ABSTRACT
This study examines the implementation level of International Financial Reporting Standards (IFRSs) by listed entities in different sectors of the Nigerian economy and compares financial statement figures obtained using Nigerian Statement of Accounting Standards with their IFRS equivalents. It also evaluates the effect of IFRS implementation on financial performance using firm size and age as moderating variables, and provides value relevance assessment of accounting quality under the global financial reporting standard. The study covers a period of seven years (2012 to 2018) and adopted expost facto research design. A sample of twenty-one (21) companies listed on the Nigerian Stock Exchange were purposively selected across ten economic sectors based on specified criteria. An IFRS Implementation Index was constructed to serve as proxy for IFRS Adoption. Paired samples of six financial statement figures under the two financial reporting treatments (NGAAP-based and IFRS-restated) were obtained and compared for the year preceding the year of adoption of the new standard. Also, financial performance data on Return on Assets, Earnings Per Share, and Price Earnings Ratio as well as total assets and firm age were extracted for the period of IFRS adoption. The Annual Stock Returns model was used to measure accounting quality of earnings and book value of equities. Descriptive statistics, paired samples t-test, correlation, balanced panel least squares and moderated multiple regression techniques were used to analyze the data. Results reveal that the level of IFRS implementation widely varies across the ten sectors investigated, and that differences between the means of NGAAP-based financial statement figures and the IFRS-restated equivalents for ROA and NI are significant. Results further indicate that IFRS implementation has significant effects on ROA and EPS, while the effect on PER is not significant. The interaction effects of firm size and age on the relationship between IFRS adoption and the three financial performance measures are not statistically significant. Results also reveal that the transition from NGAAP to IFRS has a significant positive trade-off on accounting quality of earnings and book value of equities of listed entities in Nigeria. The study concludes that the adoption of IFRS improves the profitability and accounting quality of listed firms in Nigeria, and therefore makes recommendations for creating regular capacity building opportunities, promotion of research efforts to address emerging issues in IFRSs, provision of compliance incentives for entities, and strengthening monitoring and supervisory controls using appropriate non-compliance deterrent measures to improve and sustain high compliance to IFRSs and enhance the profitability and quality of accounting information of listed entities in Nigeria.
(416 words)
TABLE OF CONTENTS
Title
page i
Declaration
ii
Certification iii
Dedication iv
Acknowledgements v
Table
of Contents vi
List
of Tables ix
List
of Appendices xi
List
of figures xiv
Abstract xv
CHAPTER
1:
INTRODUCTION
1.1
Background to the Study 1
1.2
Statement of Problem 6
1.3
Objectives of the Study 8
1.4
Research Questions 9
1.5
Research Hypotheses 10
1.6
Significance of the Study 11
1.7
Scope of the Study 13
CHAPTER 2: REVIEW OF RELATED LITERATURE
2.1 Conceptual Framework 14
2.1.1 International convergence of accounting
standards: A brief history 14
2.1.2 The international accounting standard board
(IASB) 17
2.1.3 Financial reporting in Nigeria 19
2.1.4 Benefits of IFRS adoption 22
2.1.5 Demerits of IFRS adoption in Nigeria 24
2.1.6 Challenges of IFRS adoption: A review 25
2.1.7 Financial performance 28
2.1.8 Accounting quality 30
2.1.9 Firm size and age as predictors of financial
performance 32
2.1.10 Firm size and age as moderators of the
