Does International Financial Reporting Standards (IFRS) Impact Profitability Ratios of Listed Banks in Nigeria?

Erin, Olayinka; Oduwole, Foluke; Olojede, Paul; Arumona, Jonah

doi:10.20448/2002.22.79.90

Cited by 4 publications

(5 citation statements)

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“…According to Cohen, .1=small effect, .3=moderate effect, and .5=large effect. This technique was used in the study of Erin et al (2018) when determining the pre and post-impact of IFRS on the profitability of listed companies.…”

Section: Descriptive Statistics Summarymentioning

confidence: 99%

The effect of the adoption of International Financial Reporting Standards on foreign portfolio investment in Africa

Omotoso

Schutte

Oberholzer

2021

South African Journal of Accounting Research

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1994 to 2015 on total foreign portfolio investments in liabilities (equity and debt) were collected.Panel data regression analysis incorporating pooled regression, fixed-effects, and random-effects models was estimated. Also, the generalised method of moment estimator was employed to address the problem of endogeneity, usually associated with panel data analysis and as a robustness check for the model. The logit regression model was used to examine the determinant factors of IFRS adoption.Various statistical tests were estimated, such as the diagnostic test, using the histogram and Jarque-Bera statistics, difference-in-difference (DID) test, the unit root test, and the cross-sectional dependence test. The Hausman's chi-square was estimated to determine the best alternative technique between the fixed-effects and random-effects models. Also the Arellano-Bond estimator autocorrelation 〈1〉 and 〈2〉 was used to evaluate the validity of the variable instruments in the model. Besides, the average marginal effect (AME) was estimated for the effect of each covariate on the result. Certain covariates were estimated as control variables in the model.The statistical results show a significant and positive effect of the adoption of IFRS on FPI inflows after the adoption and implementation of IFRS in adopting countries. Equally, the finding further indicates a significant difference in the volume of FPI inflows after the adoption of IFRS than before the adoption, in adopting countries. The statistical estimates also reveal a positive and significant effect of IFRS adoption on FPI in adopting countries, compare with non-adopting IFRS countries where it shows a negative and non-significant relationship. It shows that countries that adopted IFRS experience more inflows in FPI compare with the non-adopting countries in Africa.Furthermore, the logit regression results show that culture, the legal system, political system, investor protection, market capitalisation, and tax were found to be positively significant with the probability of adopting IFRS in the logistic model. This thesis, therefore, suggests that the adoption of IFRS is justified in the selected countries in Africa since the results indicated a positive and significant effect of IFRS adoption on FPI in these countries. Hence, substantiated the assumption of IFRS proponents that adoption will enhance the flow of FPI in adopting countries for economic development. Policies measure to monitor the activities of listed firms and to enforce compliance with IFRS rules and regulations are warranted.These policies would further enable IFRS adopting countries to enhance more flow of FPI.

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Section: Descriptive Statistics Summarymentioning

confidence: 99%

The effect of the adoption of International Financial Reporting Standards on foreign portfolio investment in Africa

Omotoso

Schutte

Oberholzer

2021

South African Journal of Accounting Research

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“…Although the importance of financial literacy on the financial performance of MSMEs is well-documented and evidenced, a significant number of entrepreneurs lacked the financial knowledge, attitudes, and behaviors required to increase their business profitability, liquidity, and how to effectively make use of debt (leverage) to undertake better investments or projects (Pakovic et al, 2018). Erin et al (2017) noted that one of the reasons why entrepreneurs make poor, inappropriate, unprofessional, and undesirable financial decisions is due to the absence or deficiency of financial knowledge, attitudes, and behaviors, as well as inadequate time to learn about the basic concepts of financial literacy. Ernest (2018) further argued that these poor financial decisions undermine entrepreneurial activity, manifested in poor business profitability, insufficient liquidity, and the accumulation of too many business debts with no successive repayment plans.…”

Section: Relationship Between Financial Literacy and Financial Perfor...mentioning

confidence: 99%

“…Moreover, Tumba et al (2021) found that financial literacy has a significant relationship with financial performance because it is a vital indicator of success in managing the affairs of small business operations in the present complex and rapidly changing business environment. This is vital given that there is evidence showing that one of the reasons why entrepreneurs make poor, inappropriate, unprofessional, and undesirable financial decisions is due to the absence or deficiency of financial knowledge, attitude, and behaviors, as well as inadequate time to learn about the basic concepts of financial literacy (Erin et al, 2017). Consequently, higher levels of financial literacy promote better financial performance, thereby providing opportunities for better planning of future life events for entrepreneurs like retirement, buying a house, or savings for children's education (Owolabi et al, 2021).…”

Section: Fpmentioning

confidence: 99%

Financial Literacy and Financial Performance of Micro, Small and Medium Enterprises in Lagos City, Nigeria

