International Financial Reporting Standards and Value Relevance of Financial Information: An Empirical Evaluation of Selected Nigerian Listed Companies
Keywords:
IFRS, Value Relevance, Financial Information, Stock Price, Nigeria
Abstract
This study investigates the International Financial Reporting Standards (IFRS) and value relevance of financial information among Nigerian listed companies after the adoption of IFRS. 77 sample companies were randomly selected from the population. Data were collected from UUM-Data stream through the annual reports and accounts of companies, which consist of Stock price (dependent variable), Book value of equity and net income as (independent variables) for the year 2016. Ordinary Least Square Regression was the method used in analyzing the variables. The regression result revealed that there is a positive and significant relationship between book value of equity and net income on stock price. These reveal that the financial information of listed companies in Nigeria is more value relevant after the adoption of IFRS. In view of the findings, the study recommends that, Nigerian Stock Exchange should ensure that all listed companies are comply with the accounting framework issued by IFRS, in order to have full disclosure of their financial information.
References
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Aliabadi, S., Dorestani, A., & Balsara, N. (2013). The Most Value Relevant Accounting Performance Measure by Industry. Journal of Accounting and Finance, 13(1), 22-34.
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Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The Relevance of the Value Relevance Literature for Financial Accounting Standard Setting: Another View. Journal of Accounting and Economics, 31(1), 77-104.
Bilgic, F. A. & İbis, C. (2013). Effects of New Financial Reporting Standards on Value Relevance: A Study about Turkish Stock Markets. International Journal of Economics and Finance, 5(10), 126-140.
Bonham, M., Richard, C., Curtis, M., Davies, M., Dekker, P., Denton, T., & Williams, T. (2009). International GAAP 2009 under International Financial Reporting Standards. Chichester: John Wiley & Sons.
Brown, S., Lo, K., & Lys, T. (1999). Use of R-square in Accounting Research: Measuring Changes in Value Relevance over the Last Four Decades. Journal of Accounting and Economics, 28(2), 83-115.
Callao, S., Jarne, J. I., & Lainez, J. A. (2007). Adoption of IFRS in Spain: Effect on the Comparability and Relevance of Financial Reporting. Journal of International Accounting, Auditing and Taxation, 16, 148-178.
Callao, S., Jarne, J. I., & Lainez, J. A. (2007). Adoption of IFRS in Spain: Effect on the comparability and relevance of financial reporting. Journal of International Accounting, Auditing and Taxation, 16, 148-178.
Chalmers, K., Clinch, G., & Godfrey, J. M. (2011). Changes in Value Relevance of Accounting Information upon IFRS Adoption: Evidence from Australia. Australian Journal of Management, 36(2), 151-173.
Chen, H., Tang, Q., Jiang, Y., & Lin, Z. (2010). The Role of International Financial Reporting Standards in Accounting Quality: Evidence from the European 79 Union. Journal of International Financial Management & Accounting, 21(3), 220-278.
Christensen, H. B., Lee, E., Walker, M. & Zeng, C. (2015). Incentives or Standards: What Determines Accounting Quality Changes around IFRS Adoption? European Accounting Review, 24(1), 31-61.
Cotter, J., Tarca, A., & Wee, M. (2012). IFRS Adoption and Analysts’ Earnings Forecasts: Australian Evidence. Accounting & Finance, 52(2), 395-419.
Dimitropoulos, P. E., Asteriou, D., Kousenidis, D. & Leventis, S. (2013). The impact of IFRS on accounting quality: Evidence from Greece. Advances in Accounting, Incorporating Advances in International Accounting, 2, 108–123.
Easton, P. D., & Sommers, G. A. (2003). Scale and the Scale Effect in Market‐based Accounting Research. Journal of Business Finance & Accounting, 30(1‐2), 25-56.
Edogbanya, A., & Kamardin, H. (2014). Adoption of International Financial Reporting Standards in Nigeria: Concepts and Issues. Journal of Advanced Management Science, 2(1), 72-75.
Ezeani, N. S., & Rotimi, O. (2012). Adoption of International Financial Reporting Standards (IFRS) to Enhance Financial Reporting in Nigeria Universities. Arabian Journal of Business and Management Review,2 (3), 71-85.