relationship between IFRSII
and financial
performance 34
2.2 Theoretical Framework 37
2.2.1 The liability of smallness theory 37
2.2.2 The structural inertia theory 38
2.2.3 Diffusion of innovation theory 40
2.3 Empirical Review 41
2.3.1 IFRS adoption and financial performance 41
2.3.2 IFRS adoption and accounting quality 54
2.3.3 Moderation effect of firm size and age on
the nexus between IFRS
implementation
and financial performance 71
2.4 Summary
of Empirical Review 82
2.5 Gap
in Literature 96
CHAPTER
3: METHODOLOGY
3.1 Research
Design 102
3.2 Population
of the Study 103
3.3 Sample
and Sampling Technique 103
3.4 Source
of Data and Data Collection Method 105
3.4.1 Instrument
for data collection 105
3.5 Description
and Measurement of Study Variables 108
3.6 Model
Specification 110
3.7 Techniques
for Data Analysis 114
CHAPTER 4: DATA PRESENTATION AND ANALYSIS/RESULTS
4.1 Cross Sector Analysis of
IFRS Implementation in Nigeria 118
4.1.1 Level
of IFRS implementation in Nigeria: A sectoral overview 118
4.1.2 Evaluation of differences in financial
statement figures due to
the
application of NGAAP and IFRS 120
4.2 Effect of IFRS Implementation on Financial
Performance 125
4.2.1 Descriptive
analysis of IFRSI, financial performance and
moderator
variables 125
4.2.2 Correlation
analysis of IFRSI, financial performance and
moderator
variables 127
4.2.3 Validity
test on IFRSI, financial performance and
moderator
variables 127
4.2.3.1 Unit
Root test on financial performance series, IFRSII
and
moderator variables 128
4.2.3.2 Cointegration
test on ROA model series 129
4.2.3.2.1 Cointegration
test on the relationship among ROA, IFRSII,
And
the moderating variables 129
4.2.3.2.2 Cointegration
test on the relationship among EPS, IFRSII,
and
the moderating variables 131
4.2.3.2.3 Cointegration
test on the relationship among PER, IFRSII,
and
the moderating variables 131
4.2.4 Granger
causality test on financial performance model variables 134
4.2.5 Test
of hypothesis on the effect of IFRS implementation on ROA 136
4.2.6 Test
of hypothesis on the effect of IFRS implementation on EPS 138
4.2.7 Test
of hypothesis on the effect of IFRS adoption on PER 140
4.3 Moderation
Analysis of Firm size and Firm Age on the Effect
of
IFRSI on Financial Performance 143
4.3.1 Testing
for the interaction effect of firm size and age on the
relationship
between IFRSI and return on assets 143
4.3.2 Testing for the interaction effect of firm
size and age on the
relationship between IFRSI and
earnings per share 146
4.3.3 Testing for the interaction effect of firm
size and age on the
relationship between IFRSI and price earnings ratio 149
4.4 Analysis
of Accounting Quality under NGAAP and IFRS
Reporting
Regimes in Nigeria 151
4.4.1 Descriptive
analysis of ASR model variables for accounting quality 152
4.4.2 Correlation
analysis of ASR model variables for accounting quality 153
4.4.3 Validity
test on annual stock returns model variables 153
4.4.3.1 Unit
root test on ASR series for accounting quality 153
4.4.3.2 Co-integration
test of ASR model series for accounting quality 155
4.4.4. Granger
causality test on ASR model series for accounting quality 156
4.4.5 Test
of the effect of IFRS adoption on accounting quality of listed
entities
in Nigeria 158
4.5 Discussion
of Results 161
4.5.1 IFRS
implementation level 161
4.5.2 Comparison
of NGAAP-based and IFRS-restated financial
statement
figures of listed entities in Nigeria 163
4.5.3 Effect
of IFRS adoption on financial performance 165
4.5.3.1 IFRS
implementation and return on assets (ROA) 166
4.5.3.2 IFRS
implementation and earnings per share (EPS) 167
4.5.3.3 IFRS
implementation and price earnings ratio (PER) 168
4.5.4 Moderation
effect of firm size and age on the relationship between
IFRSI
and financial performance series 169
4.5.4.1 Interaction
