Internal Control Information and Communication Effect on Operational Risk of Quoted Banks in Nigeria

Abstract

Operational risk disclosure is expected to close the gap in communication between banking management and its stakeholders especially lenders and investors. The objective of this study is to investigate the effect of internal control information and communication on operational risk of quoted banks in Nigeria. 16 selected quoted banks in the Nigerian stock exchange from 2013-2017 were studied based on the 2012 banking reform on corporate governance by the then CBN governor Sanusi Lamido Sanusi's "Project Alpha Initiative” (PAI). Data were collected from banks published annual reports, CBN statistical bulletin, NDIC report, CBN fact book, company website and banks' Pillar III disclosure report for the relevant years sampled for analysis. The analysis carried out included pooled OLS regression, fixed and random effect and Hausman tests to determine the most suitable model for result interpretation. This was conducted with the aid of E-View 7 software. It was concluded that information and communication (FDB, FDF, and TLG) has a significantly positive effect on operational risk (OPR) and can help in curbing operational risk loses in the banking sector. It was recommended that there should be timely information communication in the banking sector of Nigeria, time lag between sending and receiving information should be minimized to the barest minimum and full disclosure in the financial statement should be embraced to help investors make investment decisions as well as inform the judgment of financial statement users