The impact of compliance with regulatory laws on financial reporting quality of Deposit Money Banks in Nigeria

Abstract

This paper assesses the impact of compliance with regulatory laws (Companies and Allied Matters Act (CAMA), Banks and Other Financial Institutions’ Act (BOFIA), the Central Bank Prudential Guidelines and Nigerian Deposit Insurance Corporation (NDIC) Act) on financial reporting quality of Deposit Money Banks (DMBs) in Nigeria. Data was collected from the annual reports and accounts of 12 DMBs over the period of 6 years (2011-2016). Compliance Index, descriptive statistics, Pearson’s Correlation statistics and multiple regression analysis were utilized to analyze the data. The results indicate that DMBs overall compliance with the requirements of the regulatory laws is 97.78% which is high. It was also revealed that DMBs compliance with CAMA, BOFIA, and NDIC Act has a positive and significant influence on their financial reporting quality while compliance with Central Bank prudential guidelines has a negative but insignificant influence on the financial reporting quality. The study therefore concludes that DMBs compliance with regulatory laws like accounting standards significantly improves their financial reporting quality hence information disclosure in the financial statements for users’ decision making. The study recommends that the Financial Reporting Council of Nigeria (FRCN) should continue to recognise these regulatory laws for financial reporting purposes in the country side by side with International Financial Reporting Standards (IFRS) but make efforts to remove any inconsistent financial reporting requirements with IFRS in order to ensure global comparability of financial reports of DMBs in Nigeria.