effect of firm size and age on the relationship between
IFRSI and ROA 171
4.5.4.2 Interaction
effect of firm size and age on the relationship between
IFRSI and EPS 172 4.5.4.3 Interaction
effect of firm size and age on the relationship between
IFRSI and PER 174
4.5.5 Effect
of IFRS adoption on accounting quality 174
CHAPTER
5: CONCLUSION AND RECOMMENDATIONS
5.1 Summary
of Findings 177
5.2 Conclusion 178
5.3 Recommendations 179
5.4 Contribution
to Knowledge 183
REFERENCES 185
APPENDICES 198
LIST OF TABLES
2.1: Full List of the IFRS / IAS 16
2.2: List of Statement of Accounting
Standards (SAS) 22
2.3: Summary of Empirical Review 82
3.1: Distribution of the Number of Listed Entities
in Economic
Sectors
in Nigeria 103
3.2: Summary of Study Variable Proxies 109
4.1: IFRS Implementation Level in Different
Economic Sectors in Nigeria 119
4.2: Paired Samples Statistics of Selected
Financial Statement Figures 121
4.3: Paired Samples T-Test Results of
Selected Financial Statement Figures
123
4.4: Summary of T-Test Results on Differences
between the Means of
NGAAP-Based
and IFRS-Restated Financial Statement
Figures of Listed Entities in
Nigeria 124
4.5: Descriptive Analysis of IFRSI, Financial
Performance and Moderator Variables 126
4.6: Correlation of IFRSI, Financial Performance
and Moderator Variable 127
4.7: Balanced Panel Unit Root Test on IFRSI,
Financial Performance and Moderator Series 128
4.8: Cointegration Test Results on ROA Model Series
in Equation 3 130
4.9: Cointegration Test Results on EPS Model Series
in Equation 4 131
4.10: Cointegration Test Results on PER Model Series
in Equation 5 133
4.11: Granger Causality Tests on IFRSI and Financial
Performance Variables 134
4.12: Summary of Hausman Test Results on the Effect
of IFRSI on ROA 136
4.13: Test Results of the Effect of IFRSI on ROA 137
4.14: Summary of Hausman Test Result on the
Effect of IFRSI on EPS 139
4.15: Test Result on the Effect of IFRSI on EPS 139
4.16: Summary of Hansman Test Result on the Effect
of IFRSI on PER 141
4.17: Test Results of the Effect of IFRS
implementation on PER 142
4.18: Model Summary Results of Moderation
Analysis of IFRSI,
Firm
Size and Age on ROA 144
4.19: Moderation Analysis Results of the
Coefficients in
Models
1 and 2 for ROA 145
4.20: Model Summary Results of Moderation
Analysis of IFRSI,
Firm
Size and Age on EPS 147
4.21: Moderation Analysis Results of the
Coefficients in
Models
1 and 2 for EPS 148
4.22: Model Summary Results of Moderation Analysis
of IFRSI,
Firm
Size and Age on PER 149
4.23: Moderation Analysis Results of the
Coefficients in
Models
1 and 2 for PER 150
4.24: Descriptive Statistics of ASR Model
Variables for Accounting Quality 152
4.25: Correlation Matrix of ASR Model Variables
for Accounting Quality 153
4.26: Balanced Panel Unit Root Test Results of
ASR Series for
Accounting
Quality 154
4.27: Summary of Johansen Cointegration Test Result
on ASR Model
Series
for Accounting Quality 155
4.28: Granger Causality Test Results on ASR
Series for Accounting Quality 157
4.29: Summary of Hausman Test Results on ASR
Series for
Accounting Quality 159
4.30: Test results of the Effect of IFRS
Adoption on Accounting
Quality using ASR Model 160
LIST OF APPENDICES
1: List of 21 Entities for Panel Data Regression
by Economic Sector 198
2: IFRS Implementation Disclosure Checklist 199
3: Raw Scores from Raters on IFRS Implementation
Disclosure
Checklist for Reliability and Validity Test 206
4:
Kendall’s Coefficient of Concordance (Kendall’s W) Test
Results 207
5: IFRS Implementation Index 209
6:
Panel Unit Root Test Results on ROA Series at Level 210
7:
Panel Unit Root Test Results on EPS Series at Level 210
8:
Panel Unit Root Test Results on PER Series at Level 211
9:
Panel Unit Root Test Results on IFRSII Series at Level 211
10:
