1.1       Background to the study

Improvements of accounting standards have been recognized as a fundamental pillar of many economic developments aimed at assuring the more effective operation of capital markets. Hence, the purpose of standardizing financial reporting procedures is to achieve effective cross-border financial integrationwhich seeks to ensure that every preparer of financial report follows the same format and language for the benefit of users globally+. 

The adoption of IFRSs has been upheld as a step toward improving financial reporting procedures and accounting information in order to promote efficient capital markets (Bolibok, 2014).Accounting information can be generated more effectively if the fundamental ideas and methodologies to financial reporting are unified. This is due to the fact that investors desire high-quality accounting data to improve their confidence in both domestic and international markets (Nobes & Parker, 2008).

Value Relevance (VR) refers to the capacity to explain stock market behavior, including stock price response to information published in firms' financial statements (Alkali & Lode, 2016). As it significantly helps investors estimate stock prices, the topic of VR of accounting information is a popular one. VR is the ability of accounting factors, such as earnings and book values, to influence share market prices (Barizah & Bakar, 2011).Therefore, the VR concept is explained as the ability of accounting information to influence stock prices.

In its conceptual framework, the IASB stated that accounting information can impact users' economic decisions by allowing them to assess past, current and future developments or confirm or correct previous assessments. IFRS identifies relevance as one of the key qualitative features of financial information. Relevant information will be presumed to influence investment decision-making if it has predictive value, previous estimates confirmatory value, or both (IASB, 2010). IFRS are expected to improve investors' confidence in financial information perceived to be more reliable as they are considered to be a set of high-quality standards. This has led to fund providers depending more on IFRS-compliant information in investment decision-making.

The arguments on the need for international harmonization and uniformity of accounting standards lednations to yield to the call and adopt IFRS, with Nigeria adopting it in 2012.  The adoption led the Nigeria stock exchange to issue a directive on conformity with the standards as a main requirement for all firms listed on the stock market. Further, section 333 (1) of the Nigeria's Companies and Allied Matters Act (2016) requires the form and contents of corporate entities‟ financial reports to conform with accounting standards issued by the Financial Reporting Council of Nigeria as an approach of providing legal support to reinforce their activities. Since its inception, the new set of standards which aim to improve the quality of financial reporting has continued to evolve.

One of the most significant developments in recent decades has been the worldwide increase in public concern for the insurance industry. Insurance has enabled societies and individuals to connect more closely than ever before. Insurance is distinct from other services in that it is sophisticated and involves significant legal aspects (Rahman, 2017). The insurance industry is vital to the global economy; insurance companies assist individuals and businesses in transferring risk;while insurers, like other types of investors, are significant long-term players (Bayazidi, 2020). This has resulted in a set of financial reporting requirements protecting the interests of insurance company investors. In addition, there is an apparent need to improve financial transparency and the comparability and compliance of insurance businesses' financial reporting globally (Bayazidi, 2020). The first phase of the standard insurance contract reporting project was launched in 2001 by the International Accounting Standards Board (IASB), with the goal of improving the insurance contract accounting process and addressing the reporting demands of insurance issuing business units. Under insurance contracts, the product was IFRS 4.

The IASB released IFRS 4 Phase I in 2004, and it went into force in 2005 as a temporary guide to insurance contracts until IFRS 17 could be implemented with full standards in 2023. In addition to those covered by other standards, IFRS 4, Insurance Contracts, consolidates all requirements for disclosure of insurance contracts, including reinsurance contracts issued and retained by an insurance business. To help users better understand financial statements, IFRS 4 aims to improve insurers' financial reporting of insurance contracts and to ensure that insurers disclose information that provides clarity on the amounts incurred by insurance contracts in insurers' statements and the amount, timing and future of insurance contracts(IFRS 4).

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The National Insurance Commission (NAICOM)reveals that the Nigerian insurance sector's adoption of IFRS is aimed at bringing them to a stage where they become a worldwide player and the best in Africa. Through IFRS, insurance firms‟ activities will be made more efficient, transparent, safe and in-line with global best practices with the aim of achieving 15^thplace in insurance premiums generation in the world by year 2020 (Tolu-Kusimo, 2013). Among the IFRS adopted by Insurance firms, IFRS 4 Insurance Contracts is particularly peculiar to the insurance industry.