Francis, J. & Schipper, K. (1999). Have Financial Statements Lost Their Relevance? Journal of Accounting Research, 37(2), 319-352.
Gassen, J., & Sellhorn, T. (2006). Applying IFRS in Germany: Determinants and Consequences. (July 2006).
Hung, M. & Subramanyam, K.R. (2007). Financial Statement Effects of Adopting International Accounting Standards: The Case of Germany. Review of Accounting Studies, 12(4), 623-657.
IASB (2008). Exposure Draft on an Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information. London.
Iatridis, G. & Rouvolis, S. (2010). The Post-adoption Effects of the Implementation of International Financial Reporting Standards in Greece. Journal of International Accounting, Auditing and Taxation, 19, 55-65.
Jacob, R. A., & Madu, C. N. (2009). International Financial Reporting Standards: An Indicator of High Quality? International Journal of Quality & Reliability Management, 26(7), 712-722.
Kaiser, J., Schmid, D., Sheward, D., & Bennett, E. (2014). IFRS in the US: The Importance of Being Financially Bilingual.
Kanagaretnam, K., Mathieu, R., & Shehata, M. (2009). Usefulness of Comprehensive Income Reporting in Canada. Journal of Accounting and Public Policy, 28(4), 349-365.
Kargin, S. (2013). The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms. International Journal of Economics and Finance, 5(4), 71.
Karunarathna, W. V. A. D., & Rajapakse, R. M. D. A. P. (2010). The Value Relevance of Financial Statements Information: With Special Reference to the Listed Companies in Colombo Stock Exchange.
Kwon, G. J. (2009). The Value Relevance of Earnings and Book Value Using an Option- Style Equity Valuation Model: Evidence from Korea. International Journal of Business and Management, 4(12), 19-41.
Madawaki, A. (2012). Adoption of International Financial Reporting Standards in Developing Countries: The case of Nigeria. International Journal of Business and Management, 7(3), 152.
Maigoshi, Z. S. (2014). The Impact of Mandatory Adoption of International Financial Reporting Standard on Accounting Quality in Nigeria. Masters Project Paper, Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia.
Martinez, J. A., Martinez, D. A. & Lin, H. (2014). The Value Relevance of Accounting Numbers under International Financial Reporting Standards. Australian Accounting Review, 24(3), 237-254.
Mohammed, Y. A., & Lode, N. A. (2015b). The Value Relevance of Accounting Disclosures among Nigerian Financial Institutions after the IFRS Adoption. Mediterranean Journal of Social Sciences, 6(1), 409.
Palea, B. (2013). IAS/IFRS and financial reporting quality: Lessons from the European Experience. China Journal of Accounting and Research, 6, 247-263.
Scott, W. R. (2015). Financial Accounting Theory. Seventh Edition. Pearson Canada.
Siyanbola, A. A. (2014). The Value Relevance of Accounting Information: A Study of Stock Price and Returns of Listed Deposit Money Banks in Nigeria. Masters Dissertation, School of Post Graduate, Bayero University Kano.
Soderstrom, N. S., & Sun, K. J. (2007). IFRS Adoption and Accounting Quality: A Review. European Accounting Review, 16(4), 675-702.
Terzi, S., Oktem, R., & Sen, I. K. (2013). Impact of Adopting International Financial Reporting Standards: Empirical Evidence from Turkey. International Business Research, 6(4), 55.
Tracy, J. A. (2013). Accounting for Dummies (5th ed.). New Jersey: John Wiley and Sons
Umoru, H. and S. Ismail.(2010). Nigeria to Adopt International Financial Reporting Standards. Vanguard 6th September p.26.
Wells, M. J. (2011). Framework-based Approach to Teaching Principle-based Accounting Standards. Accounting Education, 20(4), 303-316.
Zeghal, D., & Mhedhbi, K. (2006). An Analysis of the Factors Affecting the Adoption of International Accounting Standards by Developing Countries. The International Journal of Accounting, 41(4), 373-386.
Agostino, M., Drago, D., & Silipo, D. B. (2011). The Value Relevance of IFRS in the European Banking Industry. Review of quantitative finance and accounting, 36(3), 437-457.
