Empirical study of internal control systems and ethical conduct in banking institutions: Evidence from listed deposit money banks in Nigeria

Adeyiola Ibiwumi, Bamidele Vincent Olawale and Ogundipe Francis Bamidele
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Adeyiola Ibiwumi: Department of Accounting, Ekiti State University, Ado Ekiti, Ekiti State, Nigeria.
Bamidele Vincent Olawale: Department of Accounting, Federal College of Education (Technical), Gusau, Zamfara State, Nigeria.
Ogundipe Francis Bamidele: Department of Accounting, Ekiti State University, Ado Ekiti, Ekiti State, Nigeria.

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Abstract: This study investigates the relationship between internal control system effectiveness, whistleblowing systems, and ethical conduct in listed deposit money banks in Nigeria, motivated by ongoing concerns about unethical practices and fraud in the sector. Adopting a quantitative, cross-sectional design, the research utilizes secondary data from annual reports and corporate governance disclosures of ten listed banks between 2015 and 2024, with three banks excluded due to insufficient data. Internal control effectiveness and whistleblowing systems were measured using COSO-based indicators and whistleblowing disclosures, while ethical conduct was proxied by reported ethical breaches, compliance with codes of ethics, and related disclosures; firm age was included as a control variable. Descriptive statistics, correlation analysis, and panel data regression were employed, with the Hausman test supporting the use of a fixed effects model. The results reveal that both internal control system effectiveness (Coefficient = 0.410, p <0.01) and whistleblowing systems (Coefficient = 0.295, p <0.01) are significant positive predictors of ethical conduct, explaining a substantial proportion of its variance (R-squared = 0.672), while firm age has a marginal effect (coefficient = 0.002, p = 0.075). These findings align with Agency Theory and the Fraud Triangle, underscoring the critical role of robust internal controls and transparent reporting mechanisms in promoting ethical behavior. The study provides context-specific evidence for the Nigerian banking industry and recommends that bank management and regulators prioritize continuous improvement of internal controls, accessible whistleblowing channels, and regular ethical training to foster a culture of integrity and accountability.

Date: 2026-02-16
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Published in Journal of Accounting, Business and Finance Research, 2026, 22 (1), pp.29-39. ⟨10.55217/102.v22i1.1053⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05675387

DOI: 10.55217/102.v22i1.1053

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