Impact of Regulatory and Supervisory Framework on Financial Reporting Quality of Microfinance Banks in Kwara State, Nigeria

Abstract

The alarming rate of reported cases of winding-up of firms especially among microfinance banks raise serious questions on the information provided through annual reports of these banks. Expectedly, financial reports supposed to give relevant and reliable information about the economic realities of these business but this seems not be so. The level at which microfinance banks complied with regulatory and supervisory framework need to be empirically investigated. Therefore, this study examined the impact of regulatory and supervisory framework on the quality of financial reports of microfinance banks in Kwara State, Nigeria. The study employed a cross-sectional survey research design. The primary data collected through the questionnaire administered to three hundred and one (301) respondents from all microfinance banks in Kwara State were analysed using ordinary least square (OLS) regression analysis. The study found that prudential requirements, reporting requirements and corporate governance requirements have positive and significant effect on the quality of financial reports of microfinance banks in Kwara state, Nigeria as shown by t-values 6.82, 4.582 and 4.141 with p-values of 0.009,0.037and 0.0102 respectively. This result implies that the extent to which management of microfinance banks comply with prudential requirements, reporting requirements and corporate governance requirements explain variations in their financial reports. In view of these findings, this study recommends that regulatory bodies such as CBN and NDIC should ensure that the laid down rules and regulations guiding the conduct and preparation of the financial reports of the microfinance banks in Nigeria are strictly adhere to.