Assessing International Financial Reporting Standard and Financial Performance of Selected Manufacturing Companies in Nigeria
Keywords:
International financial reporting standard (IFRS), return on asset (ROE), earnings per share (EPS), performance
Abstract
This study assessed International Financial Reporting Standard (IFRS) and performance of selected manufacturing companies in Nigeria between 2014 and 2021. Evidently, financial performance is the execution and assessment of business transactions, profitability, financial evaluation and company’s efficiency which necessitated the need for regulators, multinational corporations, auditing firms, investors, and all stakeholders to recognize the importance of international financial reporting standard (IFRS) in firms or organization. The dependent variable, performance proxied, returns on asset (ROA) and earnings per share (EPS) and the independent variable, International financial reporting standard (IFRS). This study adopted descriptive statistics where data were generated on the explanatory variables indicated and statistical numerical approach (SPSS) was adopted to analyse the data. Multiple regression models and Ordinary Least Square (OLS) were employed. Techniques adopted in the study were multicollinearity test and heteroscedasticity test. Secondary data were obtained from annual reports and accounts, fact book and websites of the selected manufacturing companies on Nigerian Stock Exchange (NSE). The study found that IFRS adoption has a positive but insignificant impact on the performance (earnings per share) with p value 0.3090<2.7%, and also IFRS adoption has a positive but insignificant impact on the performance (return on asset) with p value 0.7856<78% of manufacturing firms listed on (NSE) which means that the adoption of IFRS had an insignificant impact on the performance of manufacturing companies in Nigeria. The study recommended that government should increase incentives and encourage more investment in the Nigerian manufacturing sectors to increase their earning potential and profitability, as these are the country's most important economic sectors.
References
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Barth, M., Landsman, W., & Lang, M. (2007). International Accounting Standards and Accounting Quality. Journal of Accounting Research, 46, 467-728.
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Christopher, I. N. & Mmanuel, I. C. (2021). The Effect of IFRS Adoption on Corporate Performance of Listed Firms in Nigeria. International Journal of Academic Research in Accounting Finance and Management Sciences, 11(3), 1–18.
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Glejeser, H. (1969). A new test for heteroscedasity. Journal of American Statistical Association, 64, 325-376.
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Gunst, R.F. & Webster, J.T. (1975). Regression analysis and problems of multicollinearity. Communications in Statistics, 4(3), 277-292.
Hadiza, A. S. & Abdulraham, B. S. (2021). IFRS 4 Disclosure and Firm Performance of Insurance Companies in Nigeria. Asian Journal of Economics, Business and Accounting, 21(6), 27-38.
Herbert, W. E., Ene, E. E., & Tsegba, I. N. (2014). Globalization of financial reporting: Obstacles to international financial reporting standards (IFRS) adoption in Nigeria. Asian Journal of Business and Management Sciences, 3(12), 18-23.
Ibrahim, E.E. (2022). IFRS Adoption and Accounting-Based Performance Measures: Evidence from Emerging Capital Market. Journal of Money and Business, 2(1), 94-106. https://doi.org/10.1108/JMB-11-2021-0057.
Ikpefan, O. A., & Akande, A. O. (2012). International Financial Reporting Standard (IFRS): Benefits, Obstacles and Intrigues for Implementation in Nigeria. Business Intelligence Journal, 5(2), 299-307.
Isenmila, P. A., & Adeyemo, K. A. (2013). Mandatory Adoption of International Financial Reporting Standards (IFRS) in Nigeria: The Unresolved Institutional Question. Mediterranean Journal of Social Sciences, 4(1), 175-184.
Kirkham, R. (2012). Liquidity analysis using cash flow ratios and traditional ratios: The telecommunications sector in Australia. Journal of New Business Ideas & Trends, 10(1), 1-13.
Liargovas, P. & Skandalis, K. (2008). Factors affecting firms’ financial performance: the case of Greece. Working Papers No. 0012, Department of Economics, University of Peloponnese.
Lin, J.W., Li, J. F. & Yang, J. S. (2006).The effect of audit committee performance on earnings quality. Managerial Auditing Journal, 21(9), 921-933.