Aliabadi, S., Dorestani, A., & Balsara, N. (2013). The Most Value Relevant Accounting Performance Measure by Industry. Journal of Accounting and Finance, 13(1), 22-34.
Aruwa, S.A. S. and Naburgi, M. M. (2015). Value Relevance of Accounting Information and Share Prices in the Nigerian Banking and Manufacturing Sectors: A Comparative Analysis
Babalola, Y. A. (2012). Significance of Accounting Information on Corporate Values of Firms in Nigeria. Research Journal in Organizational Psychology & Educational Studies, 1(2), 105-113.
Bala, M. (2013). Effects of IFRS Adoption on the Financial Reports of Nigerian Listed Entities: The Case of Oil and Gas Companies. The Macro theme Review 2 (7), 9-26.
Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The Relevance of the Value Relevance Literature for Financial Accounting Standard Setting: Another View. Journal of Accounting and Economics, 31(1), 77-104.
Bilgic, F. A. & İbis, C. (2013). Effects of New Financial Reporting Standards on Value Relevance: A Study about Turkish Stock Markets. International Journal of Economics and Finance, 5(10), 126-140.
Bonham, M., Richard, C., Curtis, M., Davies, M., Dekker, P., Denton, T., & Williams, T. (2009). International GAAP 2009 under International Financial Reporting Standards. Chichester: John Wiley & Sons.
Brown, S., Lo, K., & Lys, T. (1999). Use of R-square in Accounting Research: Measuring Changes in Value Relevance over the Last Four Decades. Journal of Accounting and Economics, 28(2), 83-115.
Callao, S., Jarne, J. I., & Lainez, J. A. (2007). Adoption of IFRS in Spain: Effect on the Comparability and Relevance of Financial Reporting. Journal of International Accounting, Auditing and Taxation, 16, 148-178.
Callao, S., Jarne, J. I., & Lainez, J. A. (2007). Adoption of IFRS in Spain: Effect on the comparability and relevance of financial reporting. Journal of International Accounting, Auditing and Taxation, 16, 148-178.
Chalmers, K., Clinch, G., & Godfrey, J. M. (2011). Changes in Value Relevance of Accounting Information upon IFRS Adoption: Evidence from Australia. Australian Journal of Management, 36(2), 151-173.
Chen, H., Tang, Q., Jiang, Y., & Lin, Z. (2010). The Role of International Financial Reporting Standards in Accounting Quality: Evidence from the European 79 Union. Journal of International Financial Management & Accounting, 21(3), 220-278.
Christensen, H. B., Lee, E., Walker, M. & Zeng, C. (2015). Incentives or Standards: What Determines Accounting Quality Changes around IFRS Adoption? European Accounting Review, 24(1), 31-61.
Cotter, J., Tarca, A., & Wee, M. (2012). IFRS Adoption and Analysts’ Earnings Forecasts: Australian Evidence. Accounting & Finance, 52(2), 395-419.
Dimitropoulos, P. E., Asteriou, D., Kousenidis, D. & Leventis, S. (2013). The impact of IFRS on accounting quality: Evidence from Greece. Advances in Accounting, Incorporating Advances in International Accounting, 2, 108–123.
Easton, P. D., & Sommers, G. A. (2003). Scale and the Scale Effect in Market‐based Accounting Research. Journal of Business Finance & Accounting, 30(1‐2), 25-56.
Edogbanya, A., & Kamardin, H. (2014). Adoption of International Financial Reporting Standards in Nigeria: Concepts and Issues. Journal of Advanced Management Science, 2(1), 72-75.
Ezeani, N. S., & Rotimi, O. (2012). Adoption of International Financial Reporting Standards (IFRS) to Enhance Financial Reporting in Nigeria Universities. Arabian Journal of Business and Management Review,2 (3), 71-85.
Francis, J. & Schipper, K. (1999). Have Financial Statements Lost Their Relevance? Journal of Accounting Research, 37(2), 319-352.
Gassen, J., & Sellhorn, T. (2006). Applying IFRS in Germany: Determinants and Consequences. (July 2006).
Hung, M. & Subramanyam, K.R. (2007). Financial Statement Effects of Adopting International Accounting Standards: The Case of Germany. Review of Accounting Studies, 12(4), 623-657.
