CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
A student who sits for examination expects result. A farmer who plants crops expects results. The same is also true of an investor. A result sheet or a report card would usually sulfuric for a student. For the farmer, the result mighty be communicated to him in the from of a bumper harvest. However, in the case of an investor, then result is communicated through the financial reports. Financial reports are by law to be prepared by every limited liability company. These limited liability companies abound in virtually all sector of the economy. Every company shall cause accounting records to be kept. The accounting records shall be suicient to show and explain the transitions of the company and shall be such as to disclose with reasonable accuracy, at the any time the financial position of the company. Financial reports in the banking industry are of great interest to the general public because the banks directly or indirectly interact with people. This public interest has caused companies (including banks) to accept social as well as economic. Financial and legal responsibilities and has created a consequence, a growing need for the communication of information to account of the results which are of considerable interest to a wide range of individuals and organisations. So, it become very imperative for reliable information to be circulated to interests parties which can enable them to acquire an essential knowledge of the way in which companies particularly the banks are performing in relation to the public interest. This fact is further educated by the recommendations of the working set up in Britain by the accounting standard committee in October 1974 under the chairmanship of Derek Booth man which took a study of the scope and aim of published financial statement. The committee recommended that: “The fundamental objective so corporate reports are to communicate economic measurement of information about the resource and performance of the reporting entity useful to those having reasonable rights to such information”. It is not an over statement when one says that the banking industry in the fulcrum on which the national economy rotates. This mammoth impact upon a country economy therefore makes it a public aair ie everybody in the country has a right to know what such organisations are doing, more so all information, necessary to explain the organisation activities fully should be provided in the annual reports. One of the most significant aspects of the information system of business enterprises in an economy is that which deals with the communication of financial data, especially in describing business profitability and financial position.
1.2 STATEMENT OF PROBLEMS
The genuineness of financial reports has attracted diverse opinions from different quarters; such opinions can come from the general public, tax authorities, shareholders, creditors with long to short term interest financial analysis and potential investors. They argue that the financial reports do not usually give an accurate data about the activities of such business concerns, for example, the idea of stating assets at their historical costs do not favour most investors as they argue that inflation is not usually taken care of, though the real value of such assets might have been eroded. Again, since the financial reports are prepared by management’s, the shareholders and other argue that there would usually be some elements of bias on the part of management in the disclose of management’s financial ineptitude. But in any case the management claims that some inherent problems would usually affect the accuracy of such reports. It is therefore the intention of this researcher to delve into this matter to enable him establish a relationship between financial reporting and performance evaluation in a bank.
1.3 OBJECTIVE OF THE STUDY
Those companies in the banking industry have had to face the anerous task of presenting a credible and generally acceptable financial statement in their annual reports, to various people to whom they own such obligations. The specific objective of this study is to:
– Examine the impact of financial reporting on bank performance. Other objectives are:
– Find out whether financial reports are prepared to fight inflation in the economy.
– To ascertain whether or not management financial ineptitude is usually disclosed to shareholders while preparing financial reports.
1.4 RESEARCH QUESTION
The researcher formulated the following research question:
– What are the impact of financial reporting on bank performance.
– Is financial reports prepared to fight inflation in the economy?
– Does the management of union bank disclose the content of the financial report to their shareholders?
– To what extent does financial reporting affect the profitability of the bank?
1.5 SIGNIFICANCE OF THE STUDY
Banking industry is a very important sector of the economy. This is because banks can determine the direction of growth or development of the economy through the financial service rendered by banks. The financial services which includes, finds mobilization, safekeeping and custodianship, funds transfer, foreign exchange transactions, equipment leasing, extension of loans ad advances, investment in securities, bill discounting etc. At the end of this study, we shall have been able to establish:
1. Whether or not the financial reports affects investment in the banking industry
