INTERNATIONAL FINANCIAL REPORTING STANDARDS AND EARNINGS MANAGEMENT AMONG QUOTED NON-FINANCIAL FIRMS IN NIGERIA (2007-2016)
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Date
2019
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Abstract
The study analysed the trend of earnings management in listed non-Financial companies in
Nigeria from 2007-2016 and examined the determinants of earnings management among
selected listed non-Financial companies in Nigeria during the study period. It also assessed the
direction of causality between earnings management and quality of accounting information and
evaluated the effect of International Financial Reporting Standards (IFRS) implementation on
earnings management of Nigerian quoted non-Financial companies during the period. These
were with the view to providing an insight on the effect of the mandatory adoption of IFRS on
earnings management among quoted non-financial firms in Nigeria between 2007 and 2016.
Data were collected from primary and secondary sources. The population consisted of 84
quoted non-financial companies in Nigeria. A sample size of 62 non-Financial firms whose
shares were traded during the period 2007 - 2016 were purposively selected based on availability
and accessibility of data. Year 2007 was chosen as the base year due to the fact that the global
economic recession coupled with the high level of international business competitions became
prominent making sustainability of performance elusive for reporting entities. Primary data were
sourced through the administration of open and close-ended structured questionnaire. Data on
IFRS adoption and earnings management were sourced from annual reports and accounts of
companies and from Nigerian Stock Exchange Factbooks. Data were analysed using percentages,
pooled ordinary least square, random and fixed effect models as well as granger causality test.
The results showed that earnings management witnessed a rising trend in discretionary
accrual during the whole ten years` period (2007-2016) from -0.050 in 2007 to 0.036 in 2016
with smallest -0.046 and highest 0.051 in 2012 and 2013 respectively. The results showed that the leverage (r = 0.1150; p < 0.05) and growth (r = 0.006; p < 0.01) were the determinants of
earnings management. In addition, the results showed that a bi-directional relationship existed
between earnings management (z = 4.860; p < 0.01) and quality of accounting information (z =
4.7976; p < 0.01). Finally, the results revealed that IFRS adoption (r = -0.0616; p > 0.05) showed
a negative and insignificant effect on earnings management.
The study concluded that IFRS adoption had no significant effect on earnings management
among sampled quoted non-financial firms in Nigeria during the study period.