Abstract
This
study examines the impact of financial accounting quality on the corporate
performance of business organization. Providing high quality financial reporting
information is important because it will positively influence capital providers
and other stakeholders in making investment, credit, and similar resource
allocation decisions enhancing overall market efficiency. The broad objective
of the study is to ascertain if the adoption of IFRS by the organization
moderates the effect of financial reporting quality. The primary source of data
collection was used and the simple random
sampling was used to select 23 personnel as the sample size. The chi-square
statistical tool was used to test the stated hypotheses and the findings
revealed that the level of corruption perception in the organization
moderate the effect of financial reporting quality on corporate performance. It
was concluded that the financing
reporting quality issued by the financial reporting standard of Nigeria
encourages uniformity as well as provides a common ground for evaluation of
business performance. It was recommended among others that users of financial statement should be efficiently
knowledgeable on statement of financial reporting standard paying attention to
the disclosure requirement so as to enable them to defect non-compliance with
such financial reporting standard.
TABLE OF
CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgments iv
Abstract v
Chapter One: Introduction 1
1.1 Background
to the Study 1
1.2 Statement
of Problem 3
1.3 Research
Questions 4
1.4 Objectives
of the Study 4
1.5 Statement
of Hypotheses 5
1.6 Significance
of the Study 5
1.7 Scope
of the Study 7
1.8 Limitations
of the Study 7
Chapter
Two: Review of Related Literature 9
2.1 Introduction
9
2.2 Concept of Financial Reporting 10
2.3 Meaning of Corporate Performance 13
2.4 Corporate Performance Measurement 14
2.5 The Relationship Between Financial Reporting
Quality and Financial Performance 15
2.6 Impact
of Financial Reporting Quality on profitability 18
2.7 The Effect of Financial Reporting Quality on
Investment Efficiency 20
2.8 Financial Reporting Quality and Sub-Optimal Investment Levels 23
2.9 Measurement Methods to Assess the Quality of
Financial Reporting 25
2.10 Moderating Factors in the Relationship between Financial
Reporting Quality and Financial Performance 29
Chapter Three: Research Method and
Design 33
3.1 Introduction
33
3.2 Research
design 33
3.3 Description
of the Population of the Study 33
3.4 Sample
Size 34
3.5 Sampling
Techniques 34
3.6 Sources
of Data Collection 34
3.7 Method
of Data Presentation 35
3.8 Method
of Data Analysis 35
Chapter Four: Data Presentation, Analysis and
Interpretation 37
4.1 Introduction
37
4.2 Presentation
of Data 37
4.3 Data
Analysis 37
4.4 Hypothesis
Testing 47
Chapter Five: Summary of
Findings, Conclusion and
Recommendations 55
5.1 Introduction 55
5.2 Summary
of Findings 55
5.3 Conclusion
56
5.4 Recommendations
57
References 59
Appendices
61
CHAPTER ONE
INTRODUCTION
1.1 Background
to the Study
The
quality of financial statements is not an indicator that can be easily
quantified, as it cannot be observed directly, being based on the perception of
the users of financial information. Each category of users has its own
expectations and perceptions regarding what information is useful and of good
quality.
Recent
studies in the field of economics and accounting are analyzing more and more
the term of financial accounting quality. One of the main objectives of the
large number of papers upon this subject consists of finding an appropriate
measure for it. That is why, it is important to understand what financial
accounting quality represents and how it can be explained and quantified.
Due to the markets and business
globalization, geographical expansion and the greater demand for information and
transparency among investors, stakeholders and society in general, market agents
find their toehold in the quality of their financial reporting and their main
source of knowledge on company strategy.
According to Jonas and Blanchet (2010),
financial reporting is not only a final output; the quality of this process depends
on the influence and category of the report, including disclosure of the
company’s transactions,
information about the selection and application of accounting
policies and knowledge of the
judgments made. Financial information issued by a company has become an essential
resource for any market participant, since it provides a reduced amount of
information asymmetries between managers, investors, regulatory agencies,
society and other stakeholders. Therefore, one of the main questions that arises
about the quality of financial reporting is its effect on subsequent performance of a
company, i.e. how the market values this higher perceived quality.
