INTERNET FINANCIAL REPORTING BY COMMERCIAL BANKS IN NIGERIA

M.R SANNI, Y.A.O AKINPELU, L.A FATONA, & J.O. OLATUNDE

usiness managers have continuously found the need and access to data can be for Internet in business activities. The areas of need made at convenient times Binclude marketing and advertisement of products and to the users. services, sales and order fulfilments, purchases payment  It offers dynamic updating supports, filing of tax returns and so forth. features, which addresses Another new area, which managers now take advantage the problem of timeliness of is Internet financial reporting. Using the Internet for this of information.

purpose gives rise to the following opportunities:  It provides access to

 It reduces the cost of providing and accessing greater volumes of data corporate financial data by both the producers and than previously possible. users by using an established network structure that all can participate in easily. Some of the questions that readily

 It offers instant results in contrast to paper versions come to mind are: how many banks

36 . Economic & Policy Review October - December 2009 INTERNET FINANCIAL REPORTING BY COMMERCIAL BANKS IN NIGERIA

have websites in Nigeria? How many  the use of hyperlinks contents of financial information of those banks that have websites  the frequency of changes to or generally were not adapted to the have financial information posted on updated to financial information new reporting medium. In another them? Do banks report current and study by Pak-Lok, Li and Yuen annual accounts and notes on their  Control issues such as the (2002) in Hong Kong, one hundred websites? Do banks report interim approval of financial information top companies in terms of market financial reports on their websites? that ultimately appears on values and turnovers in the past 12 Do banks report their 5 year financial corporate websites and the to 24 months to April 2002 were summary in the websites? Do they security infrastructure. sampled. The result is presented post current Auditors’ Reports on below: (Table 1) their websites? Do banks report In a study by Ashbaugh and Warfield Smith and Peppard (2005), online real time movement of their (1999), of companies which practice asserted that for IFR firms, the share prices on their websites? Table 1: The Distribution of Different Types of Online Financial Information by IFR Firms in Hong Kong. The objective of this study therefore, is to investigate the level of internet usage and types of financial information that listed Commercial Banks post on their websites for users of their accounts. The rest of the paper is divided into 4 sections. Section 2 is on review of related literature, while section 3 is on research Source: Pak-Lok, Li and Yuen (2002) methodology. Section 4 is on findings and discussions, while Internet Financial Reporting (IFR), it content of their report should be section 5 is on conclusion and was discovered that 70% of the unambiguous, timely and relevant to recommendation. sampled firms engaged in it. the need of existing and potential However, the financial performance users. It should comprise both Review of Related Literature information reported by these firms financial and non-financial The International Federation of varied substantially in the timeliness information, clearly distinguishing Accountants (IFAC) on the 28 of of online reporting, and hence its between current and historical August 2002 released a paper in usefulness. In their report, Eltredge, information. They conducted in their which it urged management and Richandson and Scholz (2001) work the benchmark of IFR practice directors to develop an Internet revealed that websites were of public liability companies in Reporting Policy, which must determined by the relative Ireland, against international best include the following: sophistication of the firm’s particular practices, and found that no single

 The type of financial information user base. In his own investigation company quoted on the Irish Stock to appear on a corporate on IFR of firms, Exchange met all the criteria listed, website and the format in which Lymer (1997) discovered that 60% and many had room for improvement. that information will be provided of the samples implemented IFR and In his work, Pervan (2002)

 tow to differentiate between that unaudited interim accounts were sampled 38 firms quoted on the audited and non-audited mostly posted on their websites. Croatian Exchange. Of the sample, financial information, as well as Bremnan and Hourigan (1998) 20 had IFR while 18 did not. Those between information that is reported that 65% of samples of listed that used IFR on the whole published subject to securities and firms on the Irish Stock Exchange their annual reports together with the market regulation, and were IFR firms, but location of online auditors’ reports. Most of the information that is meant to financial information was not always companies used the PDF format for supplement what is required. obvious and that the format and the reports published. Firms that

