Corporate Governance, Institutional Ownership and Fraud Detection Effectiveness in Listed Deposit Money Banks in Nigeria

This study examined the moderating role of institutional ownership in the relationship between corporate governance mechanisms and fraud detection effectiveness in listed Nigerian Deposit Money Banks from 2014 to 2025. Using a longitudinal panel design, data were extracted from audited annual reports of nine continuously listed banks, yielding 108 bank-year observations. Fraud detection effectiveness was measured using the regulatory penalties ratio (penalties scaled by total assets). Corporate governance was measured by board size and board independence. Institutional ownership was measured as the percentage held by the largest institutional shareholder. Data were analyzed using fixed effects panel regression with cluster-robust standard errors. The results revealed that board independence significantly reduced regulatory penalties (β = -0.138, p = 0.029), indicating enhanced fraud detection effectiveness, while board size was not significant (p = 0.498). Institutional ownership concentration significantly reduced penalties (β = -0.089, p = 0.006), supporting the monitoring hypothesis. Moderation analysis provided marginal evidence that institutional ownership amplifies governance effectiveness (INDIR × INST_OWN: β = -0.021, p = 0.069). Conditional marginal effects showed that independent directors are approximately four times more effective at high institutional ownership levels compared to low levels. The study concludes that governance effectiveness in fraud detection is contingent on ownership context. Banks with both strong board independence and high institutional ownership concentration demonstrate the strongest fraud detection outcomes. The study recommends that regulators strengthen board independence requirements, develop stewardship codes for institutional investors, and encourage active monitoring roles for institutional shareholders.