From Information Asymmetry to Agency Costs: Preliminary Evidence on Internal Audit, Board Independence and Managerial Accountability in Nigerian Financial Institutions

Abstract

This study provides a preliminary empirical extension of Agency Theory by examining how information asymmetry, principal-agent conflict, agency costs, internal audit effectiveness, managerial accountability and board independence relate within a financial-sector governance context. Building on Ajaegbu and Mmayie’s (2025) conceptualization of internal audit as an agency-governance mechanism, the study distinguishes between the formation of agency problems and the governance mechanisms intended to constrain them. A cross-sectional survey generated 33 complete responses from professionals with experience relevant to internal audit, governance, control, finance, risk and management; 23 respondents reported currently working in Nigerian financial institutions. Multi-item constructs were assessed for internal consistency, while exploratory hypotheses were examined using correlation analysis, ordinary leastsquares regression, non-parametric bootstrapping and moderation analysis. The results identify a strong agency-problem pathway.