CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

An accounting standard may be a rule or sets of rules, that prescribes the strategies by

which accounts ought to be prepare and present to various users group. However, IFRS are

standards which established the final rules by which specific activities in financial terms are

to be treated in the financial statement. The financial statement may be a statement that serve

as the sources of information, and it is use to disclose and determine the financial position,

performance, and changes in financial position of an entity over a certain period of time. The

users of financial statement (mostly investors) use information derived from the financial

reports to make useful economic decision which will have an effect on their investments. The

expectation thus is that IFRS ought to have the potential and capability to support and turn

out qualitative and sturdy financial information that's timely, correct and well detailed in all

ramifications.

Furthermore, it's expected that the proper disclosure and fair presentation demand of

IFRS compliant financial statement can eliminate or cut back discrepancies arising from

comparism of financial statement across national frontiers, promote transparency and

enhance the standard of the financial reporting of companies concerned in each native and

foreign business transactions. Literatures on IFRS have shown that the dynamic risk-return

preference of investors; growth and development of international financial markets and

superstructures, international trade and finance, however, because of the emergence and

development of multinational business considerations informs the main reason for the hunt

for convergence of world financial reporting across the national boundaries. Before

convergence, bilateral trade likewise the multinational business transactions were sweet-faced
with the challenges of examination or comparism of books of accounts which are already

being treated completely with different standards from mercantilism partners. “The result

emanating from such comparison reveals that financial statements are no longer represent the

facts they're expected to disclose. With the effort to bridging the reporting gap and make sure

that accounting standards from different countries are harmonise and improved upon so as to

make sturdy and useful financial decisions, it became imperative since the 1970s for the

International Accounting Standards Board (IASB) and also the European Union (EU)) to

hitch forces along to harmonize accounting rules in several countries”. Olaoye (2020)

Globalisation and increasing business activities across borders caused the

International Organizations of Securities Commissions (IOSCO) to adopt International

Financial Reporting Standards (IFRS) for firms listed or the one seeks to be listed on stock

exchanges worldwide (Stenka, Ormrod, & Chan, 2018). The International Financial

Reporting Standards may be a set of high-quality world accounting standards and rules issued

by the International Accounting Standards Board (IASB) of UK for the preparation and

presentation of financial statements worldwide to promote uniformity and transparency

(IASB, 2016; ICAEW, 2013). These International Accounting Standards (IASs) and

International Financial Reporting Standards (IFRSs) are posited to function a guide in the

preparation of financial statements globally (IASB, 2016 ;).

As at 31st March 2018, one hundred and fifty (150) countries have adopted IFRS

(IASB, 2018) yet, the implementation rate differs across countries and continents of the

globe. In 2005, European Union (EU) directed all listed firms in Europe to migrate from

national accounting standards to IFRS. Also, the US Securities and Exchange Commission

(SEC) allowed foreign companies that were mercantilism on the U.S.A. Stock Exchanges to

report their financial statements in line with IFRS rules. Kighir et al (2018).
 In recent times, there are considerations among financial statements users, regulators,

investors and also the general public on the high quality of financial reports made by the

banks in Nigeria and every other country all over the globe. it's during this regard that Nigeria

as adopted International financial statements Standards (IFRS) in 2012. Moreover,

improvement in technology and financial process of the capital market has inflated the flow

of capital in several counties through foreign direct investment. it's thus necessary to know

the impact of changes in Accounting Standards on the earnings of banks in Nigeria. The most

significant purpose of adopting IFRS in Nigeria is to take advantage of the accounting

standard that was published by the International Accounting Standard Board to help preparers

of financial reports in Nigeria.

However, periodicity is one of the significant principles of accounting that stipulates

mandatory report of an entity every twelve calendar months. Stakeholders in any organization

can wish to be inform concerning the performance of the organization. The information is

often gotten through the published financial statement. Before the last 20 years different

accounting standards were utilized by different nations as developed by such nation.

Diversification of rules and regulations guiding preparation of financial statements by

different countries for proper disclosure and measurement didn't allow comparison of

financial statements between different countries to be true and fair (Adelusi and Ibigbami

2017). The issue relating to comparism of financial statements diode to the search and

development of International Financial Reporting Standards (IFRS) that may be a globally

accepted rules and principles rather than the individual national standards.