Musa, Y. A., Nasiru, A. & Muhammad, Y. A. (2017). The Impact of the New Accounting Reporting among Listed Firms in Nigerian Stock Market. Asian Journal of Social and Management Sciences, 4(1), 1-9.
Odia, J. O. & Ogiedu, K. O. (2013). IFRS Adoption: Issues, Challenges and Lessons for Nigeria and other Adopters. Mediterranean Journal of Social Sciences, 4(3).
Oduware, U. (2012). International financial reporting standards and adoption in Nigeria and optimizing the gains of global investment climate. Retrieved Jul 28, 2015, from:https://www.wecadeloitte.com/extranet/ifrsacademy/display/pages/
Osho, A.E, Olutayo, M.E. & Emmanual-Adeyefa, O. (2021). International Financial Reporting Standards (IFRS) and Financial Performance of Multinational Companies in Nigeria. Journal of Accounting and Management, 11(2).
Owolabi, O.Y., & Babalola, G.E. (2023) Total Quality Management and Performance in First bank of Nigeria PLC. Ado Ekiti. International Journal of Innovation Scientific Research and Review, 5(6), 4738-4744.
Pavtar, A. A. (2017). A Comparative Analysis of the Effect of IFRS Adoption on Value Relevance of Accounting Information in an Emerging Economy: A Focus on Listed Deposit Money Banks in Nigeria. IIARD International Journal of Banking and Finance Research, 3(2), 76-99.
Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.
Soye, Y. A. & Raji, O. A. (2016). The Comparability of Pre and Post Adoption IFRS in Nigeria Insurance Companies. Journal of Management and Corporate Governance, 6(2), 41-53.
Tanko, M. (2012). The Effect of International Financial Reporting Standards (IFRS) Adoption on the Performance of Firms in Nigeria. Journal of Administrative and Economic Sciences, 5(2), 133-157.
Tendeloo, B. V., & Vanstraelen, A. (2005). Earnings management under German GAAP versus European IFRS. European Accounting Review, 14(1).
Uwuigbe, U., Uwuigbe, O.R., Durodola, M. E., Jafaru, J. & Jimoh, R. (2017). International financial reporting standard adoption and value of relevance of accounting information in Nigeria. International Journal of Economics and Financial Issues, 7(3), 1-8.
Vodova, P. (2011). Liquidity of Czech commercial banks and its determinants. International Journal of Mathematical Models and Methods in Applied Sciences, 5(6), 1060-1067.
Adebimpe, O. U., & Ekwere, R. E. (2015). IFRS adoption and value relevance of financial statements of Nigerian listed banks. International Journal of Finance and Accounting, 4(1), 1-7. https://doi.org/10.5923/j.ijfa.20150401.01
Adeyanju, O. D. (2020). Impact of the adoption of IFRS on performance of private sector enterprises in Nigeria. International Journal of Economics, Commerce and Management, 8(11), 151-176.
Agyei-Mensah, B.K. (2012). The impact of adopting International Accounting Standards 1 (IAS 1) in Ghana: The extent of disclosures, and their relationship to corporate characteristics. African Journal of Business Management, 6(44), 10896-10905.
Ajibade, M. (2011). Financial Reporting Council (Formerly National Accounting Standard Board – NASB). In Essien-Akpan (Ed.), International Financial Reporting Standards (IFRS): The Role of the Chartered Secretary and Administrator. A paper presented at the 35th Conference of Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN). Lagos Sheraton Hotels and Towers, October 26th and 27th.
Ajibade, A. T., Nyikyaa, T. P., & Nyikyaa, N. M. (2019). IFRS adoption and bank performance in Nigeria and Canada banks. Unpublished research, 1-13.
Alagbe E.A. (2021). International Financial Reporting Standard and Financial Performance: Evidence from Multinational Manufacturing Companies in Nigeria. Fuoye Journal of Accounting and Management, 4(2), 197-217
Akande, A. A. (2020). International financial reporting standards and performance of Manufacturing firms in Nigeria. International Journal Scientific Engineering and Science, 4(1), 63-67.