IFRS compliance studies seek to evaluate the level or scope of companies‟ compliance with requirements of the accounting standards as disclosed in financial reports(Yiadom & Atsunyo, 2014). The compliance to the standards is seen as the extent to which entities comply with their requirements – this decides the usefulness of financial figures in the eyes of investors (Zango, Kamardin & Ishak, 2015). An entity's level of compliance is seen to be of great importance as it enhances the quality of accounting information presented in annual reports.

Hence, sufficient compliance with IFRS is anticipated to improve VR (Alfraih & Alanezi, 2015).

As VR implies the influence of share value in the stock market by accounting information (Kargin,2013), the level of compliance with IFRS disclosures is presumed as an additional information that can be incorporated into the valuation model to see if greater compliance is valued by investors (Alfaraih, 2009). VR, according to Al-Hogail (2004), is all about the amount of a company's market value that can be explained by the accounting information that has been provided. IFRS-based financial information's perceived high quality may improve satisfying investors' information need, depending on how well listed companies adhere to them.

The insurance industry is viewed as one of the pillars of the financial sector as it serves as a central element for trade and development. It is believed that the industry plays the double role of risk management and capital formation. However, in Nigeria the insurance industry faced several challenges, which resulted in the adoption of the first Insurance Act in 2003 by the National Insurance Commission (NAICOM), which resulted in an increase in its capital base requirements. Recapitalization required a minimum capital base of the insurance companies according to the insurance categories of life insurance covered by N150m, general N200m and composite and re-insurance insurance to be established at N350m.Persistence of the issues further led to an amendment in the Act in 2005 which led to consolidation of most of the firms in 2007 (Etomi & Partners, 2019). Further need to strengthen the sector again, moved the National Insurance Commission (NAICOM) to impose new capital requirements which were expected to be implemented in June 2020. It is assumed that this measure will reduce the registered insurance firms from 59 firms to 25 due to mergers and acquisitions that may possibly take place (Czartoryski, 2019).

Despite its apparent importance and the challenges plaguing it, the Nigerian Insurance Sector remains understudied, as seen in the review of relevant literature. The VR literature, though extensive, has relatively focused largely on other sectors. Additionally, of the studies carried out on the sector, a majority have only examined the VR of accounting numbers – earnings and equity book values. However, other information such as those required under IFRS 4 are considered important. Thus, the significance of the sector and the scarcity of literature examining it drive the motivation for this study. The study is therefore, motivated to examine the importance of compliance with IFRS 4 following the challenges of listed insurance firms in Nigeria and whether variations in extent of compliance affect VR.

1.2       Statement of the Research Problem

The goal of IFRS in the insurance industry is to guarantee that all financial reports would adhere to the international best practice. Although the majority of companies claim that their financial statements comply with IFRS, the extent of compliance varies amongst companies.

       The     Nigeria's     insurance     market     as     being     plagued     by        lax   enforcement       and

regulation(PricewaterhouseCoopers, 2015; Osinuga, 2016; Olunuga, 2021). This demonstrates the necessity for the sector and professional organizations to intensify efforts to address the issues behind the sector's below normal performance (Oji, 2019). Regulators and investors have also expressed concern regarding the decline in the value of publicly traded insurance corporations. The sector's issues were caused by Nigeria's low insurance coverage, lax regulation, and certain questionable business practices (Oji, 2018).

Furthermore, IFRS 4; Insurance Contracts are under pressure from auditors, practitioners, and financial analysts because it permits insurance companies to calculate their financial results and positions using outdated metrics and allows them to report profits even when their insurance coverage has not yet been rendered. Other criticism centers on the fact that genuine profit drivers are invisible (Hogendoorn, 2018).

Both in developed and emerging economies, studies have been done on IFRS compliance and VR which produced empirical evidence on the relationship by comparing IFRS accounting numbers to those prior to IFRS adoption.(Alade, Olweny &Oluoch, 2017;Elbakry, Nwachukwu, Abdou& Elshandidy,2016; Adeyemo, Ajibolade, Uwuigbe & Uwuigbe,2017;

Alade, 201; Nijam & Jahfer 2018;Umoren, Akpan & Ekeria, 2018; Odoemelam, Okafor & Ofoegbu, 2019)However, few studies have been undertaken in relation to IFRS 4: Insurance Contracts and the VR of accounting information. For example, Wu and Hsu (2011) conducted a study focusing on Taiwan, London, and Euromarkets. Few studies in Nigeria have studied firms' IFRS 4 compliances, such as (Usman, n.d.) and (Yusuf, 2014).

