability has been a hot debate in the management of businesses and governance all over the world. In fact it is a barometer for measuring business competitiveness among nation states.According to Oladoyin,, Elumilade, and Ashaolu, (2005), the issue of transparency and a ccountability in financial institutions is one that cannot be readily glossed over. That transparency and accountability constitute pivotal features of any respectable public official or professional practitioner. In recent years, there has been great concern on the management of banks’ assets and liabilities because of large scale financial distress. Adam,(2009). The banking sector has been singled out for the special protection because of the vital role banks play in an economy.Bank supervision entails not only the enforcement of rules and regulations, but also judgments concerning the soundness of bank assets, its capital adequacy and management. Volcker,(1992). In Nigeria, the rising cases of bank distress have also become a major source of concern for policy makers. McNamara, C (2009) stated that performance management is a relatively new concept to the field of management. That performance management reminds us that being busy is not the same as producing results. It re minds us that training, strong commitment and lots of hard work alone are not results.That the major contribution of performance management is its focus on achieving results — useful products and services for customers inside and outside the organization. Despite the recent attention to achieving maximum performance, McNamara (2009) stated that there is no standard interpretation of what 46 International Journal of Management Vol. 30 No. 1 March 2013 that means or what it takes to get it. However having stated what people are suggesting that it takes for organizations to achieve maximum performance he stated that, we should be aware of the various views and be able to choose our own.The efficiency and competitiveness of financial institutions cannot easily be measured, since their products and services are of an intangible nature. Idialu, and Yomere, in their article â€Å"Stochastic frontier analysis of the efficiency of Nigerian Banks† cited Berger, Hunter and Timme (1993) as defining efficiency as the ratio of the minimum costs that could have been expended to produce a given output bundle to the actual costs expended. Arshadi and Lawrence (1987) on the other hand, measures bank performance using normal correlation analysis.Srinivane (2009) capsulate that banks are exposed to credit risk, liquidity risk, interest risk, market risk, operational risk and management/ ownership risk. He stated that it is the credit risk which stands out as the most dreaded one. Considering the Nigerian banking history and customers attitude to credit obligations, this is the most dreaded risk in Nigeria. Though often associated with lending, credit risk arises whenever a party enters into an obligation to make payment or deliver value to the bank.Srinivani (2009). The nature and extent of credit risk, therefore, depend on the quality of loan assets and soundness of investments. Based on the income, expenditure, net interest income and capital adequacy one can comm ent on the profitability and the long run sustenance of the bank. Research Methodology The study employed the survey research method using the technique of interview to complement the questionnaire administration and review of documentary sources.The questionnaire was structured in a four point likert scale model where strongly agreed was assigned 4 points, agreed assigned 3 points, disagree assigned 2 points and strongly disagreed assigned 1 point. Scope of Research Area Thirteen publicly quoted commercial banks were selected as the study population from the twenty four commercial banks operating in Nigeria. The selection covers both the first generation Banks, second generation Banks and Banks that emerged from mergers of more than one bank during the recent bank consolidation in Nigeria. Their choices are premeditated on their size and their banking coverage.Model Specification To examine the impact of bank board composition, top management equity interest and audit committee eff ectiveness on top management transparency in the Nigerian banking sector, hypothesis formulated was developed into models and was subjected to empirical test using multiple regression analysis, percentages comparison and ratio analysis. y = ? 0 + ? 1x 1+ ? 2Ãâ€"2 + †¦+ ? nxk +? ijk Where ? 0 = Regression Constant and ? 1, ? 2, ? 3 †¦ ? n are = regression coefficients Where ? 0 and ? 1 are obtained by solving simultaneously the equations: International Journal of Management Vol. 30 No. 1 March 2013 47 y = ? 0N+ ? 1? X ?XY = ? ? X + ? ?X2 0 1 Where y = Dependent variable, x = Independent variables Estimation and validation To determine the use-ability of the questionnaire on the Impact of Bank Board Composition, Top Management Equity Interest and Audit Committee Effectiveness on Top Management Transparency in the Nigerian banking sector, the questionnaire was built on a four point Likert scale on one hundred and forty eight respondents. To determine the use-ability, item-te st correlation coefficient were computed. All item-test correlation lie in the range r=0. 6  ±0. 