Panel Unit Root Test Results on IFRSII Series at First Differencing 212
11:
Panel Unit Root Test Results on Firm Size Series at Level 212
12:
Panel Unit Root Test Results on Firm Size Series at First Differencing 213
13:
Panel Unit Root Test Results on Fage Series at Level 213
14:
Preliminary Data Checks on the Assumptions of
Moderated
Multiple Regression Analysis 214
15:
Panel Unit Root Test Results on ASR Series at Level 216
16:
Panel Unit Root Test Results on BVPS Series at Level 217
17:
Panel Unit Root Test Results on BVPS Series at First Differencing 217
18:
Panel Unit Root Test Results on BVCH Series at Level 218
19:
Panel Unit Root Test Results on NIPS Series at Level 218
20:
Panel Unit Root Test Results on NIPS Series at First Differencing 219
21:
Panel Unit Root Test Results on NICH Series at Level 219
22:
Test Results of the Fixed Effect Model of IFRSII on ROA Series. 220
23:
Test Results of the Random Effect Model of IFRSS on ROA 221
24:
Hausman Test Results of the Effect of IFRSII on ROA 222
25:
Test Results of the Fixed Effect Model of IFRSII on EPS Series. 223
26:
Test Results of the Random Effect Model of IFRSII on
EPS Series. 224
27:
Hausman Test Results of the Effect of IFRSII on EPS. 225
28:
Test Results of the Fixed Effect Model of IFRSII on PER Series 226
29:
Test Results of the Random Effect Model of IFRSII on
PER Series 229
30:
Hausman Test Results of the Effect of IFRSS on PER 228
31:
Kao Residual Cointegration Test Results on ASR Model Series for Accounting
Quality 229
32:
Test Results of the Fixed Effect Model of ASR Series 230
33:
Test Results of the Random Effect Model of ASR Series 231 34: Hausman Test Results of the ASR Model 232
35:
Raw Data from Selected 21 Companies for the Study 233
36:
Included/Excluded IFRS in the Implementation Checklist 239
LIST OF FIGURES
2.1: Moderation / Interaction Effect of Firm Size
and Age on the Relationship
Between IFRS Implementation and Financial Performance 35
4.1: Bar Chart of IFRS Implementation Index by
Economic Sectors in Nigeria 120
4.2: IFRS Implementation and Financial Performance
Framework 184
CHAPTER 1:
INTRODUCTION
1.1 Background
to the Study
International
Financial Reporting Standards (IFRS) are principle–based accounting standards
issued by the IFRS Foundation and the International Accounting Standards Board
(IASB) to provide a common global reporting language for business affairs so
that company’s accounts are understandable and comparable across international
boundaries. The IASB is an independent accounting standard setting body of the
IFRS Foundation with responsibility for developing IFRS and International
Accounting Standards (IAS), and promoting the use and application of these
standards.
Prior
to 2001, the body existed as the International Accounting Standards Committee
(IASC) – the first international standard setting body which was formed in 1973
by sixteen (16) professional accountancy bodies across the globe (Abata, 2015).
The IASC originally published IAS, many of which were adopted by the IASB on
its inception in 2001. The list of extant standards used by many countries
across the globe contains seventeen (17) IFRS and twenty – eight (28) IAS
(Melville, 2014).
Back
here in Nigeria, the Nigerian Accounting Standards Board (NASB) was established
in 1982 and had the responsibility of developing and issuing domestic standards
(the Statement of Accounting Standards – SAS) for users and preparers of
financial statements. The Board equally had the responsibility of enforcing
compliance with its set standards, although multinational companies refused to
adopt SAS (ICAN, 2006 and Nigeria’s Financial Hub, 2011). By June 2011, a total
of thirty one (31) SAS had been issued by NASB, and at which time the Board was
replaced by Financial Reporting Council of Nigeria (FRCN) following the
enactment of FRCN Act, 2011.
