CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

The financial industry plays a crucial role in the economic development of any country, acting as
the backbone of financial intermediation that facilitates economic activities. Deposit money
banks (DMBs), being a significant component of this industry, are tasked with mobilizing and
allocating financial resources efficiently. Given their role, it is essential that their financial
statements present a true and fair view of their financial position and performance. To achieve
uniformity, transparency, and comparability in financial reporting across different jurisdictions,
the adoption of International Financial Reporting Standards (IFRS) has become imperative
(Adebiyi et al, 2019)

IFRS, developed by the International Accounting Standards Board (IASB), aims to create a
global language for financial reporting that enables businesses and financial institutions to
provide consistent and comparable financial information. Since its adoption by many countries
worldwide, IFRS has been recognized as a standard that enhances the credibility and accuracy of
financial statements, making it easier for investors, regulators, and other stakeholders to make
informed economic decisions (Okafor & Nwafor, 2020).

In Nigeria, the implementation of IFRS began in 2012 as part of the government's strategy to
align with global best practices in financial reporting. The adoption of IFRS in Nigeria marked a
significant shift from the previous local Generally Accepted Accounting Principles (GAAP) to a
more globally recognized financial reporting framework. Prior to the adoption of IFRS, Nigerian
banks operated under the Statement of Accounting Standards (SAS), which lacked the
international comparability and consistency needed to attract global investors. The decision to
adopt IFRS was motivated by the need to integrate Nigeria’s financial reporting practices into the
global economy, thereby enhancing investor confidence and fostering economic growth. For
deposit money banks in Nigeria, the transition to IFRS involved significant changes in the way

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financial information is recorded, reported, and interpreted (Ijeoma & Anoruo, 2017). These
changes were expected to improve financial transparency, reduce information asymmetry, and
increase the comparability of financial statements with those of banks operating in other
countries. The adoption of IFRS was also anticipated to lead to better risk assessment and
management practices, which are critical for the stability of the banking sector.

The adoption of IFRS is expected to enhance the quality and transparency of financial reporting
by deposit money banks. Property, Plant and Equipment (PPE), audit size, and firm age are key
factors influencing the adoption and compliance of IFRS in deposit money banks in Nigeria.
Hence, there is a need for the examination of the relationship between Property, Plant, and
Equipment (PPE), audit size, and firm age concerning the compliance or adoption of IFRS
(International Financial Reporting Standards) in deposit money banks in Nigeria.

Under IFRS, particularly IAS 16, PPE must be measured initially at cost and subsequently using
either the cost model or the revaluation model. Deposit money banks with significant
investments in PPE must comply with detailed IFRS standards regarding their valuation,
depreciation, and impairment. Banks with substantial PPE might face more complex reporting
requirements under IFRS, thus necessitating stricter compliance. Larger investments in PPE may
drive the need for better financial reporting mechanisms in line with IFRS.

Larger audit firms tend to have more resources and expertise in handling complex IFRS
standards. They are more likely to ensure that banks adopt the standards appropriately. Banks
audited by larger audit firms often demonstrate higher compliance levels with IFRS because of
better guidance and scrutiny during the audit process. The size of the audit firm is often linked to
audit quality. Larger audit firms are more equipped to guide banks through the complexities of
IFRS adoption, which is crucial for ensuring the accuracy and completeness of financial
reporting under IFRS.

As regards Firm Age and IFRS adoption, older firms might have more established internal
controls and systems in place, which can facilitate smoother transitions to IFRS. They might
have had more experience in adapting to regulatory changes, making it easier to comply with
IFRS. Older banks are more likely to have accumulated institutional knowledge that supports the
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adoption of international standards like IFRS. However, they may also face challenges related to
legacy systems that are not fully compatible with IFRS reporting requirements, which could
delay full compliance.

Banks with significant PPE and larger audit firms are more likely to comply with IFRS, as audit
firms ensure that banks adhere to the revaluation and reporting standards of PPE. Firm age may
influence the ease of IFRS adoption, with older firms having the experience but also potentially
facing technological or structural challenges. Audit size plays a moderating role, as larger audit
firms help ensure even older banks comply with modern standards.

As banks are pivotal to the economic structure, their financial performance is critical in assessing
the overall health of the financial sector. Financial performance is crucial for banks as it reflects
their profitability and overall health, impacting their ability to attract investment and maintain
competitiveness. The effectiveness of IFRS in enhancing this performance can be evaluated
using three key financial performance metrics: Return on Assets (ROE), Return on Equity
(ROE), and Dividend Per Share (DPS). Understanding the dynamics and relationships among
these variables is essential for determining the impact of IFRS on the financial performance of
banks.

Dividend Per Share (DPS) represents the portion of a company's earnings that is paid out to
shareholders for each share they own. It's a key financial ratio for investors as it helps measure
the amount of cash they receive from a company’s earnings. DPS is typically calculated
annually, although some companies pay dividends quarterly. DPS is a useful measure for
investors to determine the return they receive directly from their investment in the form of
dividends.

Return on Assets (ROA) measures how efficiently a company is using its assets to generate
profits. It shows the percentage of profit a company earns relative to its total assets. A higher
ROA indicates that the company is efficient in managing its assets to produce profits, while a
lower ROA may signal inefficiency.

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Return on Equity (ROE) is a vital measure of financial performance, indicating how effectively a
bank is using its equity to generate profits. ROE is calculated as Net Income divided by
Shareholder's Equity. A higher ROE signifies greater efficiency in generating returns for
shareholders. The impact of IFRS on ROE can be significant, as the standards often require more
comprehensive disclosures and improved accounting practices that can enhance profitability and
shareholder value (Hassan & Ali, 2021). Additionally, increased transparency may attract more
investments, further boosting ROE.

These metrics are crucial for evaluating profitability, efficiency in utilizing shareholders' funds,
and earnings distribution, which are key indicators of a bank's financial health and performance.
The relationship between Dividend Per Share (DPS), Return on Assets (ROA), Return on Equity
(ROE), and International Financial Reporting Standards (IFRS) is essential for understanding a
company's financial health, performance, and adherence to standardized accounting practices.
IFRS ensures that the calculation and reporting of financial metrics like net income, assets, and
equity (which are inputs for calculating ROA, ROE, and DPS) are done consistently and
transparently across companies and industries. IFRS affects how companies report their financial
performance, including profits and dividends. By standardizing financial reporting, IFRS enables
investors to accurately compare the profitability and dividend policies of different companies.

However, the impact of IFRS on the financial performance of Nigerian deposit money banks
remains a subject of debate among stakeholders. Some argue that IFRS adoption has resulted in
improved financial disclosures, better decision-making processes, and increased profitability,
while others contend that the high costs of implementation and complexity of the standards pose
significant challenges to banks. This study, therefore, evaluated the extent to which IFRS has
influenced the financial performance of deposit money banks in Nigeria, analyzing key
profitability metrics in terms of net profit margin, return on assets and earnings per share of the
selected deposit money banks in Nigeria before and after the adoption of these standards. The
study will cover five years before and recent five years after adoption. Specifically, it covered a
period of ten years, pre adoption 2007-2011 and post adoption 2018-2022. Understanding these
impacts is critical for regulators, policymakers, and financial institutions in formulating

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strategies to maximize the benefits of IFRS and mitigate any challenges that may arise in the
process

This study focused on five prominent banks in Nigeria: Access Bank, First Bank, United Bank
for Africa (UBA), Guaranty Trust Bank (GTB), and Zenith Bank. The study focused on a period
of ten years 2013 to 2022 (post-adoption), this study ascertained the impact of IFRS on key
financial performance indicators, Dividend Per Share (DPS), Return on Equity (ROE) and
Return on Assets (ROA) of the selected deposit money banks in Nigeria.

1.2 Statement of the Problem

The adoption of International Financial Reporting Standards (IFRS) by deposit money banks in
Nigeria was intended to enhance the quality, transparency, and comparability of financial
reporting in the banking sector. The transition from local Generally Accepted Accounting
Principles (GAAP) to IFRS was seen as a strategic move to align Nigeria's financial reporting
practices with global standards, improve investor confidence, and attract foreign investments.
However, despite the adoption of IFRS, there are lingering concerns about its actual impact on
the financial performance and stability of Nigerian deposit money banks.

The empirical evidence examining the actual impact of IFRS on the financial performance of
these banks has yielded mixed results, raising important questions about the standards'
effectiveness in achieving their intended objectives. Several studies have documented
improvements in financial metrics following the adoption of IFRS. For instance, Uwuigbe (2016)
found that banks that adopted IFRS experienced significant enhancements in their financial
performance, particularly in profitability measures such as Return on Equity (ROE) and Earnings
Per Share (EPS). This can be attributed to several factors. The requirement for more detailed
disclosures under IFRS is believed to have improved the quality of financial information
available to stakeholders. Enhanced transparency can lead to greater investor confidence,
potentially boosting stock prices and improving capital raising efforts. IFRS encourages banks to
adopt better risk management practices through more rigorous financial reporting. By
recognizing and measuring risks associated with financial instruments, banks may make more
informed decisions, leading to enhanced financial stability and performance. The alignment of
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Nigerian banks with international standards may have made them more attractive to foreign
investors, facilitating capital inflows that can be utilized for growth and expansion (Chukwu et
al., 2020). The move towards a standardized accounting framework means that banks are better
equipped to benchmark their performance against peers, identify best practices, and improve
operational efficiency (Hassan & Ali, 2021).

Some studies reported negligible or even negative effects on the profitability and performance
metrics of banks post-IFRS adoption. According to Ofoegbu et al. (2020), the transition to IFRS
requires substantial changes to accounting systems, training for staff, and updates to internal
processes. Many banks may have faced significant implementation costs and operational
disruptions during this transition period, which could have adversely affected their financial
performance (Okafor & Nwafor, 2020) and that the financial performance of banks can be
influenced by external economic conditions. During the years following the IFRS adoption,
various macroeconomic factors—such as inflation, exchange rate volatility, and changes in
regulatory frameworks—may have overshadowed the benefits of adopting IFRS. This context-
dependent performance may lead to inconclusive results regarding IFRS's direct impact
(Uwuigbe, 2016).

Some studies suggest that the benefits of IFRS adoption may not be immediately apparent and
could manifest over a longer time horizon. As banks fully integrate IFRS into their operations
and financial practices, the longer-term benefits of enhanced transparency and improved
reporting may become more evident (Hassan & Ali, 2021).

Given the conflicting findings in the existing literature, there is a pressing need for a
comprehensive analysis of the relationship between IFRS adoption and financial performance in
the Nigerian banking sector by focusing on pre adoption of IFRS from 2007 to 2011 and post
adoption from 2019 to 2023. Previous studies have considered the years between 2012 t0 2018
(Noble 2011, Fawokan, 2012, Herbert et al 2013).

This research focused on the impact of adoption of international financial reporting standards
utilizing a sample size of five Nigerian Money Banks with International operating license using

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longitudinal approach to better capture the effects of IFRS on their financial performance metrics
in terms of Dividend Per Share, Return on equity and Return on Assets.

1.3 Research Questions

i. How does adoption of IFRS affect Dividend Per Share (DPS) of Nigerian
selected banks?
ii. What is the effect of IFRS adoption on the Return on Equity (ROE) of selected
banks in Nigeria?
iii. What is the effect of adoption of IFRS on the Return on Assets (ROA) of the
selected banks?

1.4 Objectives of the Study

The broad objective of the study is to evaluate the impact of adoption of International Financial

Reporting Standards (IFRS) on financial performance of selected deposit money banks in Nigeria.

The specific objectives are to:

i. evaluate the effect of IFRS adoption on Dividend Per Share (DPS) of selected banks in
Nigeria,
ii. analyze the effect of IFRS adoption on the Return on Equity (ROE) of the selected banks.
iii. assess the effect of IFRS on the Return on Assets (ROA) of the selected banks.

1.5 Hypotheses of the Study

i. H01: There is no significant difference in Dividend Per Share (DPS) of the selected
banks on adoption of IFRS.
ii. H02: There is no significant impact of IFRS adoption on the Return on Equity (ROE)
of the selected banks
iii. H03: IFRS adoption has no significant effect on the Return on Assets (ROA) of the
selected banks.

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1.6 Significance of the Study

This study contributes to the understanding of the effect of IFRS on financial performance within
the Nigerian banking sector. It provides valuable insights for stakeholders, including bank
management, investors, regulators, and academics, about the efficacy of IFRS in enhancing
financial transparency and performance. Furthermore, it serves as a basis for policymakers in
assessing the effectiveness of regulatory frameworks surrounding financial reporting.