Economic & Policy Review October - December 2009 . 37 INTERNET FINANCIAL REPORTING BY COMMERCIAL BANKS IN NIGERIA

used IFR, it was also found, were driven, whereas others paid more respect to the Croatian sample, it more profitable and their shares were attention to non-technological was discovered that the IFR score more actively traded. factors such as resistance to was statistically significant and Debrencency, Gray and Rahma technological changes, users’ positively correlated with size, (2002) investigated the presentation reluctance to read financial reports profitability, number of shareholders and content of IFR of six hundred and and slow reaction to regulators. and the amount of traffic in the stock sixty large firms in 22 countries, to The results of a survey of top 99 market. It was also revealed by identify the firms and environmental Japanese companies that engaged regression analysis that majority of determinants of IFR. The study in IFR in 1998 by Marston (2003), foreign ownership had a positive revealed that firm size; listing on US showed that majority of the effect on IFR score. Stock Exchange and Technology companies (78) had a website in Pinchegger and Wagenhofer were specific determinants. The English and that of these, 68 (1999) analysed the use of the presentation aspect of IFR was more reported some financial information internet to present financial associated with the identified with 57 providing detailed accounting information by Austrian companies determinants than the content of information. There was no significant listed in most liquid market segment IFR, which suggests that Internet relationship between profitability, of the Vienna Stock Exchange. The presentation technologies were industry group and overseas listing study covered 2 points in time: more related to the determinants status and Internet disclosure. December 1997 and 1999, than the contents of the reports on The study of the largest respectively. The scores of these companies’ websites. companies in UK in 1999 and their firms were analysed across firms In another cross country study disclosure on the internet by Craven and overtime and were compared where detailed dates on websites and Marston (2003), revealed that with those of 30 German DAX characteristics were collected for two there is a statistically significant companies. The results showed that hundred and seventy companies positive relationship between the size Austrians large companies and located in 6 countries (Australia, of a company and the use and extent companies with higher percentages Belgium, , The Netherlands, of disclosure on the internet. There of free floats scored higher. South Africa and the UK), and using was no significant association The work of Probal and Sudipta univanate and multivanate analysis, between industry type and (2007) studied two hundred and sixty Boller, Geering and Hanssik (2006), disclosure. eight companies listed on the Dhaka reported that variables like: company Growthorp and Amat (1999) Stock Exchange and the size, level of internationalisation described the current (1998) level of Chittaogong Stock Exchange. The (foreign listing and foreign revenues), usage of internet communication results showed that only 38.81% of proportion of shares available to technologies by Spanish quoted the sampled firms had a web. In the individual investors and disclosure companies for communication of scoring scheme developed to ensure environment are significantly related financial and other information to the level of online corporate reporting, to the extent of investor related interested parties. An investigation it was discovered that a wide activities on the internet. by Pervan (2006), which compared variation existed in the level of online Xiao, Jones and Lymer (2002) stocks listed on the Croatian and reporting across 15 sectors. The studied the responses of 17 UK Slovene Stock exchange market highest-ranking sector was the experts in ccounting and Internet. showed that Slovene corporations banking, leasing and finance. The experts were drawn from had a statistically significant higher academics, auditing firms, level of financial reporting (as Research Methodology regulators, reporting companies and measured by IFR score). The IFR The population of this study covered users of corporate reports. The result score for 55 corporate entities from all the licensed commercial banks revealed that while these experts Croatian was just 6.85, compared to listed on the Nigerian Stock concurred on some issues, they the average score of 17.73 for 30 Exchange, which are currently 23 in provided a range of different views on Slovene firms. The second aspect of number. The 13 sampled banks cut others. Some were technology the study was explanatory. With across the different sizes and age in

38 . Economic & Policy Review October - December 2009 INTERNET FINANCIAL REPORTING BY COMMERCIAL BANKS IN NIGERIA