Furthermore, results from studies on the VR of IFRS accounting information remain inconclusive. While some extant literatures found IFRS-based accounting information to be value relevant (Alade, 2018; Ionascu, IIonascu, Sacarin & Minu, 2018; Alade et al., 2017;

Alfraih & Alanezi, 2015) others found them not value relevant such as Umoren et al. (2018).

These studies have also considered mainly accounting numbers for the purpose of evaluation. With IFRS however, a multitude of other information are considered relevant for proper decision making, therefore, the impact of these information need to be examined more in the literature. Therefore, no study has looked at the VR of IFRS 4 disclosure requirements as well as how variations in the amount of information disclosed by different firms affect the VR of the associated accounting numbers.

The importance of evaluating the VR of accounting information, particularly information required under IFRS 4 which is particularly peculiar to the industry, cannot be overstated in light of challenges raised in the sector and gaps observed. The study aims to add to the body of knowledge on VR by investigating a field that has received very little attention.

1.3       Research Questions

According to the stated research challenge, the specific research questions raised to empirically analyze the VR of listed insurance companies in Nigeria complying with insurance contracts disclosure (IFRS 4) include:

i.             To what extent does earnings per share (EPS) influence the Share Price of insurance companies in Nigeria?

ii.           To what extent does book value per share (BVPS) influence the Share Price of insurance companies in Nigeria?

iii.         What is the incremental VR of marginal increase in compliance with IFRS 4 on Earnings Per Share (EPS)? 

iv. What is the incremental VR of marginal increase in compliance with IFRS 4 on Book

Values Per Share (BVPS)?

v. To what extent does level of compliance with insurance contracts disclosure influence the Share Price of insurance companies in Nigeria?

       1.4       Objectives of the Study

The main objectives of this study is to examine the VR of compliance with Insurance Contracts

Disclosure (IFRS 4) of Listed Insurance Firms In Nigeria. Other Objectives includes;

              i.         To examine the effect of EPS on the Share Price of Listed Insurance Firms in

Nigeria. 

ii.      To examine the effect of BVPS On the Share Price of listed insurance firms in Nigeria 

iii. To examine the incremental VR of EPS between firms with high and low levels of compliance with IFRS 4. 

iv. To examine the incremental VR of BVPS between firms with high and low levels of compliance with IFRS 4.

v. To examine the effect of compliance with Insurance Contracts Disclosure (IFRS 4) on share price of listed insurance firms in Nigeria.

 1.5       Research Hypotheses

Pursuant to the above objectives, the following hypotheses are formulated in null form:

The study focused on theVRof compliance with IFRS 4: Insurance Contracts disclosure among Nigeria‟s listed insurancefirms.  The choice of the domain is due to the peculiarity of the standard to industry. The study will cover the period of Nine (9) years starting from 2012- 2020. This period was selected as it represents the time IFRS 4 was adopted in the Country.

The study will examine the explanatory powers of accounting numbers; earnings per share, book value per share and IFRS 4 Disclosures in explaining fluctuation in market price of the listed insurance firms. The Share Price at the end of March will be used to represent the value of the listed insurance firms.

 1.7       Significance of the Study

Accounting information is important to a wide variety such as investors, regulators and policy makers, board of directors, management and so forth. The findings of the study will benefit investors in the stock market. It will assist in improving their decision-making tactics for the purpose of investment.

It will also benefit the regulators Financial Reporting Council of Nigeria and National Insurance Commission.  As the research will divulge the scope of compliance with IFRS 4 and its VR, it will benefit them by providing information which may serve as a guide to watching out for insurance firms‟ attitude to adoption of the new IFRS Insurance guidelines taking effect in 2023.

As the research will reveal the reaction of investors to compliance with IFRS 4 Insurance Contracts disclosure requirements, the study will be of relevance to management and board of directors in understanding how informative and relevant their adherence to disclosure requirements on insurance contracts is to investors and to the value of their firms.

Also, the study will benefit the academia. It will form an empirical reference point for future research work on VR and IFRS disclosures especially on IFRS 4 and other related standards.

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