IASB (2008). Exposure Draft on an Improved Conceptual Framework for Financial Reporting: The Objective of Financial Reporting and Qualitative Characteristics of Decision-useful Financial Reporting Information. London.
Iatridis, G. & Rouvolis, S. (2010). The Post-adoption Effects of the Implementation of International Financial Reporting Standards in Greece. Journal of International Accounting, Auditing and Taxation, 19, 55-65.
Jacob, R. A., & Madu, C. N. (2009). International Financial Reporting Standards: An Indicator of High Quality? International Journal of Quality & Reliability Management, 26(7), 712-722.
Kaiser, J., Schmid, D., Sheward, D., & Bennett, E. (2014). IFRS in the US: The Importance of Being Financially Bilingual.
Kanagaretnam, K., Mathieu, R., & Shehata, M. (2009). Usefulness of Comprehensive Income Reporting in Canada. Journal of Accounting and Public Policy, 28(4), 349-365.
Kargin, S. (2013). The Impact of IFRS on the Value Relevance of Accounting Information: Evidence from Turkish Firms. International Journal of Economics and Finance, 5(4), 71.
Karunarathna, W. V. A. D., & Rajapakse, R. M. D. A. P. (2010). The Value Relevance of Financial Statements Information: With Special Reference to the Listed Companies in Colombo Stock Exchange.
Kwon, G. J. (2009). The Value Relevance of Earnings and Book Value Using an Option- Style Equity Valuation Model: Evidence from Korea. International Journal of Business and Management, 4(12), 19-41.
Madawaki, A. (2012). Adoption of International Financial Reporting Standards in Developing Countries: The case of Nigeria. International Journal of Business and Management, 7(3), 152.
Maigoshi, Z. S. (2014). The Impact of Mandatory Adoption of International Financial Reporting Standard on Accounting Quality in Nigeria. Masters Project Paper, Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia.
Martinez, J. A., Martinez, D. A. & Lin, H. (2014). The Value Relevance of Accounting Numbers under International Financial Reporting Standards. Australian Accounting Review, 24(3), 237-254.
Mohammed, Y. A., & Lode, N. A. (2015b). The Value Relevance of Accounting Disclosures among Nigerian Financial Institutions after the IFRS Adoption. Mediterranean Journal of Social Sciences, 6(1), 409.
Palea, B. (2013). IAS/IFRS and financial reporting quality: Lessons from the European Experience. China Journal of Accounting and Research, 6, 247-263.
Scott, W. R. (2015). Financial Accounting Theory. Seventh Edition. Pearson Canada.
Siyanbola, A. A. (2014). The Value Relevance of Accounting Information: A Study of Stock Price and Returns of Listed Deposit Money Banks in Nigeria. Masters Dissertation, School of Post Graduate, Bayero University Kano.
Soderstrom, N. S., & Sun, K. J. (2007). IFRS Adoption and Accounting Quality: A Review. European Accounting Review, 16(4), 675-702.
Terzi, S., Oktem, R., & Sen, I. K. (2013). Impact of Adopting International Financial Reporting Standards: Empirical Evidence from Turkey. International Business Research, 6(4), 55.
Tracy, J. A. (2013). Accounting for Dummies (5th ed.). New Jersey: John Wiley and Sons
Umoru, H. and S. Ismail.(2010). Nigeria to Adopt International Financial Reporting Standards. Vanguard 6th September p.26.
Wells, M. J. (2011). Framework-based Approach to Teaching Principle-based Accounting Standards. Accounting Education, 20(4), 303-316.
Zeghal, D., & Mhedhbi, K. (2006). An Analysis of the Factors Affecting the Adoption of International Accounting Standards by Developing Countries. The International Journal of Accounting, 41(4), 373-386.
Published
2017-07-29
How to Cite
Musa, A., & Muhammad Tanimu, I. (2017). International Financial Reporting Standards and Value Relevance of Financial Information: An Empirical Evaluation of Selected Nigerian Listed Companies. International Journal of Accounting & Finance Review, 1(1), 1-11. https://doi.org/10.46281/ijafr.v1i1.13
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2017 Auwalu Musa, Ibrahim Muhammad Tanimu
This work is licensed under a Creative Commons Attribution 4.0 International License.