the industry so that the result of the Table 2: Distribution of Financial Information on Websites visited. study can validly represent the whole population. The sampled banks were randomly selected from each stratum. The banks selected were those that fairly retained their identities before and after the January 1 2006 consolidation exercise. Selected were 5 ‘old’ generation banks, in addition to 4 ‘new’ generation banks and 4 ‘up- coming’ (that is, neither old nor new) banks. In all, the sampled banks had combined shareholders’ funds Source: Computations by the authors. of N1.690 million, combined total assets of N11.791 million, and which showed that all the top one combined gross earnings of N1.209 that 70% of the sampled firms hundred companies in Hong Kong million and combined total deposits engaged in IFR. All the banks had provided annual reports in their of N9.037 million as at the end of website facilities (attributed partly to websites. The non availability of 2008. due to the January 2006 current annual accounts by the The website addresses of the recapitalisation exercise of minimum sampled Nigerian banks might be sampled banks were collected from issued share capital from N2 billion due to the fact that it sometimes various sources such as the banks’ to N25 billion) that led to banking takes some months after the published financial statements and consolidation and reduction in the financial year for most firms to publications by the Nigerian Stock number of commercial banks from 89 prepare their audited financial Exchange and the Central Bank of to 25, and later to 23. With statements. Nigeria (CBN). The data were consolidation, came stiff competition Only a small percentage (23%) collected from visits to these and huge investments in Information of the sampled IFR banks featured identified web addresses between Communication and Technology their interim financial reports online, the months of September and (Sanni, 2008) with its attendant contrary to the findings of Pak -Lok, November 2008. This was benefits. Li and Yuen, where the bulk (89%) deliberately done, as Nigerian banks Majority of the sampled banks in of the sampled firms featured theirs. do not have a uniform accounting the study engaged in one form of While not justifying the Nigerian date. The data collected were then Internet financial reporting or the situation, it must be pointed out described using simple percentages other. This is quite in agreement with however, that the economy of Hong in order to be in line with previous the earlier works of Ashbaugh and Kong is far more developed than that works on this topic. Warfield, Lymer and Bremnan and Hourigan. Just like in the earlier of Nigeria. A positive correlation however, exists between the number Findings and Discussions works, not all the sampled firms fully of sampled Nigerian banks that did This section presents and complied with all the requirements. not feature their current annual discusses the result of the data Most of the sampled banks (62%) accounts (62%) and those that did collected and analysed. (Table 2) did not feature their current annual not feature their interim financial It is clear from the above that all Accounts and notes in their reports online (77%). the sampled banks had websites. websites. Where current annual More than 1/3 (38%) of the This is contrary to the findings of Accounts were shown, sampled banks had their 5-year Lymer where just 60% of the accompanying notes were not financial summary online. This is sampled firms implemented IFR, shown. This is contrary to the quite expected as only 38% of the and that of Ashbaugh and Warfield findings of Pak -Lok, Li and Yuen,

Economic & Policy Review October - December 2009 . 39 INTERNET FINANCIAL REPORTING BY COMMERCIAL BANKS IN NIGERIA

sampled banks were able to post price movement is not a statutory useful to users of accounts, and their current annual accounts and requirement. It is however observed that most of the information posted notes (which must statutorily that most of the companies that on the websites is already stale. contain 5 year financial summary) show their end of the financial year Most information on Nigeria banks’ on line. share price quotations are blue chip websites are mainly on services It is also observed that less than companies in the banking and provided by these banks. 1/3 (31%) of the sampled banks Information on share price featured their Auditors’ Reports movements, earnings per share and online. Though the percentage of It is also observed that dividend per share are not provided. the sampled banks that featured Though, we appreciate the fact their current annual accounts and less than 1/3 (31%) of that aggressive investment in ICT notes is quite small (38%), one the sampled banks fea- started in Nigeria in 2006, with the would have expected all of them to consolidation in the banking sub- feature their Auditors’ Reports, tured their Auditors’ sector of the economy, Nigeria can being a statutory requirement. The Reports online. not avoid to be left behind finding here negates that of Pervan, technologically, more so, that the whose finding showed that all the world has become a global village Croatian firms that published their brewery sectors of the Nigerian with the abundant benefits of the annual reports online did so with economy. internet. In order to assist academic their Auditors’ Reports. researchers and other users of Majority of the sampled banks Conclusion and Recommendation financial statements, we (85%) did not report their share The study revealed that all the recommend that Nigerian banks price movement real time online. sampled banks have presence on the should overhaul the IFR section of This is consistent with the findings Internet, and that majority of them their websites in line with the best of Pak -Lok, Li and Yuen, where are Internet reporting firms. However, globally accepted practices, in 72% of the sampled companies in we discovered that only very few of order to fulfil their objectives and Hong Kong did not. Reason for this these banks feature information that those of users of financial

might be due to the fact that share is comprehensive enough to be information. e p r

M.R Sanni, Y.A.O Akinpelu, L.A Fatona, & J.O. Olatunde, are of the Department of Accountancy, Federal Polytechnic, Ilaro, Ogun State. [email protected]

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