The significance of this study lies in its potential to provide valuable insights into the impact of
International Financial Reporting Standards (IFRS) on the financial performance of deposit
money banks in Nigeria. By analyzing the effects of IFRS adoption on profitability, the study
will contribute to a deeper understanding of its influence on the financial performance of the
deposit money banks in Nigeria. It will aid policymakers, regulators, and financial institutions in
formulating strategies to maximize the advantages of IFRS and address its limitations.
Furthermore, the findings will be of interest to investors, stakeholders, and academics, as they
will offer evidence-based conclusions on how IFRS has influenced the financial performance of
deposit money banks in Nigeria. Ultimately, this study will support the development of more
robust financial reporting practices, enhancing the credibility and attractiveness of Nigeria's
banking sector to both local and international investors.

1.7 Scope of the Study

The study focused on five deposit money banks in Nigeria—Access Bank, First Bank, UBA,
GTB, and Zenith Bank—comparing their financial performance from 2013 to 2022. The analysis
utilized secondary data sourced from annual financial reports of the selected banks, ensuring that
the data covers a sufficient time frame to assess the impact of IFRS.

1.8 Limitation(s) of the Study

Generalizability: The findings may not be applicable to smaller banks or other sectors not
included in the study, limiting the broader applicability of results.

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 Time Constraints: The study's time frame may limit the examination of long-term
impacts of IFRS, and external factors affecting bank performance may not be accounted
for.

1.9 Operational Definition of Terms

International Financial Reporting Standards (IFRS): A set of global accounting

standards developed by the International Accounting Standards Board (IASB) that
provides guidelines on how financial statements should be prepared and presented to
ensure consistency, transparency, and comparability across different countries and
industries.

Deposit Money Banks (DMBs): Financial institutions that accept deposits from the
public and offer various financial services such as loans, savings, and investment
opportunities. They play a key role in the financial system by facilitating money transfers
and providing credit to individuals and businesses.

Financial Performance: A measure of how well a bank is using its assets to generate
revenue and profit. It is often assessed using financial indicators like profitability,
liquidity, return on assets (ROA), return on equity (ROE), and other key ratios that reflect
the bank's financial health.

Profitability: The ability of a deposit money bank to generate earnings relative to its
revenue, assets, or shareholders' equity. It is often evaluated using financial metrics such
as net profit margin, return on assets (ROA), and return on equity (ROE).

Liquidity: A measure of a bank's ability to meet its short-term financial obligations

without raising external capital. It indicates how easily a bank can convert its assets into
cash to cover liabilities, which is critical for maintaining operational stability.

Risk Management Practices: The strategies and processes employed by banks to

identify, assess, manage, and mitigate risks associated with their financial activities.

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Effective risk management helps banks reduce the impact of potential losses arising from
credit, market, operational, and liquidity risks.

Generally Accepted Accounting Principles (GAAP): The standard framework of

guidelines and principles for financial accounting and reporting in a specific jurisdiction.
In Nigeria, GAAP was used before the adoption of IFRS, and it consists of rules and
conventions that companies follow in preparing their financial statements.

Financial Reporting Transparency: The clarity, accuracy, and completeness with

which a bank presents its financial information in its financial statements. Transparency
is essential for stakeholders to make informed decisions based on the bank's financial
health and performance.

Comparability: The ability of financial statement users to identify similarities and

differences between the financial information of different entities. IFRS aims to enhance
comparability by standardizing financial reporting practices across different countries and
industries.

Transition: The process by which deposit money banks in Nigeria moved from using the
local Generally Accepted Accounting Principles (GAAP) to adopting the International
Financial Reporting Standards (IFRS) for their financial reporting and disclosures.

Stakeholders: Individuals or groups with an interest in the financial performance and

stability of deposit money banks. Stakeholders include investors, shareholders,
regulators, customers, employees, and other parties affected by the bank's financial
activities and decisions

Return on Equity (ROE): A financial performance ratio that measures the ability of a
company to generate profits from its shareholders' equity, calculated as Net Income
divided by Shareholder's Equity.

Earnings Per Share (EPS): A measure of a company's profitability calculated as Net

Income divided by the number of outstanding shares of common stock.
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 Net Profit Margin (NPM): A profitability ratio that shows the percentage of revenue
that remains as profit after all expenses are paid, calculated as Net Income divided by
Total Revenue.

CHAPTER TWO

LITERATURE REVIEW

2.1 Introduction

This chapter focused on literature review which are classified into conceptual review, theoretical
review and empirical review. Conceptual review focuses on theories, concepts, and models
related to the research topic. Theoretical Review: reviews existing theories to explain the
phenomenon being studied and Empirical Review: focuses on reviewing previously conducted
studies and their findings.

2.2 Conceptual Review

2.2.1 International Financial Reporting Standard (IFRS)

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The IFRS can be described as a set of accounting rules issued for public companies with the goal
of making company financial statements to be consistent, transparent, and easily comparable
across various jurisdictions globally. The emergence of IFRS came as a result of efforts made by
International Accounting Standards Committee (IASC) to ensure uniformity of financial
reporting globally. The International Standard Accounting Standards Board (IASB) took over
from IASC in 2001 with the main aim of setting the International Accounting Standards (IAS).
The main goal of IASB is to develop high quality international accounting standards that will be
easily understandable and enhance transparency in financial reporting globally (IASB, 2010).

The adoption of International Financial Reporting Standards (IFRS) represents a significant

development in the global financial landscape, aimed at harmonizing accounting practices and
improving the quality of financial reporting across borders. It has been designed to ensure that
companies present their financial statements in a consistent manner that is understandable and
comparable, regardless of their location. According to Barth et al. (2008), the move towards
IFRS adoption has been motivated by the need to enhance transparency and reliability in
financial reporting, thereby making it easier for investors to make informed decisions.

IFRS has been adopted by many countries as a way to strengthen their financial markets and
improve the quality of their financial disclosures. Research by Barth et al. (2008) indicates that
the adoption of IFRS is positively associated with improved accounting quality and reduced
earnings management, suggesting that it plays a critical role in enhancing the credibility of
financial statements. This global standardization is expected to increase cross-border investment
opportunities by reducing the risk of financial misrepresentation and providing a clearer picture
of an entity's financial performance and position.

The concept of Total Loan in relation to the International Financial Reporting Standards (IFRS)
is closely linked to how banks report and manage their lending activities. IFRS, particularly
IFRS 9 (Financial Instruments), significantly impacts the recognition, classification, and
measurement of loans, which ultimately affects how the Total Loan figure is reported in financial
statements.

2.2.2 Total Loan and Advances in Relation to IFRS

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IFRS 9 introduces a forward-looking approach to loan classification and measurement, which
affects the way Total Loans are reported. Under IFRS 9, loans are categorized into different
stages based on their credit risk status, which includes:

Stage 1: Loans that have not experienced a significant increase in credit risk since initial
recognition.

Stage 2: Loans that have experienced a significant increase in credit risk but are not credit-
impaired.

Stage 3: Loans that are credit-impaired.

This classification directly influences the Total Loan figure, as banks are required to recognize
expected credit losses (ECL) based on these stages, impacting the amount of loans reported in
financial statements (PwC, 2017).

One of the most significant changes under IFRS 9 is the introduction of the ECL model, which
requires banks to account for credit losses earlier in the loan's life cycle. Unlike the previous
incurred loss model, the ECL model considers future credit losses, leading to a more
conservative approach in loan valuation and provisioning (Deloitte, 2017). The implementation
of the ECL model ensures that banks reflect the true value of their Total Loans, taking into
account the potential risk of default, which impacts both the balance sheet and income statement.

IFRS 9's guidelines for classifying and measuring loans influence how banks manage their risk
exposure and make lending decisions. The standard aims to provide a more transparent view of a
bank's financial health by ensuring that the Total Loan figure accurately represents the quality of
the bank's loan portfolio (Ernst & Young, 2018). This transparency in loan reporting is crucial for
stakeholders and investors, as it provides insights into the bank's ability to manage credit risk,
maintain liquidity, and generate income.

2.2.3 Total Deposit Liabilities in Relation with IFRS

The concept of Total Deposit in relation to International Financial Reporting Standards (IFRS)
involves understanding how deposit liabilities are recognized, measured, and reported in

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accordance with IFRS guidelines. IFRS significantly impacts how banks account for deposits,
influencing their financial statements and overall financial stability.

Under IFRS, particularly IFRS 9 (Financial Instruments), deposit liabilities are classified and
measured at amortized cost, unless they are designated to be measured at fair value through
profit or loss. Most deposits are recognized as financial liabilities, with their initial measurement
based on the fair value of the consideration received (IFRS Foundation, 2023). The standard
requires that any transaction costs directly attributable to the acquisition of the deposit liability
be included in its initial measurement, ensuring a true representation of the bank's liabilities
(Deloitte, 2019).

IFRS also addresses the valuation of deposit liabilities at fair value when specific conditions are
met. Although deposits are generally not traded in the market, IFRS guidelines provide methods
for estimating their fair value based on prevailing interest rates and the characteristics of the
deposits (KPMG, 2020). This approach to fair value measurement contributes to the transparency
of financial statements, allowing stakeholders to assess the bank's financial position and stability
more accurately.

Under IFRS 9, interest expenses on deposits are calculated using the effective interest rate (EIR)
method. This method accounts for all fees, transaction costs, and other premiums or discounts
that are an integral part of the deposit’s financial cost (Ernst & Young, 2018). The application of
the EIR method ensures that the interest expenses related to Total Deposits are systematically
recognized over the deposit's life, improving the accuracy and consistency of financial reporting.

2.2.4 Transparency in Financial Reporting

Transparency in financial reporting is a fundamental goal of IFRS, aiming to provide clear,

accurate, and comprehensive financial information to stakeholders. The adoption of IFRS is
designed to minimize the ambiguity that often accompanies financial disclosures, thereby
promoting a higher level of trust among investors and regulators. Chen et al. (2010) found that
IFRS adoption significantly enhances financial transparency, which leads to reduced information
asymmetry between companies and their investors, ultimately fostering a more efficient financial
market.

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Transparent financial reporting is essential for the effective functioning of capital markets as it
reduces the risk of fraud and misrepresentation. Chen et al. (2010) argues that when companies
provide more transparent disclosures, it leads to better governance practices and a reduction in
the cost of capital. This is because investors are more willing to invest in companies whose
financial reports are reliable and clear, knowing that they can accurately assess the risks and
returns associated with their investments.

2.2.5 Risk Management in Banking

Risk management is a critical component of banking operations, focusing on identifying,

assessing, and mitigating potential risks that can adversely affect the bank's financial stability.
Pyle (1997) emphasized that effective risk management practices are necessary for banks to
safeguard against unexpected losses and to maintain a competitive advantage in the industry. The
ability to manage risks efficiently is crucial for sustaining profitability and ensuring the long-
term survival of financial institutions.

Banks face various types of risks, including credit risk, market risk, operational risk, and
liquidity risk, all of which can significantly impact their financial performance if not properly
managed. Pyle (1997) further noted that banks that adopt robust risk management frameworks
are better positioned to handle financial shocks and uncertainties, thereby enhancing their
resilience in volatile market conditions. Effective risk management not only protects the bank's
assets but also builds investor confidence and promotes financial system stability.

2.2.6 Financial Performance of Banks

Financial performance is a crucial aspect of any banking institution, as it reflects the bank's
ability to generate income and sustain its operations over time. Key indicators such as return on
assets (ROA), return on equity (ROE), net interest margin, and profitability ratios are often used
to assess a bank’s performance. According to Flamini et al. (2009), a bank's financial
performance is largely influenced by its internal management strategies and external economic
conditions. These performance measures not only determine the bank’s financial health but also
its ability to compete effectively in the financial market.

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The financial performance of deposit money banks in particular is a critical factor in maintaining
investor confidence and ensuring the stability of the financial system. Flamini et al. (2009) also
suggest that the profitability of these banks is affected by factors such as credit risk, operational
efficiency, and the regulatory environment. Understanding these factors is essential for banks to
develop strategies that will enhance their performance, profitability, and resilience in the face of
economic uncertainties.

2.2.6.1 Net Profit Margin (NPM)

Net Profit Margin is a financial metric that shows the percentage of profit a company earns from
its total revenue after deducting all expenses, including operating costs, interest, taxes, and other
expenses. The adoption of IFRS can significantly impact the Net Profit Margin of deposit
money banks because it affects how revenue and expenses are recognized. IFRS promotes more
transparent and consistent financial reporting, which can lead to more accurate profit
calculations. By analyzing the Net Profit Margin, researchers can determine whether the
implementation of IFRS has led to an increase or decrease in profitability. This metric helps in
understanding how IFRS influences the cost structure, revenue recognition, and overall financial
efficiency of the banks.