The
establishment of FRCN was to aid the implementation of the IFRS in Nigeria
which had started gaining international acceptance following increasing
globalization of business and economic activities (Kenneth, 2012; and Essien–Akpan,
2011). It was envisaged that adoption and implementation of IFRS in Nigeria,
like in other countries of the world, would make companies operating in Nigeria
more attractive and accessible to capital from both local and foreign
investors. Consequently, the Nigerian Federal Executive Council in July 2010,
accepted the recommendations of a committee on the Roadmap for reporting
entities in Nigeria to implement the globally accepted accounting standard by
fully adopting the IFRS in a three phased transitional arrangements that set
out January 1, 2012 as commencement date for compliance by entities in phase 1,
January 1, 2013 for those in phase 2, and January 1, 2014 for entities in phase
3 (Fastina & Adegbite, 2014, Oyedele, 2011, and Mardoroaki, 2012).
The
adoption of IFRS in Nigeria was predicated on government convictions that the
implementation of the global standards will enhance financial reporting quality
and promote the compilation of meaningful data on the performance of various
reporting public and private entities in Nigeria thereby increasing the comparability
and reliability of financial statement of Nigerian companies in the global
market.
Other
canvassed benefits of the adoption include a reduction in the cost of doing
business across borders by eliminating the need for supplementary information
from Nigerian companies, distinctive reporting standards between Nigeria and
other countries, enhancement of knowledge of a global financial reporting
standards by tertiary institutions in Nigeria and for government to be able to
have a framework for easier regulation of financial information of entities
operating in Nigeria and better access
to the tax liabilities of multinational companies in Nigeria.
It
should be stated that the introduction of IFRS in the global market generated
considerable public debate as to the possible impacts which its adoption could
have on reporting entities, particularly in developing economies. Since 2012
when economic entities in Nigeria commenced implementation of this global
standards, considerable concerns have continued to mount as to whether the
canvassed benefits of the adoption are being realized, particularly in the
areas of encouraging transparency, efficiency and reliability of financial
reporting in Nigeria, in providing better quality financial information for
stakeholders, coupled with the effect which the implementation of the global
standards could have on the financial performance of entities in Nigeria. It is
arguable whether a single set of reporting standards could truly satisfy the
needs of economies at different stages of development given differences in
culture, legal, political and economic systems. The possibility of losing
national identity by undermining domestic financial reporting standards and the
feasibility of mounting a strong
accounting, institutional and sustainable training frameworks to manage
the changes occasioned by the new standards have been widely acknowledged as
obvious challenges of IFRS adoption in developing countries (Obazee, 2007;
Abdulkadir, 2012; Assens–Okofo, Ali, & Ahmed, 2011; and Odia & Ogeido,
2013).
For
now research is ongoing and there is yet no consensus on major areas of these
problems. Considerable research efforts that investigated different dimensions
of these issues within and outside the Nigerian environment have been widely
reported in literature with conflicting results. The preponderance of research
efforts in Nigeria tend to focus on the Banking Sector (Dang et al., 2020;
Jibril, 2019; Elosiuba & Okoye, 2018; Ishola, 2017; Ezeagba, 2017; Amalahu
& Ezechukwu, 2016; Akinley, 2016; and Ugbede, Mohd & Ahmed, 2014) .
While some of these scholars measured the effect of IFRS on credit quality,
accounting quality and accrual and earnings quality, others evaluated the
effect in relation to different dimensions of bank performance. Besides, the
works ended with conflicting results on the same variables; with some finding
positive and significant effects of predictors in cases where other authors
established either negative or no causal links with IFRS adoption.
Within
the Nigerian manufacturing sector, a good number of studies have been reported
on IFRS. Akande (2020) and Amaefule et al
(2018) measured the effect of IFRS on different parameters of performance in
the manufacturing sector and found no significant positive link between the
variables while Yasa and Pevera (2019) investigated the effect of adoption on
accounting quality in the sector and reported no significant difference in
value of pre and post IFRS adoption periods.