Akpaka, N. C. (2015). International Financial Reporting Standards (IFRS) Adoption and Value Relevance of Financial Information of Listed Deposit Money Banks in Nigeria (M.Sc. Thesis, Ahmadu Bello University, Zaria).
Amaefule, L. I., Onyekpere, U. R & Kalu, E. O. (2018). International Financial Reporting Standards and Manufacturing Firms’ Financial Performance in Nigeria: A Study of Selected Quoted Firms. International Journal of Accounting and Taxation, 6(1), 102-114.
Aseoluwa, A. C. N., & Jelil, A. A. (2017). IFRS Adoption and Performance of Quoted Consumer Goods Manufacturing Companies in Nigeria. Archives of Business Research, 5(9), 128-138.
Asian, A.U. (2015). IFRS Adoption and Firms Performance; A comparative Analysis of Quoted Food and Beverage Manufacturing Firms in Nigeria. European Journal of Accounting and Finance Research, 3(8), 77-90.
Asika, R., & Ezejiofor (2018). Effect of IFRS on Value Relevance of Accounting Information: Evidence from Quoted Manufacturing Firms in Nigeria. International Journal of Trend in Scientific Research and Development (IJTSRD), 2(5).
Atu, O. O., Atu, O. G., & Atu, O. V. (2014). A comparative study of accounting standards in Nigeria, United Kingdom and United States of America. Journal of Economics and Finance, 13(2), 1-7.
Barth, M., Landsman, W., & Lang, M. (2007). International Accounting Standards and Accounting Quality. Journal of Accounting Research, 46, 467-728.
Bello, F. O. & Yinusa, S. A. (2010). Finance and Investment Decisions. Lagos: Napion Nigeria Company.
Breusch, T.S., & Pagan, A.R. (1979). A Simple test for heteroscedasticity and random coefficient variation. Econometrica: Journal of the Econometric Society, 47(5), 1287-1294. https://doi.org/10.2307/1911968.
Chen, H., Tang, Q., Jiang, Y., & Lin, Z. (2010). The Role of International Financial Reporting Standards in Accounting Quality: Evidence from the European Union. Journal of International Financial Management and Accounting, 21(3), 220-278.
Christopher, I. N. & Mmanuel, I. C. (2021). The Effect of IFRS Adoption on Corporate Performance of Listed Firms in Nigeria. International Journal of Academic Research in Accounting Finance and Management Sciences, 11(3), 1–18.
Dogan, M. (2013). Does firm size affect firm profitability? Evidence from Turkey. Journal of Finance and Accounting, 4(4), 53-59.
Dumont, C. (2012). International Financial Reporting Standards: What you need to know. Retrieved from http://www.investopedia.com/articles/fundamental-analysis/12/international-financial-reporting-standards.asp
Gel, Y. R., & Gastwirth, J. L. (2008). A robust modification of the Jarque–Bera test of normality. Economics Letters, 99(1), 30-32.
Glejeser, H. (1969). A new test for heteroscedasity. Journal of American Statistical Association, 64, 325-376.
Godfrey, L. (2006). Tests for Regression Models with Hetroscedascity of Unknown Form. Computational Statistics & Data Analysis, 50, 2715-2733
Gunst, R.F. & Webster, J.T. (1975). Regression analysis and problems of multicollinearity. Communications in Statistics, 4(3), 277-292.
Hadiza, A. S. & Abdulraham, B. S. (2021). IFRS 4 Disclosure and Firm Performance of Insurance Companies in Nigeria. Asian Journal of Economics, Business and Accounting, 21(6), 27-38.
Herbert, W. E., Ene, E. E., & Tsegba, I. N. (2014). Globalization of financial reporting: Obstacles to international financial reporting standards (IFRS) adoption in Nigeria. Asian Journal of Business and Management Sciences, 3(12), 18-23.
Ibrahim, E.E. (2022). IFRS Adoption and Accounting-Based Performance Measures: Evidence from Emerging Capital Market. Journal of Money and Business, 2(1), 94-106. https://doi.org/10.1108/JMB-11-2021-0057.