2.2.6.2 Return on Equity (ROE)

Return on Equity is a measure of financial performance that indicates how efficiently a company
uses shareholders' equity to generate profits. IFRS affects the calculation of both net income and
shareholders' equity through its guidelines on revenue recognition, asset valuation, and expense
matching. These changes can have a direct impact on ROE, as they influence the earnings
reported by banks and the valuation of equity components. ROE is crucial for assessing the
financial performance of banks in relation to IFRS, as it reflects the bank's ability to generate
profits from its equity base. Higher transparency and better risk management practices under
IFRS can lead to more stable and potentially higher ROE.

2.2.6.3 Earnings Per Share (EPS)

Earnings Per Share is a financial metric that represents the portion of a company's profit
allocated to each outstanding share of common stock. EPS is directly influenced by how IFRS

16
standards affect the measurement of net income. The standards emphasize a fair representation of
financial results, which includes adjustments in revenue recognition, impairment of assets, and
other critical factors that can impact earnings. Analyzing EPS in relation to IFRS implementation
helps in evaluating whether the adoption of these standards has improved the accuracy and
comparability of earnings reports for investors. A more reliable EPS figure can lead to better
investment decisions and greater market confidence in the financial statements of the banks.

2.2.6.4 Dividend Per Share (DPS) refers to the amount of money a company pays out to its
shareholders for each outstanding share of stock. It represents the portion of a company's
earnings distributed to its shareholders in the form of dividends. DPS is an important metric for
investors as it indicates the income they will receive from their investments in the company.

2.2.6.5 Return on Assets (ROA) is a financial metric used to measure how efficiently a
company uses its assets to generate profit. It indicates the company’s ability to convert the
money it has invested in assets into net income. ROA is expressed as a percentage, and a higher
ROA generally indicates that the company is more efficient at using its assets to generate profits.

2.3 Theoretical Review

The Shareholder Theory

The Shareholder Theory was propounded by Friedman in 1970 with the center that association’s
needs ought to be towards boosting investors’ riches. This is only the solitary obligation owed to
the general public. As per this hypothesis, it is normal that directors ought to plan to augment the
investors abundance since this was the purpose for the substance of their reality. Investor
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abundance boost was upheld by Basman (2017) who believed that the overall objective of a firm
ought to be focused to investors’ abundance amplification. The significant analysis for the
hypothesis notwithstanding, is that it offers need to investors, with practically no contemplations
given to different partners.

Fig. 2.1 Shareholder Theory

The Stakeholder Theory

This theory was propounded by Freeman in 1984 essentially to address reactions of investor
hypothesis. The central purpose of the hypothesis is that different partners are similarly
significant and as such everybody’s advantage ought to be considered by the firm. The partners
are individuals who can have effect on the association or that could be affected by the association

18
and it contends that a firm ought to make esteems for all partners and not simply investors. These
investors incorporate banks, the representatives, the clients, government and the whole society

Fid. 2.2 Stakeholder Theory

s2.4 Empirical Review
Leventis, Dimihopoulos and Anandaraja (2011) used a sample of 91 EU listed commercial banks
covering a period of ten years (before and after implementation of IFRS), they dichotomize their
sample into early and late adopters. They found that earnings management (using loan loss
provisions) for both early and late adopters while significant over the estimation window is
significantly reduced after implementation of IFRS. They also find that, for risky banks, earnings
management behavior is more pronounced when compared to the less risky banks, but is
significantly reduced in the post IFRS period. Capital management behavior by bank managers is
not significant in both pre and posts IFRS regimes. Their study concluded that the
implementation of IFRS in the EU appears to have improved earnings quality by mitigating the
tendency of bank managers of listed commercial banks to engage in earnings management using
loan loss provisions.

Tanko (2012) examined financial performance measures on some selected Nigerian banks that
are quoted under the Nigerian stock market under the IFRS regime. The study used regression
model to examine the banks financial performance. The study defined the change in performance
based on two parameters. First, change in accounting quality (earnings management and timely

19
loss recognition). Secondly, the performance of the firms based on changes on identified
financial rations of the firms. The study tested the impact of adoption as it relates to profitability,
growth, leverage, and liquidity performance. Multiple logit regression and t-test were used in the
analysis. The study finds that variability of earnings has decreased which suggest that there was
low variability in earnings in the post IFRS adoption period. Timely loss recognition is the
measure for prevalence of large negative earnings where large negative net income to be positive
which signifies that IFRS firms recognize losses more frequently in the post adoption period than
they do in the pre adoption period, the study conclude that accounting quality improves after the
adoption of IFRS. They study also find that under IFRS, firms exhibit higher values on
profitability measure, such as earnings per share (EPS). The study concludes by recommending
comprehensive implementation of IFRS and that SEC and external auditors should monitor and
ensure strict compliance with the adoption and provision of standards.

Abdul-Baki, Uthman and Sanni (2014) investigated the effect of IFRS adoption on bank
performance in Nigeria. The study appraised selected financial ratios comparing reports under
the IFRS with GAAP. The study also employed the Kolmogorov-Smirnov test, and Mann-
Whitney U-Test to ascertain whether significance variance occurred between performance
measures in the presence of normality in the distribution of the set of data. The Mann- Whitney
U-Test revealed that there was insignificant variance at the 5% significance level.

In a case study that spanned seven years, Abdul-Baki et al. (2014) compared 24 financial ratios
that were computed using both IFRS and Nigerian GAAP. The goal is to determine whether a
meaningful difference exists and whether that difference improves stakeholders' assessments of
the firm's financial performance, hence raising its value. According to the findings, there are no
statistically significant differences between the financial ratios calculated using Nigerian GAAP
and IFRS. On the other hand, Lueg et al. (2014) confirm that the switch from UK GAAP to IFRS
caused a significant increase in profitability (Operating Income Margin, Return on Equity, and
Return on Invested Capital), as well as liquidity ratios (Current Ratio), while the P/E ratio
decreased as the stock price was held steady (numerator) but net income increased
(denominator). Despite the fact that both UK GAAP and IFRS are market-oriented, the results

20
show that there is a variation between the two standards that affects a firm's financial
performance, which is regarded as one of the unique evidence of variances between IFRS and
local GAAP in common law countries.

Nugrahanti (2015) investigated the impact of risk assessment using the risk inherent and quality
implementation of quality risk management in the operational activities of banking operations to
earnings management practices through loan loss provisions. The investigator used data pool
from 2012 through 2014. Base on the purposive sampling method, 36 listed banks on the Stock
Exchange Indonesian were selected as sample of the study. A panel data multivariate regression
methodology was used. The findings of the study showed that risk assessment strengthens the
decrease in the earning management implementation after the adoption of IFRS in IAS No. 39
and Basel II Accord generally evidence to improve I bank’s financial report quality.

Umoren and Enang, (2015) examined whether the mandatory adoption of IFRS has improved the
value relevance of financial information in the financial statements of commercial banks in
Nigeria. The sample comprises of twelve listed banks in Nigeria. Specifically, financial statement
figures of 2010 and 2011 (pre-adoption period) and 2012 and 2013 (post-adoption) were utilized.
Descriptive statistics and least square regression were conducted to analyze the effect of IFRS
adoption on the accounting quality. The result indicated that the equity value and earnings of
banks are relatively value relevant to share prices under IFRS than under the previous Nigerian
SAS. Results also indicate that earnings per share is incrementally value relevant during post-
IFRS period while book value of equity per share is incrementally less value relevant during the
post-IFRS period.

Yahaya, Kutigi, and Mohammed, (2015) investigated how the change in the recognition and
measurement of banks’ loan loss provision affects earnings management behavior. They
investigated the post adoption off IFRS and value relevance of accounting information of quoted
banks in Nigeria. Using the price model and the return model, their study found that the EPS
increased in the post adoption than in the pre adoption periods. The study concluded that the
restriction to incur losses under IFRS significantly reduced the ability of banks to engage in
earnings manipulation. The study recommended that investors should understand the IFRS

21
adoption process so as to avoid overvaluation of the economy when the financial markets are
doing well,

Hassan (2015) investigated firm attributes from the perspective of structure, monitoring,
performance elements and the quality of earnings of listed deposit money banks in Nigeria. The
study adopted correlational research design with balanced panel data of 14 banks as sample of
the study using multiple regression as a tool of analysis. The result reveals that firms’ attributes
(leverage, profitability, liquidity, bank size and bank growth) has as significant influence on
earnings quality of listed deposit money banks in Nigeria after the adoption of IFRS, while the
pre period shows that the selected firm attributes have no significant impact on earnings quality.
It is therefore concluded that the adoption of IFRS is right and timely

Akinleye (2016) examined the impact of International Financial Reporting Standards

appropriation on the presentation of banks in Nigeria. In particular, the examination analyzed the
impact of IFRS selection and monetary proportion on return on resource and return on value. The
investigation utilized information from 10 banks from 2009-2014. The study uncovered that
IFRS selection had a constructive outcome on return on asset and return on equity of banks in
Nigeria. The examination likewise showed that venture proportion, liquidity proportion and
current proportion fundamentally influence return on resource and return on value. In this
manner, the examination reasoned that IFRS had a constructive outcome on the execution of
banks in Nigeria.

Adebisi, Otuagoma and Abah (2016) assesed the impact of International Financial Reporting
Standards on the nature of monetary store cash banks in Nigeria. The investigation explicitly
investigates the impact of IFRS exposure level on the nature of monetary store cash. The study
utilized information from 2012-2015 for five store cash banks in Nigeria. The investigation
showed positive connection among IFRS and its exposure among banks in Nigeria. The
examination also uncovered IFRS revelation consistence level has constructive outcome on
nature of monetary reports of banks in Nigeria.

Eneje and Paul (2016) examined the effect of IFRS adoption on the mechanics of loan loss
provisioning for Nigerian Banks. Specifically, it analyzed how the change in the recognition and
measurement of loan loss provision affects the accounting quality of banks thereby reducing the
22
income smoothing behavior of the money deposit banks. Ordinary least square multiple
regression analysis was used to analyse secondary data obtained from the annual reports and
accounts of deposit money banks covering the period of 2005 to 2015. The findings of the study
revealed that the post-IFRS has had significant effects on the mechanics of loan loss provisioning
compared to the pre IFRS era in the Nigerian Money Deposit Banks. Their study recommended
that banks CEOs should actively sensitize fresh accountants and auditors who are yet to be
acquainted with IFRS guidelines and standards

Ajekwe, Onobi and Ibiamke (2017) examined the impact of International Financial Reporting
Standards on the review expenses of recorded Deposit Money banks in Nigeria. The
investigation embraced information from 15 banks from 2009-2012. The study examined
information with a combined t-test, Pearson connection and numerous relapse examinations. The
results showed that the review charges, review intricacy and announcing quality are genuine
distinction in the post-IFRS. The results further uncovered that review intricacy of IFRS has
prompted expansion in review expenses by 49.8%.

Sanyaolu, Iyoha and Ojeka (2017) examined the effect of adopted International Financial
Reporting Standards (IFRS) adoption on the earning yield (EY) and earning per share (EPS) of
quoted banks in Nigeria. The study made used of cross-sectional data obtained for a period of 6
years from 2009 to 2014, while the panel ordinary least method of analysis was used to examine
the impact of IFRS adoption on the earnings of all 15 quoted banks in the Nigerian Stock
Exchange. The study found a significant and positive relationship between IFRS adoption and
the earnings yield of quoted banks in Nigeria. The study also found a significant and positive
relationship between IFRS adoption and EPS of quoted banks in Nigeria. The study concludes
that IFRS adoption has improved the decision-making capability of the various stakeholders,
thus, increasing investor confidence and the inflow of capital in the country through foreign
direct investment.

Kvaal & Nobes (2020) examined the international differences in IFRS policy choice assessed the
accounting policy choices and other practices of companies on 16 issues where IFRS allows a
choice. The sample comprises 232 companies from five countries: Australia, France, Germany,
Spain and the UK. The authors found different national versions of IFRS practice and show that

23
companies not only have an opportunity to pursue pre-IFRS practices originating in their
national GAAP, but also extensively use the opportunity.

