Impact of Spritual Accounting on the Profitability of Listed Nigerian Banks

Abstract

The Nigerian banking sector is pivotal in driving economic growth, facilitating investments, and ensuring financial stability. However, challenges such as financial malpractices and ethical lapses have occasionally undermined stakeholder confidence. Integrating spirituality into accounting practices, known as spiritual accounting, offers a pathway to address these challenges by embedding ethical and moral considerations into financial decision-making. SA enhances ethical values by fostering integrity, professional identity, and moral excellence, ensuring adherence to accounting standards and pronouncements. This study examines the impact of spiritual accounting on the profitability of Nigerian banks, focusing on its role in promoting financial transparency, corporate governance, and ethical banking practices. This study employs a quantitative research approach to examine the relationship between financial transparency and financial performance indicators, including Return on Assets (ROA), Return on Equity (ROE), and Net Interest Margin (NIM). A regression analysis was conducted using financial data from selected commercial banks in Nigeria over a five-year period (2019–2023). The study population comprises all 24 commercial banks licensed by the Central Bank of Nigeria (CBN). A purposive sampling technique was used to select 10 banks based on their market share, financial disclosure practices, and data availability. Secondary data were obtained from annual financial reports, Nigerian Stock Exchange (NGX) filings, and regulatory disclosures from the CBN. Transparency in financial reporting was measured using an index based on compliance with International Financial Reporting Standards (IFRS) and corporate governance guidelines. Statistical analysis was conducted using regression models to assess the impact of transparency on ROA, ROE, and NIM. The study’s findings reveal a significant positive relationship between financial transparency and financial performance, demonstrating that banks with higher transparency in financial reporting achieve higher profitability, greater investor confidence, and improved operational efficiency. These results support the argument that spiritual accounting, by fostering ethical banking practices and corporate governance, enhances long-term financial sustainability. The study recommends strengthening financial reporting standards, enforcing corporate governance frameworks, and incorporating spiritual values into financial decision-making to promote sustainable banking practices in Nigeria.