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Impact of Executive Compensation on Financial Statement Fraud of Listed Deposit Money Banks in Nigeria

Onyinye Emeanua

Abstract

Executive compensation constitutes a critical component of corporate governance, exerting substantial influence on organizational performance and ethical behavior. Within the financial sector, particularly among Nigerian Deposit Money Banks (DMBs), the design of compensation structures significantly impacts the integrity of financial reporting. Financial statement fraud (FSF) remains a persistent issue with far-reaching implications for stakeholders and economic stability. This study investigated the impact of executive compensation structures on FSF in Nigerian listed DMBs from 2014 to 2023. Utilizing secondary data sourced from annual reports, the study employed logistic regression to analyze the effects of equity-based compensation, cash-based compensation, and the composition of remuneration committees on FSF. The findings indicate that equity-based compensation significantly reduces FSF, whereas cash-based compensation demonstrated a weaker positive correlation. Furthermore, a higher proportion of independent members within remuneration committees is associated with a reduction in FSF. Based on these findings, the study recommended the enhancement of equity-based compensation, the reassessment of cash incentives, and the strengthening of remuneration committee independence to improve corporate governance and mitigate fraud.

Keywords

Executive compensationfinancial statement fraudequity-based compensationcash-

References

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