Analysis of Bank Information and Decision Making

1.1 Introduction

Modum (1995) described Accounting Information System (AIS) as a “complete collection of business components that comprises entire inputs, gathering and reporting of financial transactions information”. Businesses with a well-designed and operating accounting system have the tendency to manage their information as one of their most valuable resources and come up with sound decisions. The reason for this is that professionals in managing business have come to terms that availability of effective information can be a critical success factor that will enable organisations to have competitive advantage in today’s business environment (Esmeray, 2016).

As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are Significance of the study, Scope of work, Limitation of the study and Definition of technical terms.

1.2 Background of Study

Decision making can be for day-to-day running of the business: operational decision; short term planning: tactical decision; or long term planning: strategic decision (Misni & Lee, 2017). Decision making mostly have a long term effect on the operation of a business and as such it is imperative to ensure proper analysis of accounting information that will form the basis of the decision (Eugeria & Tiberiu, 2013). To ensure that that the decision reached is based on good foundation and led by reliable outcomes of past occurrences, the accounting information system of the organisation must have been tested to possess some attributes in the collection of inputted data, processing of such data, generating the information outcomes and storage of the information for future use and reference. Some of these attributes include the need for the information to be from a reliable source, relevant to the business and the decision at hand, a true outcome of past events in the organisation and be made available as at when it is required for the decision at hand.

In mobilizing savings and allocating scarce resources between competing ends, commercial banks and other financial institutions occupy a very important position in the Nigerian economy: In contemporary Nigeria, banking is one industry which has witnessed unprecedented upsurge in activities as a result of reforms in the economy by the federal government. In the past years, there were about 89 banks with 3,389 branches located in both rural and urban centres nationwide. These banks were characterized by structural and operational weaknesses such as:

1. Low capital base; Dominance of a few banks
2. Insolvency and illiquidity
3. Over dependency on public sector deposits and foreign exchange trading.
4. Weak corporate governance; A system with low depositor confidence
5. Banks that could not effectively support the real sector of the company at 24% of GDP, compared to.

A new banking system that depositors can trust and investors can rely upon ushers in a new economy. The ability of the commercial banking system to perform its tasks efficiently and in harmony with our needs and economic goals depends in large measure an efficient management. There is too much at stake to do otherwise.

However, the efficiency of a commercial bank as well as its overall success depends to a great extent on the quality of information available to its management in its decision making process. Effective planning and control of an organization requires good information system. Logical decision making requires an understanding of the circumstances surrounding on issue and knowledge of the alternatives available. The more pertinent and timely the information the better the resulting decision.

The accounting function helps in the accumulation of accounting data, which help management in the planning process. Benjamin C. [199: 6] define “accounting as process of measurement and communication in which the major responsibilities are recording, analyzing, reporting and interpreting financial information of an economic entity” Accounting is more than this; however, it permits informed judgements and decisions to be made by the users of the information. Perry, F.E (1973: 2) describes the users of accounting information as “Owners and prospective owners of a business enterprise, bankers and supplies of credit and government agencies”.

Obviously, inflationary presumes had much to do with this phenomenal increase, but the gain are very large, even when aptitude for the rise in prices. Although, the Structural Adjustment Program led to stiff competition in the banking industry, it equally made new opportunities manifest in all sectors of the Nigerian economy.

Therefore, in Rivers State where the research was carried out, the activities that was conducted is to know the Analysis of Bank Information and Decision Making.

1.3 Statement of Research Problem

Information is indispensable for decision making in any business organization (Haldma & Laats 2016). Accounting information has the major purposes to minimize risk and uncertainties, and gives the business a competitive advantage in the market. Accounting information system performs a vital role in decision making in banks and management of banks cannot afford to make a wrong decision largely due to the impact such decision may have on various internal and external stakeholders, the competing environment they are operating and the regulatory implication of making a wrong decision. In recognition of this vital role, emphasis must be placed on the effectiveness of the entire system surrounding the gathering of the information to ensure the impact of accounting information generated on decision making process is positive.

Despite these identified role and emphasis, the issues lies in the quality, reliability and validity of the information on which basis decision is to be made. Is the information timely, clear, adequate, and free from error? Inadequate attention to these questions largely contribute to the failure of the use of accounting information in business with the result that inaccurate decisions are made to the detriment of the organization.

1.4 Aim and Objectives of the Study

The aim of the study is to analyze the Bank Information and Decision Making using Halliburton in Rivers State as a case study. In achieving this aim, the following specific objectives were laid out as follows:

1. To examine whether Nigerian commercial banks request for accounting information from Halliburton in quest for loans
2. To determine the utilization process of accounting ratios in amending credit applicants.
3. To examine the quality and reliability of information derived from computed ratios
4. To investigate whether Nigerian commercial banks lend on the basis of accounting information or on the basis of collateral security offered.

1.5 Research Questions

The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:

• Can bank information be used for strategic decision making in Halliburton in Rivers State?
• Should a bank lend on the basis of pro-positions or on the basis of collateral securities?
• To what extent do Nigerian commercial banks rely on accounting information in their lending decision?
• How can a lending officer assess the credit worthiness of a firm seeking a loan?

1.6 Research Hypothesis

In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.

Hypothesis One

• H0: Bank information cannot be used for strategic decision making in Halliburton in Rivers State
• H1: Bank information can be used for strategic decision making in Halliburton in Rivers State

1.7 Significance of Study

Accounting information system is a crucial tool for decision making process in global environment of today. Investment in information technology tools is very vital to organizations to enable them improve their performance through efficiency and effectiveness of the system. Hence, accounting information system plays a vital role in decision making and organizations are trying to have efficient accounting information system to support their business activities.

This research work will be of immense importance to the researchers, since it is a practical requirement for the award of Ordinary National Diploma (OND) in Science Technology of the Institute of Management and Technology (IMT), Enugu.

Besides, the study will serve as reference material for subsequent researcher in the field or related topics.

1.8 Scope of Study

The study focuses on the analysis of Bank Information and Decision Making using Halliburton in Rivers State as a case study.

1.9 Limitations of the Study

During the course of this study, many things militated against its completion, some of which are:

1. Time Constraint: The time frame given to accomplish this project was very short due to school academic calendar and it was carried out under pressure which made the researcher not to implement some necessary features.
2. Establishment Policies: Establishment policies posed a serious limitation as most staffs are not ready to release information needed for this project work. There were lots of information needed from the staffs of this institution to enhance the study which took them time to release or they did not release at all for security purposes, hence the scope was reduced.
3. Financial Constraint: Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
4. Lack of Initial Cooperation from Respondents: A particular limitation of this work came as a result of the respondent refusal to offer their cooperation at the initial time they were contacted. This contributed in making the success of this research study difficult.

1.10 Definition of Terms

Collateral Security:

Any property, negotiable interest or documentary evidence of a claim against or ownership in property conveying title to the holder as a pledge for the repayment of money lent.

Financial Statement:

May be referred to as overall general purpose entity statements that present the financial position and operating results of an entire business at the end of the annual accounting period or for a shorter period (Kennedy and Macmillan, 1968:6).

Analysis:

The resolution or suppuration of data into their elements or component parts, the tracing of facts to their source (Osisioma, 1990: 306).

Loans:

A generic term that embraces all types of credit facilities like advances, overdraft, commercial papers, banker’s acceptance and bill discounted.