Other
industry specific studies based on data from the Nigerian environment were
carried out by Ibanichuka and Asukwo (2018), Donwa et al (2015) and Zayyad et al (2014). While Ibanichuka and
Asukwo found no significant causal link between IFRS adoption and financial
performance of petroleum marketing entities, Donwa et al (2015) reported that the adoption of the new standard lowered
liquidity and leverage ratios in the oil and gas sector, but enhanced
profitability of the entities studied.
Zayyad et al (2014) drew their
data from Oando Plc and concluded that the firm’s NGAAP figures were not
statistical difference from their IFRS equivalents. It is doubtful if these industry and firm
specific studies can validly be used to conclude on the effect of IFRS adoption
in Nigeria without a cross sector perspective.
Eluyela, et
al, (2019) is probably the only recent study that used data of small and
medium scale entities in the phase 3 of the adoption roadmap in Nigeria. These
studies were either industry or firm specific and clearly avoided comparison of
the effect of the adoption across sectors in the Nigerian economy. Except perhaps
the works of Ofoegbu and Odoemelam (2018), there seems to be no other published
empirical works that adopted a cross sectional panel data in investigating the
effect of IFRS adoption on financial performance measures of economic entities
in Nigeria. Even at that, Ofoegbu and Odoemelam (2018) did not integrate the
interaction effects of any variable in determining the relationship between
IFRS adoption measures and financial performance variables. It is therefore doubtful whether industry and
firm specific studies can validly be used to draw conclusions on the effect of
IFRS adoption by listed entities in Nigeria. Also, it is yet to be ascertained
whether industry specific studies that measured the quality/value of accounting
numbers under NGAAP and IFRS could yield the same results with the one obtained
when value relevance perspective to accounting quality is adopted in a cross –
sectional dimension.
Again,
there is need to construct a valid instrument for ascertaining the level of
compliance to IFRS by entities in the Nigerian economy and to further determine
the IFRS implementation levels in different sectors. Nwoye et
al., (2017) investigated IFRS compliance impact and global ranking of
Nigerian banks and reported that the level of compliance of the banks to IFRS
disclosure guidelines has significantly improved the acceptability of their
financial reporting practices globally. Again, this is industry specific and
failed to investigate how the improvement in level of implementation affected
financial performance of the banks. It should further be questioned whether the
IFRS compliance level of a firm could be moderated by the resilience of its
financial capacity (firm size) and financial reporting experience (firm age).
Although Appiah et al (2016) had
investigated the relationship between level of IFRS compliance and firm size,
firm age, auditor type, financial leverage and cross listing sector among
listed firms in Ghana, prior studies in Nigeria appear to have ignored/avoided
enquiries into the moderating effect of size and age of firms on the
relationship between IFRS adoption and financial performance of companies.
This
work therefore, was targeted at filling these observed gaps. First, the study constructed
a validated IFRS implementation disclosure measurement instrument and carried
out multidimensional cross sector analysis of IFRS adoption in Nigerian. It
further evaluated the effect of IFRS implementation on financial performance,
and determined the moderating effect of the size and age of listed entities on
the causal link between IFRS implementation and financial performance outcomes.
The study compared financial statement numbers/figures under NGAAP and IFRS
reporting regimes based on value relevance perspectives to accounting quality
and developed a framework for further enquiries on different dimensions of IFRS
as an emerging area of research in accounting. Hence, the work substantially
addressed most of the identified gaps highlighted, and opened up new challenges
for further research efforts on related financial reporting issues.
1.2 Statement of the Problem
The
implementation of IFRS in Nigeria was preceded by the domestic Statement of
Accounting standards (SAS). There was a total of thirty-one (31) SAS on issue
which served as the Nigerian Generally Accepted Accounting Principle (NGAAP)
and was used in preparing and reporting financial information by economic
entities. Although the theoretical basis and general principles in NGAAP are
corresponding with IFRS in certain areas, numerous differences still exist.