The Banking sector plays a crucial role in the growth and development of the

economy of every nation. It additionally signifies the thrust of any economy, so it's

chargeable for the availability of funds to different productive sectors of the Nigerian

economy, and thus it's important to the growth and development of different Nigerian
economic sectors. Hence, it's necessary for manager and different decision makers to take

care of confidence in the banking nation. However, given the role the banking sector plays in

the growth and development of each country, there's an increased demand for prime quality

of accounting standards to produce managers and business owners with the mandatory

resources in making very important decision such that the topic matter of IFRS can't be

overstretched. Micheal et al (2020)

Nigerian banks over the years are determined to exhibit weak disclosures in financial

statement, operational inefficiencies, undercapitalization and a weak company governance

practice that impedes their performance and makes it very difficult to sight the issues with

ease. However, the reporting quality and standard of financial reporting in Nigerian banking

sector seems to not match the high standard of reporting in the banking sector of a lot of

developed countries (Garba, 2013). As a results of this, Nigerian banking system has

undergone varied reforms. This includes the rise in the minimum paid in capital of banks

from 2billion Naira (US $14m) to twenty-five billion Naira (US$173m). This simply led to

the consolidation of most banks. Alternative reforms embrace the special examination of

banks, the move from accounting year to the calendar year to enhance transparency and

comparison of financial results and also the creation of AMCOM (Asset Management

Company) to get the non-performing loan from banks. Akinleye (2016)

Other reforms were within the sort of circulars. financial organisation of Nigeria

issued a circular on the format banks were expected to indicate in their annual financial

statements, the most range of years that a CEO might work was restricted to 10 years. Also,

the cashless policy was introduced and also the convergence to IFRS by the end of 2012 to

mention a vew. It's noteworthy that before January 2012, three (3) banks in Nigeria, Access

Bank, Guarantee Trust Bank and Zenith Bank started preparing and publishing their financial
reports per IFRS. Are there any implications of the adoption of IFRS on the wealth of those

banks? So this study is sort to provide answer to this question.

1.2 Statement of the Problem

In line with the Universal practice, Nigeria in 2012 adopted the International

Financial Reporting Standards (IFRS) in conjunction with another twenty-two (22) African

countries. In the light-weight of adoption, the Financial Reporting Council of Nigeria

(FRCN) a government regulatory body directed all listed firms in Nigeria to migrate from

national accounting standards to International Financial Reporting Standards with effects

from first January 2012 (FRCN, 2015; Madawaki, 2018). Within the spirit of globalization,

the Nigerian Stock Exchange (NSE) and also the Nigeria Securities and Exchange

Commission (SEC) make it obligatory for all firms trading and desire to be listed on the

ground of the Nigerian Stock Exchange to adopt IFRS reporting so that their financial

statements will be in line with Nigeria's adopted IFRS (NSE, 2015).

Nwude, 2012, posits that it had become worrisome to the shareholders in Nigeria

when the value and price of the shares crashed in 2007, it's going to not be unconnected with

the economic meltdown globally. Despite this fact, firms in Nigeria exploited the loopholes

of the Nigeria Generally Accepted Accounting Practices and given financial statements that

were spectacular by declaring dividends to shareholders, however firms couldn't offset the

obligations on the profits reported (Nwude, 2012).

Poor corporate governance practices and creative accounting caused the takeover of 5

DMBs in 2009 by Central Bank of Nigeria. The 5 DMBs are Afribank Nigeria Plc., Oceanic

Bank Plc; Platinum Habib Bank Plc., Intercontinental Bank Plc., and Spring Bank Plc (CBN,

2015). Nigeria Deposit Insurance Corporation (NDIC) and also the Central Bank of Nigeria

(CBN) intervened by injecting 650 billion Naira (the equivalent of USD 4.13 billion) to save
lots of depositors’ fund and bank stakeholders (CBN, 2015; Akinleye (2017)). Investors

raised considerations that the financial statements made by listed firms in Nigeria before the

adoption of IFRS are not adequate and lack credibility (NSE, 2015; Shehu, 2017).

Jensen and Meckling (1976), in their agency theory, posits that conflict arises once

agents (managers), pursue their interest (high pay, higher perks, and nice bonuses) to the

damage of the shareholders’ objective of wealth maximization. Some managers become

involved in window dressing of financial reports and unethical practices, and this adversely

impacts shareholders’ wealth. The principal-agent relationship breeds information imbalance.

Potential investors, shareholders and other users of the financial statements like managers,

suppliers, creditors, and government want IFRS compliant financial statements that they will

admit for decision making (IASB, 2016; Alexander, Britton, & Jorissen, 2018).

This research study tries to seek out if the adoption of IFRS has improved information

imbalance of those banks and how significant it has impacted the shareholder's wealth since

IFRS adoption. The study covers 2007 to 2017 with five years before and five years after the

adoption of IFRS by Nigeria in 2012 by vital public entities, and this is often to permit a pre

and post treatment result on shareholders’ wealth for adequate comparison.

Past researchers in Nigeria cantered chiefly on the impact of IFRS adoption on

foreign direct investments, and also the cost of capital (Nnandi & Soobaroyen, 2015; Shehu,

2015; Okafor & Ogiedu, 2017), without investigation the results of IFRS adoption on the

wealth of the shareholders. Dzugwahi & kighir (2018)

Users of financial statement like investors’, customers, regulators, creditors and

general public have an interest and can need to make sure that financial reports made by

organisations are of prime quality in term of fair view, that is, truth position is shown by the

statement made. A several work had been undertaken in developed economies. (Blanco and
Osma, 2018; Robyn and Graeme, 2019), furthermore as range of studies on IFRS and wealth

allotted in developing countries, despite the numerous researches that had been done on the

topic, discrepancies still exist. (Iyoha and Faboyede, 2019; Ojeka and Mukoro, 2017).