Armstrong, Barth, Jagolinzer & Riedi (2022) investigated market reactions to the adoption of
IFRS in Europe examined the price reactions to news events affecting the likelihood that IFRS as
issued by the IASB would be mandatory for EU companies. Their sample comprises 3,265 firms
(7% non-EU) in 18 European countries (two non-EU: Norway and Switzerland), and they

look at market reactions to 16 announcements over the period 2002-2005. They also compare the
market reactions for the sample firms with those for US firms at the same dates. The authors
found an incrementally positive reaction for firms with lower quality pre-adoption information,
which is more pronounced for banks, and with higher pre-adoption information asymmetry,
consistent with investors expecting net information quality benefits from IFRS adoption.

Fiechter (2018) examined the effects of their fair value option under IAS 39 on the volatility of
bank earnings. The sample comprises 222 banks from 41 countries using IFRS and covers the
period 2006 – 2007. 50% of the sample firms are from the EU. The author found that Banks
applying the FVO primarily to reduce accounting mismatches report lower levels of earnings
volatility than the control group. The results also indicated that the application of the FVO is a
more effective tool to reduce earnings volatility than hedge accounting, in accordance with IAS
39.

Leventis, Dimitropoulos & Anandaranja (2022) investigated Loans loss provisions, earnings
management and capital management under IFRS: the case of EU commercial banks, The
sample comprises 56 mandatory adopters and 35 voluntary adopters from 18 European countries

(one non –EU: Switzerland). The number of Swiss banks included is not disclosed. The period
covered is 1999-2008. The authors found that earnings management using loan loss provisions is
significantly reduced after IFRS adoption. They also found that earnings management is more
pronounced for riskier banks.

24
Tanko (2022) examined the effect of International Financial Reporting Standards (IFRS)
adoption on the performance of firms in Nigeria. He uses a multiple regression model to analyze
financial performance measures under the IFRS. The study tests the impact of adoption as it
relates to profitability, growth, leverage and liquidity performance. The study found that
variability of earnings has decreased which suggest that there was low variability in earnings in
the post IFRS adoption period. The study also found large negative net income which signified
that IFRS firms recognize losses more frequently in the post adoption period than they do in the
pre-adoption period. The study concludes that accounting quality improves after the adoption of
IFRS.

Lin, Hua, Lin, & Lee (2019) examined IFRS Adoption and Financial Reporting Quality using
value relevance and magnitude of earnings management. The empirical results show that the
financial reporting quality got improvement under the amendment towards IFRS adoption.

Chua, Cheng and Gould (2018) examined the impact of mandatory IFRS adoption on accounting
quality, using data from 172 firms listed on the Australian stock exchange. The result indicated
that firms report large losses in a timelier manner in the post-IFRS adoption period than in the
pre-adoption period.

Jarva & Lantto (2018) examined the reconciliations between IFRS and Finnish GAAP for 2004
provided in Finnish mandatory adopters‟ 2005 IFRS accounts and compare the two alternative
earnings figures for 2004 with cash flows for 2005. They then extend the sample to cover data
for the periods before and after mandatory IFRS adoption – 1999-2003 and 2005-2009. The
sample size is 94 firms. They found that for the reconciliation year 2004 „IFRS earnings provide
marginally greater information content than (Finnish GAAP) earnings for predicting future cash
flows.

Amiram (2019) investigated the effects of mandatory IFRS adoption on foreign portfolio
investments in equities. The full sample covers 104 countries: 59 adopters (including 25 from the
EU) and 45 non-adopters. For the main analysis, EU countries comprise 25 of the 51 mandatory
adopters. The investment data are for 1997 and 2001-2006. The author found that

25
„foreign equity portfolio investments (FPI) increase in countries that adopt IFRS. He also found
that this relation is driven by foreign investors from countries that also use IFRS. Moreover, the
effect of accounting familiarity is more pronounced when investor and investee countries share
language, legal origin, culture, and region.

Florou & Pope (2020) examined the effects of mandatory IFRS adoption on the international
holding of institutional investors. The test sample of mandatory adopters comprises 3,865 firms
(37% non-EU) from 24 countries (six non EU) and the control sample of non-adopters is 6,987
firms from 21 countries, mostly from the US and Japan. The period covered is 2003-2006. The
authors found that, after controlling for standard economic determinants of institutional holdings
over the two-year period 2005-2006 institutional ownership increases by more than 4 percent and
the number of institutional investors increases by almost ten (percent) for mandatory IFRS

adopters, relative to non-adopters. They also found that the positive impact of mandatory IFRS
adoption on institutional holdings is restricted to countries where enforcement and reporting
incentives are strong and where divergence between local accounting standards and IFRS is
relatively high.

Schleicher, Tahoun & Walker (2022) investigated IFRS adoption in Europe and investment-cash
flow sensitivity: outsider versus insider economies. The sample in the paper comprises firms
from two outsider economies (Norway, not in the EU, and the UK) and four insider economies
(Greece, Italy, Portugal and Spain) and covers the period 2000-2007. There are 3,387 firm-year
observations pre-IFRS and 2,268 post-IFRS. The authors found that the investment-cash flow
sensitivity of insider economies is higher than that of outsider economies pre-IFRS and that IFRS
reduces the investment-cash flow sensitivity of insider economies more than that of outsider
economies.

Yip & Young (2017) examined the effects of mandatory IFRS adoption in 17 European countries
(two non-EU: Norway and Switzerland) on comparability. The sample is 6,256 firms (8% non-
EU). The period covered is 2002-2007. The authors found that the comparability of accounting
information for similar firms from different countries is significantly greater in the post-IFRS
period than in the pre-IFRS period using all of the three comparability measures. They also
26
found evidence suggesting that both accounting convergence and higher quality accounting
information are likely to be the mechanisms underlying the observed comparability
improvement.

Bayelein & Al Farooque (2022) investigated Influence of a mandatory adoption on accounting

practice: evidence from Australia, Hong Kong and the United Kingdom. The study found for 12

of the 18 UK companies in their sample that their 2003 accounting policy disclosures do not
make it possible to determine what accounting policy they have following for deferred tax. This
is no longer the case for any of the 18 companies in 2006.

Chiha, Trabelsi & Hamza (2020) investigated the effect of IFRS on Earnings Quality in a
European Stock Market: Evidence from France using association studies. Results indicated that
accounting information quality has been improved by the increase of the association degree.
Earnings measured using IFRS are more useful for firm‟s evaluation. Josiah, Okoye & Adediran
(2013) examined the Accounting Standards in Nigeria and how far the Board has gone with
adoption of International Financial Reporting Standard. The study found that Nigeria will loose
without the Financial Reporting Council of Nigeria and adoption of IFRS.

Choi, Ken & Joao (2023) investigated the accuracy of analysts‟ forecasts for UK mandatory
IFRS adopters between 2003 and 30 September 2007 – stopping at that point to avoid the effects
of the financial crisis. The sample comprises up to 1,173 firms (varying from year to year).They
found that analyst forecasts are more accurate and less dispersed under IFRS than under previous
UK GAAP. They identify a transition period when firms report their first results under
mandatory IFRS. They also found that this initial post-IFRS period exhibits a less pronounced
and less significant effect on the accuracy of analyst forecasts and in the dispersion of forecasts.

Verriest, Ann & Daniel (2020) examined the impact of corporate governance differences on the
2005 accounts of 223 mandatory IFRS adopters (2% non-EU) from 15 European countries
including Norway and Switzerland from outside the EU).The authors found that the transparency
of IFRS restatements for 2004 from local GAAP to IFRS and compliance with a number of
specific IFRS standards for 2005 are both higher for firms with better corporate governance.

27
Horton, Serafeim & Serafeim (2019) investigated the accuracy of analysts forecasts for
mandatory IFRS, voluntary IFRS and non-IFR firms in 46 countries for 2001-2007. The sample
of mandatory adopters is 2,235 firms (34% non-EU). The analyst sample is 1,329 individuals.

Second they found that that the increase in forecast accuracy for mandatory adopters is partly
driven by comparability effects.

Herbert, Tsegba, Ohanele & Anyahara (2020) investigated adoption of International Financial
Reporting Standards (IFRS): Insights from Nigerian Academic and Practitioners using
exploratory study techniques. The results showed significant differences between accounting
students, lecturers and practitioners with respect to their degree of familiarity with IFRS.

Brochet, Jagolinzer & Ried (2021) investigate mandatory IFRS and financial statement
comparability, use evidence on directors and officers share purchases in the companies they work
for to assess whether mandatory IFRS adoption increases comparability. The sample for the
study is share purchases in 663 UK listed companies for the period 2003-2006. The authors
found abnormal returns to insider purchases decreasing following IFRS adoption across all the
different return periods reviewed: five days, one month, three months and six months.

Haller & Wehrfritz (2022) investigated the impact of national GAAP and accounting traditions
on IFRS policy selection: evidence from Germany and the UK, examined the accounting policy
choices under IFRS by German and UK firms in 2005 and 2009. The samples for 2005 are 182
German firms and 192 UK firms. Most of the firms in the German samples are voluntary
adopters. For 2005, the authors find significant evidence that firms tend to continue with
accounting policies required or predominantly chosen under national GAAP.

Glaum, Schmidt, Street & Voger (2023) examined Compliance with IFRS 3- and IAS 36-
required disclosures across 17 European countries: company- and country-level determinants,
The authors found evidence of substantial non-compliance, determined by company-and
country-specific factors. They also provide evidence that national culture in the form of the
strength of national traditions impacts compliance. Amiraslani, Iatridis & Pope (2013)
28
investigated the Accounting for Asset Impairment: A Test for IFRS Compliance across Europe,
look at accounting practices on impairment in 25 European countries (two non-EU: Norway and
Switzerland) over the period 2006-2011. The samples for different tests vary from 324 firm (10%
non-EU) to 4,474 (7% non-EU). The authors found significant variations in compliance with
disclosure requirements relating to impairments of non-current non-financial assets.

Haller & Wehrfriz (2013) investigated the impact of national GAAP and accounting traditions on
IFRS policy selection: evidence from Germany and UK. The samples for 2005 are 182 German
firms and 192 UK firms, and for 2009 213 German firms and 224 UK firms. They found that
accounting policy choice under IFRS differs between Germany and the UK for issues where
respective national GAAP is different.

Chen, Young & Zhuang (2018) examined „Externalities of mandatory IFRS adoption: evidence
from cross-border spillover effects of financial information on investment efficiency. The sample
has 8,857 firm-year observations (7% non-EU) from 17 European countries (two non- EU:
Norway and Switzerland) for the period 2000 – 2009. The authors found that the spillover effect
of a firm‟s ROA difference versus its foreign peers, but not domestic peers, on the firm‟s
investment efficiency increase after IFRS adoption. They also find that increase disclosure by

both foreign and domestic peers after IFRS adoption has a spillover effect on a firm‟s investment
efficiency.

Hong (2021) examined Does mandatory adoption of International Financial Reporting Standards
decrease the voting premium for dual-class shares? The sample is 133 dual-class firms (17%
non-EU) from 13 countries (five non-EU). The period covered is 2002-2007. The author found
a statistically significantly decrease, following IFRS adoption and relative to non-adopters, in
mandatory adopters voting premium.

Amel-Zadeh & Meek (2020) examined Bank failure, mark-to-market and the financial crisis.
They examined the possible impact of fair value accounting on the failure in 2007 of the UK
bank Northern Rock. The authors found that the failure was attributable to cash flow insolvency,
not fair value accounting. Using data for a sample of 125 global financial institutions for the

29
period 2007 – 2009 they did not find evidence that potential mark-to-market write downs on
asset-backed securities increase insolvency risk, which is consistent with their findings for
Northern Rock and Lehman Brothers.

Okoye & Ezejiofor (2022) assessed the effect of IFRS on stock market performance of banks
with a view to measure whether investors expectation is satisfactory is becomes necessary using
EPS and interest paid to interest earned as a measure of performance. Findings showed that most
of the banks could not generate sufficient interest earnings to cover their interest obligations
thereby unable to satisfy investor‟s expectation; hence the assessment of stock market
performance of banks therefore can be used to measure whether investors expectation is
satisfactory or not.

Abdul – Baki, Uthman & Sanni (2022) evaluated the effect of IFRS adoption on the performance
of firms using some financial ratios selected from four major categories of financial ratios. The
study used Mann – Whitney Test in analyzing computed ratios from both financial statements
under IFRS and those under Nigeria GAAP (NGAAP). The study showed that the disclosure of
IFRS compliant set of financial statements was not attributable to higher performance evaluation
of the case firm.