1. They were considered significant and useable.Analysis of Data Table 1 shows that 50(34%) respondents strongly agreed that their top management equity interest in their banks influences their level of financial disclosure. 46(31%) respondents also agreed that their top management equity interest in their banks influences their level of financial disclosure while 52(35%) respondents strongly disagreed that their top management equity interest in the bank influences their level of financial disclosure. Table 1. Top Management transparency, Banks Board composition, Top Management equity interest and Audit Committee effectiveness Research Question Whether top anagement equity interest in the Bank influence her level of financial disclosures. Whether Audit Committees are effective, efficient and independent of management. Whether the composition of Bank boards is based on director’ s individual integrity, knowledge of industry and competence high? Whether top management is transparent in her decision making? Opinion of Respondents Strongly (%) Agreed (%) Disagreed (%) Strongly (%) Total Agreed disagreed 50 34% 46 31% 52 35% 0% 148 0 0% 50 34% 98 66% 0% 148 4 3% 48 32% 96 65% 0% 148 0 0% 35 24% 113 76% Source: Data from questionnaire analysis based on responses 0% 0% 148 48International Journal of Management Vol. 30 No. 1 March 2013 In a related matter, 35(24%) respondents agreed that their top management is transparent in her decision making process as it affects the bank and their personal interests. 113(76%) respondents however disagreed that their top management is transparent in her decision making process as it affects the bank and their personal interests. 50(34%) respondents agreed that their banks audit committees are effective, efficient and independent of management while 98(66%) respondents disagreed that their banks audit committees are effective, efficient and independent of management.Also, 4(3%) respondents strongly agreed that the composition of their Bank Boards is based on the fact that the individuals’ integrity, knowledge or expertise of the industry and competence are very high. 48(32%) respondents also agreed that the composition of their Bank Boards is based on the fact that the individuals’ integrity, knowledge or expertise of the industry and competence are very high. However, 96(65%) respondents disagreed that the composition of their Bank Boards is based on the fact that the individuals’ integrity, knowledge or expertise of the industry and competence are very high. HypothesisNull (N0): Top management transparency does not depend significantly on Bank board composition, top management equity interest and audit committee effectiveness. Alternate (N1): Top management transparency depends significantly on Bank board composition, top management equity interest and audit committee effectiveness. Let y = represent dependent variable and Let x1-3 = represent independent variables Variables in the Hypothesis Dependent Variable (y) = Top management transparency Independent variable (x1) = Top management equity interest. Independent variable (x2) = Audit Committee effectiveness Independent variable (x3) Bank board composition To test the hypotheses, multiple regression analysis was used with top management transparency variable as the dependent variable and bank board composition, top management equity interest and audit committee effectiveness as independent variables. The means are not equal, at least among the predictor variables suggesting that they may not have the same predictive ability. The standard deviation though small gives us the assurance that there is variation in the variables as we move from bank to bank as reflected in table 2. The inter-variable correlations were computed via the Pearson product moment formulae.These correlation coefficients are given in tabl e 3. From table 3, we observed that the three independent variables correlates significantly International Journal of Management Vol. 30 No. 1 March 2013 49 with the dependent variable (first row and column) since the associated probabilities are all less than the chosen level of significance. The inter correlations among the independent variables are also significant. Though this phenomenon is desirable in a multiple regression analysis, it validates our claim that they are all elements of the one variable called good corporate governance in forensic accounting practice.The significance of their correlation with the dependent variable suggests that they may be significant predictors of top management transparency. To test the significance of their predictive ability collectively, the prediction model parameters were estimated and tested for significance using the F-ratio test. The results are presented in table 3. From table 4, the estimated F-value (77. 233) is greater than the cr itical F-value (2. 600) with 3,144 degrees of freedom and at 0. 05 levels. Also, the probability associated with the observed F-value (0. 000) is less than the chosen level of significance.Consequently the null hypothesis is rejected in favor of the alternative. This means that top management transparency depends significantly on top management equity interest, audit committee effectiveness and bank board composition as elements of good corporate governance in forensic accounting practice. The R-squared value of 0. 