Article2015

IFRS Adoption and Value Relevance of Financial Statements of Nigerian Listed Banks

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Financial Reporting and Valuation Research

Abstract

Adopting the International Financial Reporting Standard (IFRS) have been empirically found to improve the quality of accounting in some countries, thereby increasing its usefulness to stakeholders. This study empirically examines whether the mandatory adoption of IFRS has improved the value relevance of financial information in the financial statements of commercial banks in Nigeria. The sample comprises of twelve listed banks in Nigeria. Specifically, financial statement figures of 2010 and 2011 (pre-adoption period) and 2012 and 2013 (post-adoption) were utilized. Descriptive statistics and least square regression were conducted to analyse the effect of IFRS adoption on the accounting quality. The result indicates that the equity value and earnings of banks are relatively value relevant to share prices under IFRS than under the previous Nigerian SAS. Results also indicate that earnings per share is incrementally value relevant during post-IFRS period while book value of equity per share is incrementally less value relevant during the post-IFRS period. This may imply that earnings reported by Nigerian Commercial banks have become more informative to equity investors in determining the value of banks following IFRS adoption. We therefore recommend that Financial Reporting Council of Nigeria and other accounting standards setters should incorporate more measures to enhance the quality of the financial reporting in order to increase the value relevance of financial statements.

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References

1995Earnings, Book Values, and Dividends in Equity Valuation*2005Comparative Value Relevance Among German, U.S., and International Accounting Standards: A German Stock Market Perspective 2007Adoption of IFRS in Spain: Effect on the comparability and relevance of financial reporting 1999The market valuation of IAS versus US-GAAP accounting measures using Form 20-F reconciliations 2011The Transition to IFRS and the Value Relevance of Financial Statements in Greece 2005Value relevance of international accounting standards harmonization: Evidence from A- and B-share markets in China 2000The value relevance of IAS reconciliation components: empirical evidence from Finland 2008The IFRS Adoption's Effect on Accounting Quality in Sweden

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