There were initial concerns by stakeholders on whether differences between the
two accounting standards would not have any material effect on information reported
in financial statements and whether the adoption of IFRS will not have serious
implications on the country’s legal, political and economic systems and thus
present sustainability challenges in the nation’s accounting, institutional and
training frameworks created/caused by changes that the new standards could
cause (Obazee, 2007; Abdulkadir, 2012; Assens–Okofo, Ali, & Ahmed, 2011;
and Odia & Ogeido, 2013). There were challenges relating to compliance
costs and needed human capacity to cope with the knowledge requirements of the
new standard, particularly for small and medium sized entities. No doubt, these issues posed serious concerns
for IFRS adoption in Nigeria at the beginning of the adoption roadmap in 2012.
Seven (7) years after adopting IFRS in Nigeria (that is, by the end of 2018
covered by this study), it is not yet determined what the IFRS implementation
levels by listed entities across the economic sectors in the country are. It is
also not yet empirically confirmed what differences exist between NGAAP based
financial statement figures and the IFRS restated equivalents on certain
accounting outcomes of listed entities in the country. Related to this is the
challenge of determining whether the adoption of the new standard will cause
remarkable differences in financial statement figures and thus place entities
in Nigeria and other less developed and/or developing jurisdictions into
competitive disadvantage in the global market.
There
is the additional problem of evaluating the possible effects which the adoption
of IFRS could have on reported financial performance indices/numbers. Again, it
is yet to be determined, the relative effect of the new standard on the
accounting quality of earnings and book value of equities of reporting entities
over the domestic financial reporting standard; which parameters are of primary
interest to all corporate stakeholders in Nigeria. There is the other problem
of ascertaining whether the influence in the effects of the two standards on
both financial performance and accounting quality materially differ across
economic sectors in Nigeria. These challenges constitute the central problem
and focus of this study, and formed the bases on which the proposed research
objectives and hypotheses of the study were anchored.
1.3 Objectives of the
study
The
broad objective of the study is to determine the effect of IFRS adoption on the
financial performance and accounting quality of listed companies across the
sectors in Nigeria. The specific objectives of the study are to:
1.
Ascertain the distribution of IFRS implementation
level by listed entities across different economic sectors in Nigeria
2.
Evaluate the difference between NGAAP-based
and IFRS-restated financial statement equivalent figures of listed entities in
Nigeria.
3.
Determine the effect of IFRS adoption on
Returns on Assets (ROA) of listed companies in Nigeria.
4.
Evaluate the influence of IFRS adoption on
the Earnings Per Share (EPS) of listed companies in Nigeria.
5.
Ascertain the effect of IFRS adoption on
the Price Earnings Ratio (PER) of listed companies in Nigeria.
6.
Ascertain the extent to which the
relationship between IFRS adoption and ROA is moderated by the size and age of
listed companies in Nigeria.
7.
Determine the moderating effect of size
and age on the relationship between IFRS implementation and EPS of listed
companies in Nigeria.
8.
Determine the extent to which the
relationship between IFRS adoption and PER is moderated by the size and age of
listed firms in Nigeria.
9.
Ascertain the effect of IFRS adoption on
the accounting quality of listed companies in Nigeria.
1.4 Research Questions
In
order to achieve the set objectives, the following research questions guided
the study:
1.
How are IFRS
implementation levels of listed entities distributed across different economic
sectors in Nigeria?
2.
What are the differences between NGAAP-based
and IFRS-restated financial statement equivalent figures of listed entities in
Nigeria?
3.
What is the effect of IFRS adoption on the
Return on Assets (ROA) of listed companies in Nigeria?
4.
How does IFRS adoption influence the
Earnings Per Share (EPS) of listed companies in Nigeria?
5.
What is the effect of IFRS adoption on the
Price Earnings Ratio (PER) of listed companies in Nigeria?
6.
To what extent is the relationship between
IFRS adoption and ROA moderated by the size and age of listed entities in
Nigeria?
7.
What is the moderating effect of size and
age on the relationship between IFRS implementation and EPS of listed companies
in Nigeria?
8.
To what extent is the relationship between
IFRS adoption and PER moderated by the size and age of listed firms in Nigeria?
9.
What is the effect of IFRS adoption on the
accounting quality of listed companies in Nigeria?