Ibiamike & Briggs (2014) evaluated the impact of IFRSs adoption by Nigerian listed firms using
key financial ratios used by investors. A sample of 60 companies was selected using a filter scale.
Gray index was used to evaluate the impact of IFRS adoption on financial ratios. Using paired
sample T – test and F – test to test the statistical significance under IFRS and NGAAP, their
findings revealed that IFRS adoption caused a negative impact on the financial ratios of Nigerian
listed firms but the impact was not statistically significant.

Hong, Hung & Lobo (2020) examined the impact of mandatory IFRS adoption on IPOs in global
capital market. Their test sample comprises 1,540 IPOs in 2003-2004 and 2006-2007, for firms
in 20 countries (six non-EU). They use three benchmark samples from nine countries. The
authors found both a statistically and economically significant reduction in IPO under pricing
following mandatory IFRS adoption. They also found that the effects of mandatory IFRS
adoption on IPO under pricing are greater for firms in countries experiencing large accounting
30
changes and that this relation is more pronounced among firms in countries with strong
implementation credibility. Moscariello, Skervatt & Pizzo (2014) investigated Mandatory IFRS
adoption and the cost of debt in Italy and the UK. The period covered is 2002-2008. The authors
did not find an impact of IFRS adoption on the cost of debt. They found, however, for the

Italian firms, but not for the UK ones, that after IFRS adoption, interest cover becomes
significant in explaining the cost of debt.

Adetula, Owolabi & Onyinye (2022) examined international Financial Reporting Standards
(IFRS), for SMEs adoption process in Nigeria using descriptive survey design. Findings showed
that a major factor, why IFRSs should be adopted by Nigeria is because other countries have
adopted them. Gunther G. & Zoltan N. (2011) investigated mandatory IFRS Adoption and
Accounting Quality of European Banks using descriptive statistics in multivariate analyses. The
results showed that the restriction to recognize only incurred losses under IAS 39 significantly
reduces income smoothing.

Okoye, Okoye & Ezejifor (2021) analyzed the impact of the IFRS Adoption on Stock Market
Movement in Nigeria Corporate Organization using descriptive design via stock price and shares
traded during two years periods. It observed that the adoption of IFRS in Nigeria will enhance
credible financial statements that will also provide a basis for the strength of a corporate entity in
capital market hence is a welcome development in Nigerian economy.

Sani & Dauda (2019) evaluated an assessment of compliance with IFRS Framework at First-
Time Adoption by the Quoted Banks in Nigeria using multivariate regression and chi-square test.
The study concluded that, Nigerian banking industry complied semi-strongly with the
requirements of IFRS -framework but, the exercise is still faced with some challenges which
include: lack of indept IFRS knowledge from the preparers of the financial reports. The study
also found amenability, globalization and response to users, needs as factors significantly
influencing the compliance level of Nigerian banks with IFRS – framework.

31
Ocansey & Enahoro (2023) investigated the comparative study of the International Financial
Reporting Standard Implementation in Ghana and Nigeria. It was revealed that the national
standards of Ghana and Nigeria were closely related and had both suffered lack of certain
standards and disclosure requirements. Akhidwe & Ekiomadu (2014) analysed the Adoption and
Implementation of International Financial Reporting Standard (IFRS) in Nigeria: Enduring
Challenges and Implications. They found subsisting challenges include: the non inclusion of
IFRS in the curricula of Nigerian educational institution, inadequate IFRS capacities by Nigerian
auditors and accountants in and the non amendment of Nigeria‟s corporate financial reporting
statutes to accommodate IFRS requirements.

Wu & Zhang (2017) investigated the sensitivity of credit ratings to accounting information,
including mandatory IFRS adoption. Their sample of mandatory adopters comprises 1,917 firm-
years (22% for non-EU companies) from 18 countries (six non-EU) and covers 1990-2007.
Credit relevance is measured by the sensitivity of Moody‟s credit ratings to various accounting
ratios. The authors found that mandatory adoption is associated with significant increases in the
credit relevance of accounting information (but) only in countries with stronger rule of law.

Chen, Ding & Bin (2019) examined Convergence of accounting standards and foreign direct
investment, The sample covers 30 countries, 23 from the EU. The measure of FDI is the
aggregate in-and outflow between pairs of countries. The authors found that, FDI flows are
positively associated with conformity to IFRS. They also found that positive relationship
between FDI and IFRS conformity is stronger for country pairs with greater institutional
differences.

Atoyebi and Adikwu (2018) examined the adoption of International Financial Reporting
Standards (IFRSs) in different countries of the world has become a contemporary issue
especially with respect to the reliability of financial statements. The study examined the impact
of valuation of Loan Loss Provisions (LLPs) on earnings management and capital management
during the pre and post-adoption of IFRS for listed deposit money banks (DMBs) in Nigeria.
Using an Ex-post facto research design approach, this study utilised secondary data extracted
from annual reports and accounts of fifteen (15) DMBs for the period of ten (10) years from
2006 – 2016. The results from the used of multiple regression analysis revealed a significant

32
positive relationship between LLPs and earnings management for both pre- and post-IFRS
adoption. Furthermore, the study also found a positive insignificant relationship between LLPs
and capital management for both pre and post IFRS adoption.

Elosiuba and Okoye (2018) analyzed the impact of International Financial Reporting Standards
on corporate execution of chose banks recorded on the Nigeria Stock Exchange. The
examination particularly evaluated the impact of IFRS reception on productivity, liquidity,
advance awards and market esteem. The examination utilized information from 2011 and 2012.
The examination investigated information utilizing the mean and t-test. The investigation showed
that productivity, liquidity and market esteem on the normal during GAAP are more than that of
IFRS year, however in any case for advance awards. The examination additionally uncovered
that the impact of IFRS on advance award, productivity, liquidity and market esteem was
genuinely irrelevant. Hence, the examination inferred that IFRS has no exceptional impact on the
performance of banks in Nigeria.

Jibril (2019) used the money deposit banks to assess the effects of IFRS adoption on accounting
quality in Nigeria. Linear regression analysis was used to analyze the data obtained for the study
using the annual reports and accounts of 15 banks listed on the Nigerian Stock Exchange from
2011 to 2014 (i.e., two years before and two years after adoption). The study discovered that
there have been more substantial loss recognitions in the post-adoption period based on data
analysis. The researcher suggests that developing countries adopt IFRS as their financial
reporting standard since it can improve their accounting quality based on the study's findings

Adeduro et al (2021) explored adoption of the International Financial Reporting Standards

(IFRS) on financial performance of banks in Nigeria over a time period of ten years spreading
over from 2006 to 2016. Data set utilized were randomly gathered across 10 (ten) banks, and
analyzed with the use of pooled OLS, fixed effect and random effect estimations alongside the F-
test and Hausman test. Result showed that embracing IFRS had insignificant positive effect on
ROA of banks in Nigeria (β=0.0038609 p=0.366). It was likewise shown that loan to deposit
ratio had a significant negative influence on return on asset (β=-0.0017625 p=0.046). The study
established that IFRS implementation had not significantly spurred financial performance of
banks in Nigeria.

33
Odunsi (2022) ascertained whether there were notable differences between the financial
performance measurements of multinational companies operating in Nigeria that are prepared
using IFRS financial statements and local GAAP. Second, it assessed whether financial
performance indicators created using IFRS financial statements show better performance than
those using local GAAP. The revealed that IFRS financial ratios indicated better performance
than local GAAP financial ratios. Further research revealed that, no appreciable differences
between the financial performance indicators (financial ratios) provided for multinational
corporations operating in Nigeria under local GAAP and IFRS financial statements. The study
concluded that, the more a company adheres to IFRS disclosure requirements, the more investors
are drawn to invest in it, consequently enhancing its financial performance (return on capital
employed).

2.5 Gaps in the Empirical Review

The overview of literature reflects that there is dearth of empirical studies on the discourse of
IFRS adoption as it relates to firms’ performance in Nigeria. The available few employed
multiple regressions to track the patterns of relationship among the variables. Also, none of the
study was extended to the year 2022. Therefore, this study employed the ratio analysis and panel
data analytical techniques to investigate IFRS adoption and performance of Deposit Money
Banks in Nigeria using the Ratio Analysis approach

34
 CHAPTER THREE
METHODOLOGY

3.1 Introduction

This chapter outlines the research methodology employed in the study. It describes the research
design, the population of the study, the sample size and sampling technique, the sources of data,
the measurement of variables, the method of data analysis, and the model specification.

3.2 Research Design

The research design for this study is a longitudinal approach that involves analyzing the
financial performance of selected Nigerian banks. This design allows for a comparison of the
banks' financial metrics before and after the implementation of IFRS to determine its impact on
their financial performance.

3.3 Population of the Study

The population of this study consists of all deposit money banks in Nigeria. The focus will be on
deposit money banks that have adopted IFRS, specifically those with an international operating
license.

3.4 Sample Size and Sampling Technique

The study will focus on five prominent deposit money banks in Nigeria: Access Bank, First
Bank, United Bank for Africa (UBA), Guaranty Trust Bank (GTB), and Zenith Bank.
These banks were selected based on their significant market presence and their adherence to
IFRS guidelines, making them a representative sample for assessing the impact of IFRS on the
banking sector in Nigeria.

3.5 Sources of Data

35
The data for this study will be primarily sourced from the annual financial reports of the
selected banks. Secondary data such as financial performance metrics and disclosures related to
IFRS adoption will be obtained from these reports, ensuring a robust dataset that spans a ten-year
period divided into pre- and post-IFRS adoption phases.

3.6 Measurement of Variables

The study will utilize financial performance metrics as the dependent variables, specifically:

Return on Assets:

Return on Equity (ROE): Calculated as net income divided by shareholders' equity.

Dividend Per Share (DPS): Determined by dividing total dividend declared by the
number of outstanding shares.

IFRSCOM: Compliance or Adoption of International Financial Reporting Standards

Property, Plant and Machinery: Log of the value of PPE

Audit Size: The size of the Audit Firm measured By Big 4 Audit Firms

Firm Age: The age of Selected Banks in banking business

3.7 Method of Data Analysis

The data analysis will involve the use of ratio analysis and panel data analytical techniques to
examine the financial performance of the selected banks. Statistical methods like t-tests and
regression analysis will be employed to test the hypotheses and assess the significance of
changes in financial metrics pre- and post-IFRS adoption.

3.8 Model Specification

36
The model specification for this study will include a regression analysis framework that
evaluates the relationship between IFRS adoption and financial performance indicators (NPM,
ROE, and EPS). The following econometric model will be used to analyze the data:

Yit=α+β1IFRSCOMIt+ PPEIt + AUSIt + FAGIt ϵit …………………………(1)

DPSIt =α+β1IFRSCOMIt+ PPEIt + AUSIt + FAGIt ϵit ………………………(2)

ROAIt =α+β1IFRSCOMIt+ PPEIt + AUSIt + FAGIt ϵit ………………………(3)

ROEIt =α+β1IFRSCOMIt+ PPEIt + AUSIt + FAGIt ϵit ………………………(4)

Where:

 YitY_{it}Yit represents the dependent variables (DPS, ROA, and ROE) for bank iii at
time ttt.
 α\alphaα is the constant term.
 β1, coefficients for IFRSCOM,
 DPS - Dividend per share
 ROA- Return on Assets
 ROE- Return on Equity
 PPE- Property, Plant and Equipment
 AUS- Audit Size
 FAG- Firm Age
 ϵit\epsilon_{it}ϵit is the error term.

37
 CHAPTER FOUR
RESULTS AND DISCUSSION
4.1 Introduction
The chapter focuses on Data Presentation and Discussion of Findings. It Addresses Descriptive
Statistics and Regression Analysis and interpretation of findings

4.2 Data Presentation and Analysis

4.2.1 Descriptive Statistics
Table 4.1 Descriptive Statistics

DPS ROA ROE PPE COM AUS FAG

Mean 8.515315 8.353435 0.264229 5.78E+11 0.960000 0.940000 37.30000

Median 4.856716 0.132762 0.157756 2.57E+11 1.000000 1.000000 40.00000

Maximum 24.85003 91.70588 1.138787 2.65E+12 1.000000 1.000000 56.00000

Minimum 0.042815 0.006218 0.003073 2.49E+10 0.000000 0.000000 18.00000

Std. Dev. 7.999864 22.90071 0.271285 6.97E+11 0.197949 0.239898 11.24904

Skewness 0.548996 2.755586 1.415379 1.464866 -4.694855 -3.705468 -0.132324

Kurtosis 1.864723 8.912730 4.131589 4.157784 23.04167 14.73050 1.689478

38
Observations 50 50 50 50 50 50 50

The descriptive statistics for Dividend Per Share (DPS) reveal key insights into the relationship
between IFRS adoption and financial performance of firms. The mean DPS is 8.52, indicating
that, on average, firms pay moderate dividends to shareholders. The median, at 4.86, is lower
than the mean, suggesting a right-skewed distribution, where a few firms pay significantly higher
dividends. This is supported by the positive skewness of 0.55, showing that the distribution leans
slightly towards higher DPS values. The range between the maximum (24.85) and minimum
(0.04) DPS highlights substantial variability in dividend payments across firms. The standard
deviation of 7.99 further emphasizes this variation, indicating that dividend payments fluctuate
considerably. Lastly, the kurtosis of 1.86 suggests a platykurtic distribution, meaning the data
have lighter tails than a normal distribution, with fewer extreme DPS values.