John¹

2022

theijbm

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Micro, small, and medium-sized enterprises' (MSMEs') financial literacy and performance are critical to their overall survival in a competitive business environment. The study addressed the following specific objectives: To determine the level of financial literacy of MSME entrepreneurs; To determine the financial performance of MSMEs; To determine the relationship between financial literacy and financial performance, and To determine the problems encountered by MSMEs entrepreneurs in the management of their businesses The study was guided by the upper echelon theory and competency theory. The study adopted a descriptive-correlational research design in which a total sample of 100 MSMEs was conveniently selected inside Alaba International Market, Lagos City, Nigeria. Questionnaires were administered as the main data collection tool, which included estimates of the MSME financial statements such as profitability, liquidity, and leverage for the years of 2017, 2018, and 2019. An inferential statistical tool, such as correlation analysis, was applied to test the relationship between the two main variables.The study found that the majority of the entrepreneurs had appropriate levels of knowledge, behavior, and attitude in managing their business finances but were inconsistent in putting these concepts into practice while making decisions that affected their business operations. The study also found that the MSMEs for the three-year periods assessed were not profitable due to low sales, insufficient support from stakeholders had low liquidity due to poor sales and lack of cash flow management, and incurred more debts that were diverted to other activities that did not add value to their business operations. The null hypothesis was rejected, implying that financial literacy had a significant and positive effect on the financial performance of MSMEs. Moreover, poor access to bank financing was found to be the major problem impeding the expansion and growth of MSMEs in the study area. As a result, the study concluded that the proposed recommendations would serve as the foundation for addressing the issues raised in the study, thereby assisting MSMEs in improving their financial literacy and business performance in the long run.

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“…Nigeria's leading private sector companies, particularly banks, voluntarily adopted IFRS in 2010. It is expected that the adoption of IFRS would reduce earnings variability and improve accounting quality (Erin, Olayinka & Adedayo, 2019;Tanko, 2012). It will reduce information asymmetry and would subsequently smoothen communications among managers, shareholders, creditors and other interested parties (Erin, Olayinka & Adedayo, 2019;Bushman & Smith, 2001), resulting in lower agency costs (Healy & Palepu, 2001).…”

Section: Introductionmentioning

confidence: 99%

“…It is expected that the adoption of IFRS would reduce earnings variability and improve accounting quality (Erin, Olayinka & Adedayo, 2019;Tanko, 2012). It will reduce information asymmetry and would subsequently smoothen communications among managers, shareholders, creditors and other interested parties (Erin, Olayinka & Adedayo, 2019;Bushman & Smith, 2001), resulting in lower agency costs (Healy & Palepu, 2001). Lower information asymmetry would also lead to lower costs of equity and debt financing (Guermazi, 2022;El-Gazzar et al, 1999;Botosan & Plumlee, 2002).…”

Section: Introductionmentioning

confidence: 99%

The Influence of International Financial Reporting Standard on Financial Performance and Taxation of Selected Listed Firms in Nigeria

D.V.¹,

H.²

2023

British Journal of Management and Marketing Studies

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The study examined the influence of international financial reporting standards on financial performance and taxation of five selected firms each from consumer goods, industrial goods and banking sectors in Nigeria between the period of 2009-2011 and post IFRS adoption period (2013-2020). The specific objectives of the study were to examine the effect of profitability of listed firms and IFRS adoption on taxation of selected firms in Nigeria. The study was anchored on agency and signaling theories. We employed descriptive statistics and paired sample t-tests in the analysis of data. Our findings show that mandatory adoption of IFRS has a significant impact on profitability of listed firms in Nigeria while IFRS has an insignificant impact on taxation of selected listed firms in Nigeria. There were no significant differences in the impact of IFRS adoption on profitability assessment between the key sectors of listed firms and there were no significant differences in the impact of IFRS adoption on taxation between the key sectors of listed firms in Nigeria. It was concluded that IFRS adoption has a significant possible impact on profitability and that taxation is significantly affected by IFRS adoption. Also, significant differences do not exist between the impact of IFRS adoption on the key sectors of listed firms in Nigeria, namely; consumer goods, industrial goods and the banking sectors. The study recommended amongst others that corporate managers should ensure compliance with IFRS since it positively impacts on profit.

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Does International Financial Reporting Standards (IFRS) Impact Profitability Ratios of Listed Banks in Nigeria?

Cited by 4 publications

References 8 publications

The effect of the adoption of International Financial Reporting Standards on foreign portfolio investment in Africa

The effect of the adoption of International Financial Reporting Standards on foreign portfolio investment in Africa

Financial Literacy and Financial Performance of Micro, Small and Medium Enterprises in Lagos City, Nigeria

The Influence of International Financial Reporting Standard on Financial Performance and Taxation of Selected Listed Firms in Nigeria

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