617 and its adjusted form of 0. 609 together indicate that between 60. 9% and 61. 7% of the total variation in top management transparency is accounted for by top management equity interest, audit committee effectiveness and bank board composition with a standard error of estimate of 0. 67. Table 2. Mean and standard deviation of the four variables Variable Top management transparency Top management equity interest Bank Boards Composition Audit Committee effectiveness Mea n 2. 237 2. 987 2. 378 2. 338 Standard deviation 0. 426 0. 833 0. 540 0. 475 Source: Data from questionnaire analysis based on responses Table 3. Inter correlation among Top Management transparency, Management equity interest, Board composition and Audit Committee effectiveness. Variable Y X1 X2 X3 Y 1. 000 0. 680* 0. 779* 0. 762* X1 0. 680* 1. 000 0. 872* 0. 829* X2 0. 779* 0. 872* 1. 00 0. 932* *Significant at 0. 05 level, p < 0. 05 Y = Top management transparency X1 = Top management equity interest. X2 = Audit Committee effectiveness X3 = Bank board composition Source: Data from questionnaire analysis based on responses X3 0. 762* 0. 829* 0. 932* 1. 000 50 International Journal of Management Vol. 30 No. 1 March 2013 The relative contribution of each of the independent variables to the prediction of top management transparency is estimated as regression coefficients and tested for significance using the t-test. Table 5 is summary of the results.From the table, the computed t-value for the regression constant (5. 336) and audit committee effectiveness (3. 320) are greater than the critical t-value (1. 976). Their associated probabilities (0. 000 and 0. 001) for the regression constant and audit committee effectiveness respectively are less than the chosen level of significance. This means these are the significant contributors to the prediction of top management transparency. The contribution of the other two variables: top management equity interest and bank board composition do not contribute significantly to the prediction of top management transparency.All the same, the obtained prediction model is: y= 0. 616 – 0. 009Ãâ€"1 + 0. 487Ãâ€"2 + 0. 215Ãâ€"3 Where y= x1 = x2 = x3 = Top management transparency Top management equity interest Audit Committee effectiveness Bank Board Composition. Table 4. Model summary and ANOVA for the prediction of top management transparency. R R-Square 0. 785 Source of variation Regression Residual Total 0. 617 Sum of S quares 16. 480 10. 243 26. 723 Adj. R-Square 0. 609 Df. 3 144 147 Std Error 0. 267 Mean Square 5. 493 0. 071 R. Square Change 0. 617 F Sig. 77. 233* 0. 000 * Sig. at 0. 05 level. F(3,144) = 2. 600Source: Data from questionnaire analysis based on responses Table 5. Regression constant and coefficients for the prediction of top management transparency. Variable Constant Top Management equity Audit effectiveness Bank Board Composition Un-standardized Coefficients B Std Error 0. 616 0. 115 -0. 009 0. 054 0. 487 0. 147 0. 215 0. 113 Standard Coefficients Beta * Significant at 0. 05; p < 0. 05. Source: Data from questionnaire analysis based on responses -0. 02 0. 542 0. 272 T Sig. 5. 336* -0. 172 3. 320* 1. 903 0. 000 0. 864 0. 001 0. 059 International Journal of ManagementVol. 30 No. 1 March 2013 51 Findings The study revealed that top management equity interest in the banks influences the level of correct financial disclosures of the banks and their level of transparency. This ran contr ary to recent research findings in the United States where it was revealed that individuals with much of their wealth concentrated in a bank are likely to have a strong incentive to put forth greater effort and also to be more careful in the risk they choose to take. Audit Committees are not effective, efficient and independent of management of the banks.Likewise, the appointment of the committee members is not based on integrity, competence and expertise of candidates. Conclusions The Nigerian Banking sector which constitutes over 70% of volume trading in the past four years being the most active sector in the capital market will strive for better if the issue of good corporate governance and ethical conduct by bank directors and management is addressed. The study therefore recommended that the composition of banks audit committees should be based on integrity, competence and knowledge or expertise of individuals and it should be independent of management.Those banks should have as one of their reporting requirements a statement on compliance to good corporate governance. References Ademola, T O and Soyibo A (2001), Corporate governance in Nigeria. Paper presented at conference of Corporate Governance, Accra, Ghana. 20-30 Adegbaju, A. 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(2004), Board composition and corporate f raud, Financial Analysts Journal, 60(3), 33-43 International Journal of Management Vol. 30 No. 1 March 2013 3 Wilson, I. (2007), Regulatory and institutional challenges of corporate governace in Nigeria post consolidation. Nigerian Economic Summit Group (NESG) Economic Indicators, April-June, Vol. 12, No 2. Contact email addresses: [email  protected] com [email  protected] com Copyright of International Journal of Management is the property of International Journal of Management and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.