The mean ROA is 8.35, indicating that, on average, firms generate about 8.35% return on their
assets. However, the median value is much lower at 0.13, suggesting that the distribution is
highly skewed, with most firms reporting lower ROA values while a few report significantly
higher ones. This is reflected in the skewness of 2.76, indicating a positively skewed distribution.
The range between the maximum ROA (91.71) and minimum (0.006) is large, highlighting
significant disparities in how efficiently firms use their assets to generate profits. The standard
deviation of 22.9 shows high variability in ROA across firms. Additionally, the kurtosis of 8.91
indicates a leptokurtic distribution, meaning the data has heavier tails than a normal distribution,
with a higher likelihood of extreme ROA values.

The descriptive statistics for Return on Equity (ROE) reveal important aspects of how firms
utilize shareholder equity to generate profits. The mean ROE is 0.26 (or 26%), indicating that, on
average, firms generate a 26% return on equity. The median, at 0.16 (16%), is lower than the
mean, suggesting that a few firms have much higher ROE values, which pulls the average up.
This is further supported by the skewness of 1.42, indicating a positively skewed distribution,
where the data are concentrated toward lower ROE values, but with some firms having
exceptionally high returns. The maximum ROE of 1.14 (114%) and minimum of 0.003 (0.3%)
show a significant range in firm performance. The standard deviation of 0.27 (27%) indicates a

39
moderate variation in ROE among firms. Lastly, the kurtosis of 4.13 points to a leptokurtic
distribution, suggesting the presence of outliers or extreme values in the ROE data, with firms
either performing extremely well or poorly compared to the average. This analysis shows that
while some firms achieve very high returns on equity, many others have lower ROE values,
reflecting variability in their ability to generate profits from shareholders' investments.

Property, Plant, and Equipment (PPE) reveal significant variation in firms' long-term asset
investments. The mean PPE is approximately 5.78 × 10¹¹, indicating substantial average
investments in physical assets, though the median of 2.57 × 10¹¹ suggests that many firms hold
smaller PPE values. The distribution is positively skewed, with a skewness of 1.46, reflecting
that a few firms have much larger investments, pulling the average up. This is evident in the
maximum PPE of 2.65 × 10¹², compared to the minimum of 2.49 × 10¹ ⁰. The standard deviation
of 6.97 × 10¹¹ highlights considerable variability in asset investments across firms. Additionally,
the kurtosis of 4.16 points to a leptokurtic distribution, suggesting a higher concentration of
extreme values. Overall, the data shows that while some firms have massive PPE investments,
many have significantly smaller holdings, contributing to a wide disparity in asset allocation.

Compliance (COM) suggest that most firms in the dataset are highly compliant. The mean
compliance score is 0.96, indicating that, on average, firms comply with regulations 96% of the
time. The median is 1.00, meaning that at least half of the firms are fully compliant. The
maximum compliance score is 1.00, while the minimum is 0.00, showing that a few firms are
non-compliant. The standard deviation of 0.20 indicates low variability in compliance across
firms, suggesting that most firms are clustered near full compliance. However, the skewness of -
4.69 indicates a highly negatively skewed distribution, meaning that non-compliant firms are
rare, with most data points concentrated at the higher end of the compliance scale. The kurtosis
of 23.04 suggests a leptokurtic distribution, with extreme values (i.e., non-compliant firms) being
more frequent than in a normal distribution. Overall, the data shows that compliance is generally
very high, with only a few firms showing non-compliance.

Audit Size (AUS) indicate that most firms in the dataset have larger audit sizes. The mean audit
size is 0.94, suggesting that, on average, firms tend to be audited by larger audit firms. The
median of 1.00 shows that at least half of the firms are associated with large audit firms. The

40
maximum audit size is 1.00, while the minimum is 0.00, indicating that a few firms use smaller
audit firms. The standard deviation of 0.24 reflects relatively low variability in audit size across
firms. The skewness of -3.71 suggests a highly negatively skewed distribution, meaning that
most firms are audited by large firms, while smaller firms are less common. The kurtosis of
14.73 indicates a leptokurtic distribution, with more extreme values (firms with small audit sizes)
than in a normal distribution. Overall, the data shows that larger audit firms dominate the audit
market, with only a few smaller firms being used for audits.

The descriptive statistics for Firm Age (FAG) provide insights into the maturity of the firms in
the dataset. The mean firm age is 37.3 years, indicating that, on average, firms have been in
operation for around 37 years. The median age of 40 years suggests that half of the firms are
older than 40 years, while the other half are younger. The maximum age is 56 years, and the
minimum is 18 years, showing a wide range of firm ages. The standard deviation of 11.25
indicates moderate variability in the ages of firms. The skewness of -0.13 implies a slightly left-
skewed distribution, meaning there are a few younger firms in the dataset, but the overall
distribution is relatively balanced. Lastly, the kurtosis of 1.69 suggests a platykurtic distribution,
meaning the data has lighter tails than a normal distribution, with fewer extreme firm ages.
Overall, the dataset includes a mix of both younger and more established firms, with the majority
being mature companies.

4.2.2 Regression Analysis

Objective one

DPSit = β0 + β1COM + β2PPE ++ β2AUS + + β2FAG + εit…………………….1

Dependent Variable: DPS

Method: Panel Least Squares

Date: 10/16/24 Time: 05:11

Sample: 2014 2023

41
Periods included: 10

Cross-sections included: 5

Total panel (balanced) observations: 50

Variable Coefficient Std. Error t-Statistic Prob.

PPE 1.09E-11 5.84E-12 1.867936 0.0689

AUS 0.019772 4.471275 -0.004422 0.9965
COM 5.182594 5.453144 0.950386 0.3475
FAG 0.951116 0.482833 -1.969864 0.0556
C 32.72293 17.25660 1.896256 0.0650

Effects Specification

Cross-section fixed (dummy variables)

R-squared 0.307459 Mean dependent var 8.515315

Adjusted R-squared 0.172329 S.D. dependent var 7.999864
S.E. of regression 7.277991 Akaike info criterion 6.969136
Sum squared resid 2171.735 Schwarz criterion 7.313300
Log likelihood -165.2284 Hannan-Quinn criter. 7.100195
F-statistic 2.275283 Durbin-Watson stat 0.637726
Prob(F-statistic) 0.040826

From the result of fixed effect in table 4.2 above, the estimated coefficient of 1.09E-11 indicates
that Property Plant and Equipment has positive influence on dividend per share of selected listed
firms in Nigeria. The implication of this is that higher Property Plant and Equipment leads to
higher financial performance in terms of dividend per share (DPS). The p-value of 0.0689,
however, indicates that at the 5% level, the positive effect of Property Plant and Equipment on
the dividend per share of the selected listed firms in Nigeria (0.0689>0.05) is not statistically
significant. This indicates that for every additional unit increase in PPE, the DPS increases,

42
suggesting that firms investing in physical assets like machinery, buildings, and equipment are
likely to generate greater earnings. Higher investment in PPE typically translates to improved
operational efficiency and productivity, enhancing a firm's ability to generate revenue and profit.
As these firms become more profitable, they are positioned to distribute higher dividends to
shareholders, reflecting better financial performance. This relationship underscores the
importance of capital investment in driving sustainable growth and profitability, ultimately
benefiting investors through increased dividends.

The estimated coefficient of 0.019772 indicates that Audit Size has positive influence on
dividend per share of selected listed firms in Nigeria. The implication of this is that higher Audit
Size leads to higher financial performance in terms of dividend per share (DPS). The p-value of
0.9965, however, indicates that at the 5% level, the positive effect of Audit Size on the dividend
per share of the selected listed firms in Nigeria (0.9965>0.05) is not statistically significant. A
larger audit firm typically signifies a more rigorous auditing process, which can enhance the
credibility and reliability of a firm's financial statements. This increased transparency may lead
to improved investor confidence, encouraging more investments and potentially driving higher
earnings. As firms demonstrate strong financial health and operational integrity, they are more
likely to allocate a portion of their profits towards dividends, resulting in higher DPS for
shareholders. Consequently, this relationship highlights the vital role of audit quality in
promoting better financial performance and shareholder value in the corporate sector.

The estimated coefficient of 5.182594 indicates that Compliance has positive influence on
dividend per share of selected listed firms in Nigeria. The implication of this is that higher
Compliance leads to higher financial performance in terms of dividend per share (DPS). The p-
value of 0.3475, however, indicates that at the 5% level, the positive effect of Compliance on the
dividend per share of the selected listed firms in Nigeria (0.3475>0.05) is not statistically
significant. This implies that an increase in compliance with regulatory standards and corporate
governance practices is linked to a notable rise in DPS. Higher compliance often reflects a firm’s
commitment to transparency, accountability, and ethical business practices, which can enhance
its reputation and reduce the risk of legal penalties or financial misstatements. As firms adhere to
regulatory requirements, they are likely to attract more investment and maintain operational
stability, leading to improved profitability. Consequently, these firms can afford to distribute
43
greater dividends to shareholders, underscoring the importance of compliance in driving
financial performance and fostering investor trust. This relationship illustrates how adherence to
regulatory frameworks not only safeguards a firm’s operational integrity but also translates into
tangible financial benefits for its investors.

The estimated coefficient of 0.951116 indicates that Firm age has positive influence on dividend
per share of selected listed firms in Nigeria. The implication of this is that higher Firm age leads
to higher financial performance in terms of dividend per share (DPS). The p-value of 0.0556,
however, indicates that at the 5% level, the positive effect of Firm age on the dividend per share
of the selected listed firms in Nigeria (0.0556>0.05) is not statistically significant. This suggests
that as a firm's age increases, there is a corresponding rise in its DPS. Older firms typically have
more established business operations, greater brand recognition, and a proven track record of
performance, which can contribute to financial stability and profitability. Their accumulated
experience allows them to navigate market challenges more effectively and leverage established
customer relationships, leading to sustained revenue growth. As these firms mature, they often
generate consistent cash flows, enabling them to distribute higher dividends to shareholders. This
relationship underscores the significance of firm age in enhancing financial performance,
illustrating how a longer operational history can provide a competitive advantage that translates
into increased shareholder value through higher dividends.

The coefficient of determination (R²) value of 0.307459 indicates that the index of the
International Financial Reporting Standards (IFRS) accounts for approximately 30.75% of the
variation in the financial performance of selected companies in Nigeria. This suggests that while
IFRS has a significant influence on financial performance, there are other factors contributing to
the remaining 69.25% of variability, highlighting the complexity of financial performance
determinants. The positive R² value supports the assertion that the chosen variables are effective
predictors of financial performance, reinforcing the importance of adhering to IFRS in enhancing
transparency and comparability in financial reporting.

Furthermore, the Durbin-Watson statistic of 0.637726 suggests little to no autocorrelation in the

model's variables. Autocorrelation can indicate issues with model specification or data integrity,
so a value close to 2 is typically desirable, suggesting that residuals from the regression analysis

44
are not correlated. In this case, the low Durbin-Watson statistic indicates potential concerns about
positive autocorrelation, which may necessitate further investigation. Addressing any
autocorrelation issues is crucial to ensuring the reliability and robustness of the regression model,
ultimately leading to more accurate predictions of financial performance based on IFRS
adherence.

Objective Two

ROEit = β0 + β1COM + β2PPE ++ β2AUS + + β2FAG + εit ……………………..2

Dependent Variable: ROE

Method: Panel Least Squares
Sample: 2014 2023
Periods included: 10
Cross-sections included: 5

Variable Coefficient Std. Error t-Statistic Prob.