1.5 Research Hypotheses
For
the purpose of achieving the objectives of the study, the following null
hypotheses were formulated to guide the study
H01: There is no significant difference between the
means of NGAAP-based and IFRS-restated financial statement equivalent figures of
listed entities in Nigeria.
H02: IFRS adoption does not have any significant
effect on the Return on Asset (ROA) of listed companies in Nigeria.
H03: The effect of IFRS adoption on Earnings Per
Share (EPS) of listed companies in Nigeria is not significant.
H04: IFRS adoption has no significant effect on
Price Earnings Ratio (PER) of listed companies in Nigeria.
H05: The relationship between IFRS adoption and
ROA is not significantly moderated by the size and age of listed entities in
Nigeria
H06: The moderating effect of size and age on
the relationship between IFRS implementation and EPS of listed companies in
Nigeria is not significant.
H07: The relationship between IFRS adoption and
PER is not significantly moderated by the size and age of listed firms in
Nigeria
H08: IFRS adoption has no significant effect on
the Accounting Quality of listed companies in Nigeria.
1.6 Significance of the study
The
outcome from this research will be relevant in making financial reporting
policy and investment decisions in different areas by stakeholders of quoted
companies in Nigeria and outside the country. The stakeholders who are most
likely to benefit from this research work and their specific needs which the
findings will satisfy include:
i.
Investors
Improving the quality of financial reports
will boost investors’ confidence leading to increase in investment. This study
will assist investors to known whether or not the adoption of IFRS in Nigeria
will improve the financial performance as well as the accounting quality of the
listed companies to enable useful economic decisions to be made on investments.
ii.
Regulatory Agencies
This
work will be considered useful to the financial regulatory agencies such as the
Central Bank of Nigeria (CBN), Nigerian Deposit Insurance Corporation (NDIC), Nigerian
Stock Exchange (NSE), Financial Reporting Council of Nigeria (FRCN), the
Institute of Chartered Accountants of Nigeria (ICAN), Association of National
Accountants of Nigeria (ANAN) and other stakeholders. It would provide the
basis for review of existing standards and the effect of the adoption and
implementation of the global standards on financial reporting.
iii.
Management
The
findings of this study will be of remarkable assistance to the management of
listed Nigerian companies to determine whether the adoption of IFRS would
change their reported performance and quality in the financial statement and as
such incorporate this information on their planning process.
iv.
Consultants
The
outcome of this research work will also strategically position consultants in
practice to provide better services to their numerous clients. Through a clear
understanding of the nature and extent to which IFRS influence firm’s financial
performance, consultants will be in a good position to advise the management of
their clients on how to improve performance and quality.
v.
Policy Makers
This
work will equally be useful to policy makers and assist them to know the
practical implementation of converting from the local NGAAP to IFRS and to
guide them in future development of standards.
vi.
Academics
The
academic community has been at the fore font of research on the impact of IFRS
adoption on reported financial performance and value of various organizations
across sectors in Nigeria. The outcome of this study will contribute to both
domestic and international literature that relates to the adoption and
implementation of IFRS as well as serve as a resource material to future
researchers on the subject.
1.7. Scope of the Study
The
object of this study is to ascertain the effect of IFRS adoption on the
financial performance and accounting quality of listed companies across the
sectors of the Nigerian economy. This study covers 10 economic sectors in which
entities are listed on the Nigerian Stock Exchange. A total of twenty-one (21)
companies were selected from the sectors covering a period of seven (7) years
from 2012 to 2018 for each company.
Four
major areas/issues were covered in the study – Cross sector analysis of IFRS
implementation in Nigeria, effect of IFRS adoption on three financial
performance proxies, assessment of the moderation/interaction effect of size
and age of firms on the relationship between IFRS adoption and financial
performance series, and finally, estimation of accounting quality under NGAAP
and IFRS reporting regimes based on value relevance perspectives.
It
is believed that the four areas constitute enough challenge for investigation
at this level of study, and upon which findings and policy recommendations were
made.
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