The value relevance of accounting disclosures among listed Nigerian firms: IFRS adoption

(ProQuest: . denotes formulae omitted.)IntroductionThe current study investigated the effect of the adoption of International Financial Reporting (IFRS) in Nigeria on the quality of accounting information among Nigerian listed firms. To find out the effect of IFRS, we examined the relationship between assets and liabilities with stock prices with audit "Big 4" as a control variable for the pre- and post-adoption of IFRS among listed Nigerian firms in the stock market.The financial market in Nigeria underwent a severe crisis in the year 2008-2009, even though, it was a global issue in the period. During the period, the Nigerian capital market lost more than 60% of its capitalisation (Oladipupo, 2010; Sanusi, 2010) Moreover, the financial crisis affected the majority of the industries in the capital market, mainly the banks (Mohammed & Lode, 2015). As explained by the World Bank (2011), the collapse of the market in the period was generated as a result of non-updates of accounting standard, causing the weaknesses of the accounting and auditing standards, nondisclosures of accounting information, and non-compliance with accounting regulations by the Nigeria firms. At the time, companies explored the flaws of the accounting and auditing standards to the advantage of their firms, ignoring the consequences to the capital market and investors (Mohammed & Lode, 2012a). The fundamental problem with the shortcomings of the accounting and auditing standards coupled with international demand for the adoption of IFRS necessitated the need for adoption of IFRS among Nigerian firms. Even though the economic, business environment and legal system of emerging economies are different from developed countries, yet, there was a lot of pressure to harmonize accounting reporting with developing countries (Prather-Kinsey & Shelton, 2005). Harmonization of accounting reporting with IFRS will enhance more disclosures of accounting information to the investors. Disclosures in a financial statement provide users of accounting information with relevant information that can be substantial for economic decisions(Prather-Kinsey & Shelton, 2005). The most significant Nigerian acts that regulate Nigerian companies to disclose relevant financial reporting comprises the Company and Allied Matter Act (CAMA) of 1990 and Financial Reporting Council Act of 2011 (Nigerian Accounting Standards Board (NASB) Act of 2003). Several accounting regulations have been issued by the NASB (now FRC) from 1984-2009 for Nigerian companies as Statement of Accounting Standards (SAS) (These standards issued are from SAS1 to SAS32). However, the majority of these standards for the financial reporting requirements were adopted from the International Accounting Standards (IAS), though, not updated like IAS (Mohammed & Lode, 2015). The study on capital market research, immediately after the study of Ball and Brown (1968), presented many studies showing an association between market price and accounting numbers. As soon as their research was conducted, several types of research on value relevance were conducted which include disclosures on balance sheet items such as assets and liabilities, earnings statements using Ohlson Model (1995). Nevertheless, previous research on value relevance concentrated on the UK and US stock markets only (see Barth & Clinch, 1996 Barth et al., 1999; Barth, 1994). Due to the rising significance with the more demand of financial reporting within the international capital markets, additional research examined the value relevance of financial reporting in markets considered to be non-US developed markets (Graham et al., 2000), and thereafter studies emerged in other emerging markets (see Chen et al., 2001; Kargin, 2013; Mironiuc et al., 2015; Umoren & Enang, 2015; Pa§can, 2015). Now that Nigeria has adopted IFRS, which previous literature reported having more disclosures than Nigerian domestic accounting reporting, would there be a substitute for quality (relevance) of financial reporting to the investors? …