PPE 5.94E-13 1.97E-13 -3.020309 0.0043

AUS 0.068352 0.150640 0.453743 0.6524
COM 0.100766 0.183719 0.548476 0.5863
FAG 0.032065 0.016267 1.971175 0.0555
C -0.748916 0.581384 -1.288160 0.2049

Effects Specification

Cross-section fixed (dummy variables)

R-squared 0.316443 Mean dependent var 0.264229

Adjusted R-squared 0.183066 S.D. dependent var 0.271285
S.E. of regression 0.245199 Akaike info criterion 0.188059
45
Sum squared resid 2.465033 Schwarz criterion 0.532224
Log likelihood 4.298514 Hannan-Quinn criter. 0.319119
F-statistic 2.372545 Durbin-Watson stat 0.993603
Prob(F-statistic) 0.033598

From the result of fixed effect in table 4.3 above, the estimated coefficient of 5.94E-13 indicates
that Property Plant and Equipment has positive influence on Return on Equity of selected listed
firms in Nigeria. The implication of this is that higher Property Plant and Equipment leads to
higher financial performance in terms of Return on Equity (ROE). The p-value of 0.0043,
however, indicates that at the 5% level, the positive effect of Property Plant and Equipment on
the Return on Equity of the selected listed firms in Nigeria (0.0043<0.05) is statistically
significant.
The estimated coefficient of 0.068352 indicates that Audit Size has positive influence on Return
on Equity of selected listed firms in Nigeria. The implication of this is that higher Audit Size
leads to higher financial performance in terms of Return on Equity (ROE). The p-value of
0.6524, however, indicates that at the 5% level, the positive effect of Audit Size on the Return on
Equity of the selected listed firms in Nigeria (0.6524 >0.05) is not statistically significant.

The estimated coefficient of 0.100766 indicates that Compliance has positive influence on
Return on Equity of selected listed firms in Nigeria. The implication of this is that higher
Compliance leads to higher financial performance in terms of Return on Equity (ROE). The p-
value of 0.5863, however, indicates that at the 5% level, the positive effect of Compliance on the
Return on Equity of the selected listed firms in Nigeria (0.5863 >0.05) is not statistically
significant.

The estimated coefficient of 0.032065 indicates that Firm age has positive influence on Return
on Equity of selected listed firms in Nigeria. The implication of this is that higher Firm age leads
to higher financial performance in terms of Return on Equity (ROE). The p-value of 0.0555,
however, indicates that at the 5% level, the positive effect of Firm age on the Return on Equity of
the selected listed firms in Nigeria (0.0555 >0.05) is not statistically significant.

Additionally, the test's coefficient of determination (R2) result of 0.316443 showed that the index
of the International financial reporting standard explained 31.64% of the financial performance
46
of selected companies in Nigeria, supporting the claim that these variables were effective
predictors of financial performance. The Durbin-Watson statistic calculated for the test was
0.993603, which indicates little to no autocorrelation in the model's variables, which is generally
a desirable result.

Objective Three

ROAit = β0 + β1COM + β2PPE ++ β2AUS + + β2FAG + εit ……………………..3

Dependent Variable: ROA

Method: Panel Least Squares
Date: 10/16/24 Time: 05:11
Sample: 2014 2023
Periods included: 10
Cross-sections included: 5
Total panel (balanced) observations: 50

Variable Coefficient Std. Error t-Statistic Prob.

PPE 2.16E-11 1.39E-11 -1.553034 0.1281

AUS 9.351415 10.65552 0.877612 0.3853
COM 2.991451 12.99542 0.230193 0.8191
FAG 3.027894 1.150643 2.631479 0.0119
C -103.7422 41.12432 -2.522648 0.0156

Effects Specification

Cross-section fixed (dummy variables)

47
R-squared 0.520046 Mean dependent var 8.353435
Adjusted R-squared 0.426396 S.D. dependent var 22.90071
S.E. of regression 17.34423 Akaike info criterion 8.705946
Sum squared resid 12333.71 Schwarz criterion 9.050110
Log likelihood -208.6486 Hannan-Quinn criter. 8.837005
F-statistic 5.553106 Durbin-Watson stat 0.439483
Prob(F-statistic) 0.000089

From the result of fixed effect in table 4.4 above, the estimated coefficient of 2.16E-11 indicates
that Property Plant and Equipment has positive influence on Return on Assets of selected listed
firms in Nigeria. The implication of this is that higher Property Plant and Equipment leads to
higher financial performance in terms of Return on Assets (ROA). The p-value of 0.1281,
however, indicates that at the 5% level, the positive effect of Property Plant and Equipment on
the Return on Assets of the selected listed firms in Nigeria (0.1281>0.05) is statistically
significant.

The estimated coefficient of 9.351415 indicates that Audit Size has positive influence on Return
on Assets of selected listed firms in Nigeria. The implication of this is that higher Audit Size
leads to higher financial performance in terms of Return on Assets (ROA). The p-value of
0.3853, however, indicates that at the 5% level, the positive effect of Audit Size on the Return on
Assets of the selected listed firms in Nigeria (0.3853 >0.05) is not statistically significant.

The estimated coefficient of 2.991451 indicates that Compliance has positive influence on
Return on Assets of selected listed firms in Nigeria. The implication of this is that higher
Compliance leads to higher financial performance in terms of Return on Assets (ROA). The p-
value of 0.8191, however, indicates that at the 5% level, the positive effect of Compliance on the
Return on Assets of the selected listed firms in Nigeria (0.8191>0.05) is not statistically
significant.

The estimated coefficient of 3.027894 indicates that Firm age has positive influence on Return
on Assets of selected listed firms in Nigeria. The implication of this is that higher Firm age leads
to higher financial performance in terms of Return on Assets (ROA). The p-value of 0.0119,
48
however, indicates that at the 5% level, the positive effect of Firm age on the Return on Assets of
the selected listed firms in Nigeria (0.0119 >0.05) is not statistically significant.

Additionally, the test's coefficient of determination (R2) result of 0.520046 showed that the index
of the International financial reporting standard explained 52.01% of the Financial performance
of selected companies in Nigeria, supporting the claim that these variables were effective
predictors of financial performance. The Durbin-Watson statistic calculated for the test was
0.439483, which indicates little to no autocorrelation in the model's variables, which is generally
a desirable result.

4.4 Discussion of Findings

The descriptive statistics for Dividend Per Share (DPS) provide valuable insights into the
financial performance of firms in relation to IFRS adoption. The mean DPS of 8.52 suggests that,
on average, firms are paying moderate dividends to their shareholders. However, the median
value of 4.86 being lower than the mean indicates a right-skewed distribution, implying that a
small number of firms are responsible for significantly higher dividends. This is further
evidenced by a positive skewness of 0.55, which points to a slight tendency towards higher DPS
values. The range from a minimum of 0.04 to a maximum of 24.85 reflects substantial variability
in dividend payments among firms, and the standard deviation of 7.99 emphasizes this
variability, suggesting considerable fluctuations in dividend payouts. Additionally, the kurtosis of
1.86 suggests a platykurtic distribution, indicating fewer extreme DPS values compared to a
normal distribution.

In terms of Return on Assets (ROA), the mean value of 8.35% reveals that firms, on average,
generate a reasonable return on their assets. However, the median value of 0.13 indicates a highly
skewed distribution, where most firms report lower ROA figures while a select few achieve
significantly higher returns. The skewness of 2.76 confirms this positive skew, highlighting
substantial disparities in asset utilization efficiency across firms. The extensive range of ROA
values, from a minimum of 0.006 to a maximum of 91.71, further underscores this variation,
with a standard deviation of 22.9 illustrating high variability. The kurtosis value of 8.91 indicates
a leptokurtic distribution, meaning there are more extreme ROA values than would typically be
expected, suggesting the presence of outliers among the firms.
49
The findings regarding Return on Equity (ROE) reveal that firms, on average, generate a 26%
return on equity, as indicated by a mean ROE of 0.26. Similar to the previous metrics, the
median ROE of 0.16 being lower than the mean suggests a few firms with exceptionally high
ROE values skewing the average. The skewness of 1.42 corroborates this positively skewed
distribution, indicating a concentration of data towards lower ROE values, despite the existence
of firms with high returns. The wide range of ROE values from 0.003 to 1.14 signifies
considerable performance differences among firms, and the standard deviation of 0.27 indicates
moderate variation. The kurtosis of 4.13, indicative of a leptokurtic distribution, suggests the
presence of outliers, with firms showing either extreme performance or lower returns relative to
the average.

In examining Property, Plant, and Equipment (PPE), the mean value of approximately 5.78 ×
10¹¹ reveals substantial average investments in physical assets among firms, although the median
of 2.57 × 10¹¹ indicates that many firms possess smaller PPE values. The positive skewness of
1.46 implies that a handful of firms have much larger investments in PPE, thus raising the
average. The substantial range from 2.49 × 10¹⁰ to 2.65 × 10¹², along with a standard deviation of
6.97 × 10¹¹, highlights significant variability in asset investments across the dataset. Furthermore,
the kurtosis of 4.16 signifies a leptokurtic distribution, indicating a higher concentration of
extreme values, suggesting disparities in how firms allocate resources towards long-term
investments.

Regarding compliance, the data indicate that firms generally exhibit high levels of adherence to
regulations, with a mean compliance score of 0.96 suggesting an average compliance rate of
96%. The median score of 1.00 indicates that at least half of the firms are fully compliant, while
the maximum and minimum scores (1.00 and 0.00) highlight that a few firms remain non-
compliant. The standard deviation of 0.20 suggests low variability in compliance levels, with
most firms clustered near full compliance. However, the highly negative skewness of -4.69
indicates that non-compliant firms are rare, with most data points concentrated at the higher end
of the compliance scale. The kurtosis of 23.04 reveals a leptokurtic distribution, emphasizing the
prevalence of extreme values (non-compliant firms), which are more frequent than in a normal
distribution.

50
Audit size also plays a role in the financial performance of firms, with a mean audit size of 0.94
indicating that most firms are audited by larger firms. The median of 1.00 suggests that at least
half of the firms are associated with large audit firms, while the maximum and minimum values
(1.00 and 0.00) indicate that some firms utilize smaller audit firms. The standard deviation of
0.24 reflects relatively low variability across audit sizes. The negative skewness of -3.71
indicates that larger audit firms dominate the audit market, while the kurtosis of 14.73 suggests a
leptokurtic distribution with more extreme values than a normal distribution.

The findings related to firm age reveal a mean age of 37.3 years, suggesting that, on average, the
firms in the dataset are relatively mature. The median age of 40 years indicates that half of the
firms are older than 40 years, highlighting a mix of younger and more established companies.
The maximum age of 56 years and minimum of 18 years further illustrates the diverse age range
within the dataset. The standard deviation of 11.25 indicates moderate variability in firm ages,
while the slightly left-skewed distribution (skewness of -0.13) shows a balance between younger
and older firms. The kurtosis of 1.69 suggests a platykurtic distribution, indicating lighter tails
than a normal distribution and fewer extreme values in terms of firm age.

In the regression analysis, the findings reveal that Property, Plant and Equipment positively
influences DPS, but the effect is not statistically significant at the 5% level (p-value = 0.0689).
This indicates that while higher investments in PPE may lead to improved financial performance,
other variables also play significant roles in determining DPS. The positive relationship suggests
that firms investing in physical assets may enhance their operational efficiency and profitability,
potentially allowing for higher dividends. Similarly, while audit size has a positive coefficient
indicating an influence on DPS, the high p-value (0.9965) indicates that this relationship is not
statistically significant, suggesting that audit quality may not substantially affect dividend
payouts.

Compliance shows a positive coefficient in relation to DPS, with a p-value of 0.3475 indicating
that its influence is also not statistically significant at the 5% level. This suggests that although
higher compliance with regulations may contribute to increased investor confidence and,
consequently, higher dividends, other factors might overshadow this effect. Firm age
demonstrates a positive relationship with DPS, but again the effect is not statistically significant

51
(p-value = 0.0556), indicating that while older firms may have more stable dividend payouts, this
relationship requires further investigation.

The coefficient of determination (R²) value of 0.307459 indicates that the selected variables
account for approximately 30.75% of the variation in financial performance among firms,
highlighting that while IFRS has a considerable influence, other factors contribute significantly
to the remaining variability. The Durbin-Watson statistic of 0.637726 raises concerns about
potential autocorrelation, suggesting that further investigation into model specification may be
warranted to ensure the reliability of the findings.

In examining the second objective, the positive coefficient for Property, Plant and Equipment on
Return on Equity (ROE) is statistically significant (p-value = 0.0043). This suggests that
investments in PPE enhance the financial performance of firms in terms of ROE, reflecting
effective asset utilization in generating returns for shareholders. However, audit size and
compliance demonstrate positive influences on ROE, but their p-values (0.6524 and 0.5863,
respectively) indicate that these relationships are not statistically significant. Firm age again
shows a positive influence on ROE with a p-value of 0.0555, suggesting that while older firms
may generate higher returns on equity, this effect remains marginal.