According to previous evidence, those
companies with better quality of financial information are associated
with subsequent higher performance, due to the fact that the market
positively assesses those companies which are more
committed to the issuance of good
information for shareholders and other stakeholders,
aiming to reduce or avoid information
asymmetries between market participants (Ahmed & Duellmand, 2011).
Furthermore, the manager’s decision
and his discretional behaviour have an influence on corporate performance
through the strategic management process. Thus, it is necessary to know the
manager’s actions, decisions and behaviour, corporate strategy and accounting
policies among others, to highlight and determine the causes of firm’s company
performance.
1.2 Statement
of Problem
The study analyzes the impact of financial accounting
quality on the corporate performance of business organization using Nigerian
Brewery Industry as the case study. Financial reporting quality has been on a
decline place in corporate management of business organizations in Nigeria.
Another problem is the level
of corruption perception in the country of origin moderates and the effect of
financial reporting quality on corporate performance.
1.3 Research
Questions
The
following are the research questions;
i. How does the adoption of IFRS by the
organization moderates the effect of financial reporting quality?
ii. How effective is the accounting system of
the organization on financial reporting quality?
iii. How does corruption perception in the organization moderate the
effect of financial reporting quality?
1.4 Objective
of the Study
The
broad objective of this study is to examine the impact of financial accounting
quality on the corporate performance of business organization. However, the
following are the sub-objectives;
i. To ascertain if the adoption of IFRS by
the organization moderates the effect of financial reporting quality.
ii. To determine how the accounting system of
the organization moderates the effect of financial reporting quality.
iii. To examine the level of corruption perception in the organization
and how it moderate the effect of financial reporting quality.
1.5 Statement
of Hypotheses
Hypothesis One
The adoption of IFRS by the
organization does not moderate the effect of financial reporting quality.
Hypothesis Two
The accounting system of the
organization does not moderate the effect of financial reporting quality.
Hypothesis
Three
The level of corruption perception in the organization does
not moderate the effect of financial reporting quality on corporate
performance.
1.6 Significance of the Study
Shareholders/Business Financers: As a result of the separation stakeholders
influence from maximum control in modern organization, a practices of financial
accounting quality is implemented on behalf of shareholders to reduced agency
cost and information asymmetry.
The
General Public: The researcher is beneficial to members of the public by
providing them with accurate understanding of the meaning, purpose and impact
of financial accounting quality on corporate performance as it may deemed fit
and how it affect firms in particular and the entire economy.
Users
of financial statements: Users of financial statements can get further insight about financial
strength and weakness of a company if they properly analyze information
reported in these statements. Therefore, financial analysis is the process of
identifying financial strength establishing relationship between the items in
the statement of position and statement of comprehensive income.
Future
Researchers: This
study will be of great use to intending researchers in this aspect of accounting.
From this, one can affirm that this work when completed will be of immense use
to various parties within the business and academic setting.
1.7 Scope
of the Study
This
study examines the impact of financial accounting quality on the corporate
performance of business organization using Nigerian Brewery Industry as the
case study. Benin City of Edo State was majorly focused on and this study covered
a time frame of 5 years (2011 – 2015) and it adopted a sample size of 23 for
effective survey.
1.8 Limitations
of the Study
In the
course of this study, some problems were encountered.
Firstly,
the study was carried out amidst a tight academic schedule; thus, frequent
interruption with lectures, test and private reading was not uncommon.
Secondly, financial means was a
major setback. The researcher’s financial means was grossly inadequate as a
result; the compass of the researcher’s movement and the study was
circumscribed. It was difficult to obtain some information as they were deemed
to be confidential by the companies visited.
Insufficient books in the library
also limited the effort of the researcher in carrying out an in-depth research
on the project work.
In the
face of the above limitations, it was virtually impossible to carryout an
in-depth study. However, every attempt possible has been to capture the main
purpose and the objectivity of the study.
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