Ikpefan, O. A., & Akande, A. O. (2012). International Financial Reporting Standard (IFRS): Benefits, Obstacles and Intrigues for Implementation in Nigeria. Business Intelligence Journal, 5(2), 299-307.
Isenmila, P. A., & Adeyemo, K. A. (2013). Mandatory Adoption of International Financial Reporting Standards (IFRS) in Nigeria: The Unresolved Institutional Question. Mediterranean Journal of Social Sciences, 4(1), 175-184.
Kirkham, R. (2012). Liquidity analysis using cash flow ratios and traditional ratios: The telecommunications sector in Australia. Journal of New Business Ideas & Trends, 10(1), 1-13.
Liargovas, P. & Skandalis, K. (2008). Factors affecting firms’ financial performance: the case of Greece. Working Papers No. 0012, Department of Economics, University of Peloponnese.
Lin, J.W., Li, J. F. & Yang, J. S. (2006).The effect of audit committee performance on earnings quality. Managerial Auditing Journal, 21(9), 921-933.
Musa, Y. A., Nasiru, A. & Muhammad, Y. A. (2017). The Impact of the New Accounting Reporting among Listed Firms in Nigerian Stock Market. Asian Journal of Social and Management Sciences, 4(1), 1-9.
Odia, J. O. & Ogiedu, K. O. (2013). IFRS Adoption: Issues, Challenges and Lessons for Nigeria and other Adopters. Mediterranean Journal of Social Sciences, 4(3).
Oduware, U. (2012). International financial reporting standards and adoption in Nigeria and optimizing the gains of global investment climate. Retrieved Jul 28, 2015, from:https://www.wecadeloitte.com/extranet/ifrsacademy/display/pages/
Osho, A.E, Olutayo, M.E. & Emmanual-Adeyefa, O. (2021). International Financial Reporting Standards (IFRS) and Financial Performance of Multinational Companies in Nigeria. Journal of Accounting and Management, 11(2).
Owolabi, O.Y., & Babalola, G.E. (2023) Total Quality Management and Performance in First bank of Nigeria PLC. Ado Ekiti. International Journal of Innovation Scientific Research and Review, 5(6), 4738-4744.
Pavtar, A. A. (2017). A Comparative Analysis of the Effect of IFRS Adoption on Value Relevance of Accounting Information in an Emerging Economy: A Focus on Listed Deposit Money Banks in Nigeria. IIARD International Journal of Banking and Finance Research, 3(2), 76-99.
Saleem, Q., & Rehman, R. U. (2011). Impacts of liquidity ratios on profitability. Interdisciplinary Journal of Research in Business, 1(7), 95-98.
Soye, Y. A. & Raji, O. A. (2016). The Comparability of Pre and Post Adoption IFRS in Nigeria Insurance Companies. Journal of Management and Corporate Governance, 6(2), 41-53.
Tanko, M. (2012). The Effect of International Financial Reporting Standards (IFRS) Adoption on the Performance of Firms in Nigeria. Journal of Administrative and Economic Sciences, 5(2), 133-157.
Tendeloo, B. V., & Vanstraelen, A. (2005). Earnings management under German GAAP versus European IFRS. European Accounting Review, 14(1).
Uwuigbe, U., Uwuigbe, O.R., Durodola, M. E., Jafaru, J. & Jimoh, R. (2017). International financial reporting standard adoption and value of relevance of accounting information in Nigeria. International Journal of Economics and Financial Issues, 7(3), 1-8.
Vodova, P. (2011). Liquidity of Czech commercial banks and its determinants. International Journal of Mathematical Models and Methods in Applied Sciences, 5(6), 1060-1067.
Published
2024-02-17
How to Cite
OWOLABI, O. Y., FAPOHUNDA, F. M., & ADELEKE, A. S. (2024). Assessing International Financial Reporting Standard and Financial Performance of Selected Manufacturing Companies in Nigeria . European Journal of Science, Innovation and Technology, 4(1), 247-260. Retrieved from https://ejsit-journal.com/index.php/ejsit/article/view/378
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