The R² value of 0.316443 indicates that approximately 31.64% of the variability in ROE can be
explained by the selected variables, reinforcing their potential as predictors of financial
performance. The Durbin-Watson statistic of 0.993603 suggests minimal autocorrelation, lending
credibility to the findings.

Finally, the analysis related to Return on Assets (ROA) highlights a positive coefficient for
Property, Plant and Equipment, although the effect is not statistically significant (p-value =
0.1281). This implies that while higher investments in physical assets may correlate with
improved asset utilization and profitability, the evidence does not strongly support this
relationship. Similarly, audit size, compliance, and firm age demonstrate positive influences on
ROA, but none reach statistical significance at the 5% level, indicating that the relationships may
be influenced by other underlying factors. The R² value of 0.520046 suggests that IFRS adoption
explains a significant portion of the variability in ROA among firms, while the Durbin-Watson

52
statistic of 0.439483 indicates potential autocorrelation, warranting further examination to ensure
robust results.

Overall, the findings highlight the complexity of financial performance determinants in the
context of IFRS adoption, emphasizing the need for a comprehensive understanding of various
influencing factors beyond the scope of the examined variables.

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 CHAPTER FIVE

SUMMARY, CONCLUSIONS AND RECOMMENDATION

5.1 Introduction

This chapter contains the study's summary, conclusion, and applicable recommendations. The
chapter is broken into sections, including sections on the study's executive summary, its
conclusion, and sections on recommendations, contributions to knowledge, limitations of the
research, and suggestions for future investigations.

5.2 Summary

This section presents a summary of the findings from the descriptive statistics and regression
analysis, shedding light on the relationship between International Financial Reporting Standards
(IFRS) adoption and financial performance metrics, including Dividend Per Share (DPS), Return
on Assets (ROA), Return on Equity (ROE), Property, Plant, and Equipment (PPE), compliance,
audit size, and firm age.

The descriptive statistics reveal that the average DPS is 8.52, with a right-skewed distribution,
indicating that a few firms are responsible for notably higher dividend payouts. The mean ROA
stands at 8.35%, showcasing reasonable returns on assets, although the distribution is skewed
positively, reflecting significant disparities in asset utilization efficiency among firms.
Meanwhile, the mean ROE of 26% suggests relatively strong returns for shareholders, yet a
similar skewness indicates that extreme values exist within the dataset. The analysis of PPE
demonstrates substantial average investments in physical assets, but the distribution reflects
considerable variability across firms.

Compliance rates are high, with a mean score of 0.96, suggesting that most firms adhere to
regulations, while audit size indicates that larger audit firms are prevalent in the market. The
findings on firm age reveal that firms in the dataset are relatively mature, with a mean age of
37.3 years, highlighting a blend of younger and more established companies.

In the regression analysis, the results indicate that while investments in PPE have a positive
influence on DPS and ROE, these relationships are not statistically significant, suggesting that

54
other factors play critical roles in determining these financial metrics. Compliance and audit size
show positive coefficients concerning DPS but do not reach significance. Similarly, firm age is
associated with DPS and ROE, indicating potential stability in dividend payouts and returns over
time.

The R² values suggest that the selected variables account for a considerable portion of the
variability in financial performance, with DPS and ROE exhibiting around 30% to 31%
explained variance, while ROA demonstrates a higher explanatory power of approximately 52%.
However, concerns regarding autocorrelation in the Durbin-Watson statistics indicate a need for
further examination of the model specifications.

5.3 Conclusion

The findings of this research underscore the significant impact of International Financial
Reporting Standards (IFRS) adoption on the financial performance of firms, as evidenced by the
relationship between various financial metrics and the underlying variables analyzed. The study
highlights that while compliance with IFRS is prevalent among firms, the actual influence of
specific financial practices, such as investments in Property, Plant, and Equipment (PPE), audit
size, and firm age, on key performance indicators like Dividend Per Share (DPS), Return on
Assets (ROA), and Return on Equity (ROE) is complex and nuanced.

Despite the high levels of compliance with IFRS, the regression analysis indicates that the
expected positive associations between PPE investments and financial performance metrics are
not statistically significant. This suggests that other elements—such as market conditions,
managerial decisions, and external economic factors—may play a more pivotal role in shaping
the financial outcomes of firms. The positive relationship observed between compliance and
audit size with DPS reflects the potential for larger audit firms to influence more favorable
financial reporting, yet the lack of statistical significance suggests that the effects may not be
uniform across all firms.

The variation in financial performance, as evidenced by the R² values, indicates that while a
substantial portion of the performance can be explained by the variables included in the analysis,

55
a considerable amount remains unaccounted for. This signals a need for future research to
explore additional factors and variables that may influence financial performance beyond those
examined in this study.

In conclusion, the research contributes to the understanding of the complexities surrounding

IFRS adoption and its implications for financial performance. It highlights the need for firms to
consider a broader range of strategies and practices to enhance their financial metrics. Future
studies should delve deeper into the intricate interplay of internal and external factors that
influence financial performance in the context of IFRS compliance, thereby providing more
comprehensive insights for policymakers, financial analysts, and business leaders.

5.4 Recommendations

Based on the findings and conclusions of this study, several recommendations can be made to
enhance the financial performance of firms in the context of International Financial Reporting
Standards (IFRS) adoption:

1. Enhancing Training and Awareness: Firms should invest in comprehensive training

programs for their accounting and finance staff to deepen their understanding of IFRS
and its implications for financial reporting. Increased knowledge can lead to improved
compliance and more effective financial practices that align with IFRS requirements.

2. Diversifying Investment Strategies: Given the limited significance of Property, Plant,

and Equipment (PPE) investments on financial performance, firms should consider
diversifying their investment portfolios. Exploring various investment avenues, such as
technology and innovation, can help improve financial metrics and overall performance.

3. Utilizing External Expertise: Engaging larger and more reputable audit firms can
enhance the credibility and accuracy of financial reports. Firms should consider
collaborating with external auditors who have experience in IFRS compliance to ensure
that their financial reporting meets international standards and to foster trust with
stakeholders.

4. Conducting Regular Performance Evaluations: Firms should establish regular

performance evaluations and audits of their financial practices. This can help identify
56
 areas for improvement and ensure that financial strategies are effectively implemented,
leading to better alignment with corporate goals.

5. Investigating External Influences: Further research is needed to explore external factors

affecting financial performance, such as market dynamics, economic conditions, and
regulatory changes. Firms should stay attuned to these factors to adapt their strategies
accordingly and maintain competitive advantages.

6. Fostering a Culture of Transparency: Promoting transparency in financial reporting

can enhance stakeholder trust and improve overall corporate reputation. Firms should
strive to communicate their financial results clearly and accurately, aligning with best
practices in corporate governance.

7. Encouraging Stakeholder Engagement: Engaging with stakeholders, including

investors and regulatory bodies, can provide valuable insights into their expectations and
concerns regarding financial reporting. This engagement can guide firms in refining their
reporting practices and aligning them with stakeholder interests.

5.5 Contributions to Study

This study makes substantial contributions to the literature on International Financial Reporting
Standards (IFRS) adoption and its impact on firm financial performance, enriching the body of
knowledge in multiple dimensions. Firstly, the study enhances existing theoretical frameworks
by examining the relationship between IFRS adoption and a range of financial performance
indicators, including Dividend Per Share (DPS), Return on Assets (ROA), and Return on Equity
(ROE). By integrating these metrics within an IFRS framework, the research provides a
comprehensive perspective on how standardized reporting practices may influence firm
outcomes. Furthermore, it introduces firm-specific factors such as Property, Plant, and
Equipment (PPE) investments, audit size, and firm age, thereby broadening the theoretical
discourse to include the nuanced effects of internal firm characteristics on financial performance
under IFRS.

In terms of empirical contributions, the study offers valuable contextual insights based on a
dataset that reflects a diverse range of firms with varying ages, audit sizes, and PPE investments.

57
This diverse data set enhances the robustness of the findings, providing a more nuanced
understanding of IFRS adoption across different organizational contexts. Additionally, the
study’s identification of non-significant relationships between PPE investments and key financial
performance indicators, such as DPS and ROE, challenges prevailing assumptions in the
literature and underscores the need for further exploration of the factors that genuinely drive
financial outcomes under IFRS.

Methodologically, this research adopts a dual approach by employing both descriptive statistics
and regression analysis, ensuring a comprehensive examination of the data and enhancing the
reliability and validity of the findings. Importantly, the study’s identification of potential
autocorrelation issues through Durbin-Watson statistics highlights the importance of rigorous
model specification. This methodological rigor serves as a valuable example for future
researchers, underscoring the need for refined analytical techniques to address potential issues in
model accuracy and reliability.

The study also provides practical implications for stakeholders, including policymakers, business
leaders, and financial managers. For policymakers and regulators, the findings reveal that high
compliance rates alone may not guarantee improved financial outcomes, suggesting that
additional supporting measures may be necessary to achieve the intended impacts of IFRS. For
firms, the study offers actionable recommendations, such as enhancing training, diversifying
investments, and fostering transparency in financial reporting. These strategies, grounded in
empirical evidence, provide firms with practical guidance to optimize their financial performance
within the context of IFRS compliance.

Finally, this research lays a solid foundation for future studies by identifying gaps and
encouraging further exploration. The study highlights the need for additional research to account
for the considerable portion of financial performance variability that remains unexplained by the
current variables. It advocates for investigating additional external factors that may impact
financial outcomes, such as economic conditions and market dynamics, to gain a more
comprehensive understanding of the determinants of firm performance. Additionally, by
underscoring the interplay between accounting standards, financial metrics, and firm-specific
characteristics, this study paves the way for cross-disciplinary research. Integrating insights from

58
accounting, finance, and management can lead to a holistic understanding of the complex factors
influencing firm performance in an IFRS-compliant environment.

5.6 Suggestion for further studies

This study opens avenues for future research by identifying areas that could benefit from deeper
investigation, particularly in understanding the intricate dynamics between International
Financial Reporting Standards (IFRS) adoption and firm financial performance. Given the
complexity of factors influencing financial outcomes, further studies could build on these
insights by considering additional variables, alternative contexts, and methodological
approaches.

One area for future research is the examination of external economic factors and market
conditions that may affect the relationship between IFRS adoption and financial performance.
While this study focused on firm-specific variables, broader economic influences such as
inflation rates, interest rates, and market volatility could provide valuable insights into how
external conditions interact with IFRS compliance to impact financial metrics. Such research
would allow for a more comprehensive analysis of how macroeconomic shifts shape firm-level
financial outcomes in an IFRS-compliant environment.

Another suggestion is to explore the role of managerial and organizational practices in mediating
the effects of IFRS adoption on financial performance. Factors like corporate governance quality,
managerial expertise, and strategic decision-making processes could be assessed to understand
how they influence the effectiveness of IFRS implementation. This line of inquiry could shed
light on how internal management strategies either enhance or hinder the anticipated benefits of
adopting IFRS, offering valuable insights for both scholars and practitioners.

Future research could also benefit from comparative studies across different regions or
industries. Conducting cross-country analyses, for instance, could reveal variations in IFRS
adoption outcomes based on differences in regulatory environments, economic development
levels, and market structures. Similarly, studies focused on specific industries—such as banking,
manufacturing, or technology—might uncover sector-specific dynamics that affect how IFRS
impacts financial performance. These comparative studies could contribute to a more nuanced

59
understanding of the global applicability of IFRS standards and help identify best practices in
different contexts.

In terms of methodology, future studies could explore alternative statistical techniques to address
potential issues such as autocorrelation, which was noted in this study. Advanced econometric
methods, such as panel data analysis or structural equation modeling, could provide more refined
insights into the causal relationships between IFRS compliance and financial metrics.
Additionally, longitudinal studies that track firms over extended periods would be beneficial to
capture the long-term effects of IFRS adoption on financial performance, allowing researchers to
assess trends and changes over time.

Lastly, exploring the impact of emerging technologies on IFRS implementation and financial
performance could be a valuable research direction. Technologies like blockchain, artificial
intelligence, and big data analytics are transforming financial reporting and compliance
processes. Investigating how these technologies facilitate or alter the effectiveness of IFRS
standards could provide forward-looking insights and help firms adapt to technological
advancements while maintaining compliance.

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