Researchers have reported positive impact of IFRS on the operating profit of firms (Bushman

and Landsman, 2019), whereas others posited that IFRS doesn't affect the operating profit of

an entity. Results from some studies additionally declared that impact of IFRS is negative on

the operating profit owing to the cost involved in preparation of globally comparable

financial statement. Indeterminateness of the results of past researches on IFRS impact and

also the imbalance information in the reports of researches prompted this study to look at

factors have an effect on the wealth of Money Deposit Banks in Federal Republic of Nigeria.

Idowu and Oyeleye (2021)

1.3 Research Questions

The study attempts to provide meaningful answers to the following questions:

i. What is the significant effect that IFRS adoption have on Return on Equity of listed

Deposit Money Banks (DMBs) in Nigeria?

ii. What is the significant relationship that exist between IFRS adoption and Market

Value per Share (MVPS) of listed Deposit Money Banks (DMBs) in Nigeria?

iii. What is the significant relationship that exist between IFRS adoption and Earnings per

Share of listed Deposit Money Banks (DMBs) in Nigeria?

1.4 Objectives of the Study

The main objective of the study is to empirically assess the impact of IFRS adoption

on the wealth of selected listed Deposit Money Banks (DMBs) in Nigeria.

The specific objectives of the study are:

 i. To examine the significant effect of IFRS adoption on Return on Equity of listed

Deposit Money Banks (DMBs) in Nigeria.

ii. To examine the significant relationship between IFRS adoption and Market Value per

Share (MVPS) of listed Deposit Money Banks (DMBs) in Nigeria.

iii. To examine the significant relationship between IFRS adoption and Earnings per

Share of listed Deposit Money Banks (DMBs) in Nigeria.

1.5 Reasearch Hypothesis

Based on the objectives of the study, the hypotheses guiding the study are stated and

are tested only in the null form as follows;

H01: The adoption of IFRS does not have any significant effect on Return on Equity of listed

Deposit Money Banks (DMBs) in Nigeria.

H02: There is no significant relationship between IFRS adoption and Market Value per Share

(MVPS) of listed Deposit Money Banks (DMBs) in Nigeria.

H03: There is no significant relationship between IFRS adoption and and Earnings per Share

of listed Deposit Money Banks (DMBs) in Nigeria.

1.1 Scope of the Study

These research covers the selected Money Deposit Bank in Nigeria, while Wema

Bank Plc, First Bank Nig. Ltd, Union Bank Plc, United Bank for Africa Plc and Guarantee

Trust Bank Plc, will be used as a case study. In order to attain the objectives of this research,

the scope of the study is defined to involve all relevant annual financial report published by

the selected Money Deposit Bank for the period of five (5) years before adoption of IFRS in
Nigeria in 2012 range from 2007 to 2011 and (5) five years after its adoption range from

2013 to 2017.

1.2 Significance of the Study

These study is so significant and it is anticipated to benefit so many stakeholders and

different group of people, however the outcomes of this study are anticipated to benefit the

followings;

This study will benefit the government in the sense that, it will enable them to identify

how well the Money Deposit Bank in Nigeria are being manage and how credibility their

financial report is to disclose all their operation base on IFRS principles. And it will also help

government to know its significance on the wealth of Money Deposit Bank in Nigeria, which

also affect the Banks profitability, and this will help the government to know how well to

monitor the tax responsibility of such Bank. It will also help government to visualise the

influence of fraud risk management on tax liability of the Money Deposit Bank in Nigeria,

and this study is anticipated to proffer solution to this through proper adoption IFRS.

Another stakeholder that will also benefit from this study is the general public,

because it will enlighten them, on the effect of IFRS adoption on corporate performance of

Money Deposit Bank in Nigeria and its significant effect on their wealth. In this wise, it will

help the public to understand how well the Bank is being operated and manage in order to be

free from fraud risk, so as to secure public deposit in such Bank and to encourage the general

public to deposit more of their money in such Bank without doubt. So this study is intended

to help the general public to have more insight on the effects of adoption of IFRS on Money

Deposit Banks in their locality.

Another set of people that will also benefit from this study is foreign investors,

because it will provide them necessary information on the factors to be consider before
investing in a particular Bank situated in another country. This study will enable them to

identify benefits they will derive from such Bank if they invest their resources, because this

study is tending to give them more insight on what make up the IFRS adoption and its

significant effect on corporate performance of Money Deposit Banks, so having more

knowledge on the significance of IFRS adoption on wealth of Money Deposit Banks will help

foreign investors to make proper investment decision.

Another body that will benefit from this research study is Money Deposit Banks in

Nigeria, because it will give them more insight on how IFRS adoption is critical for the

proper disclosure of their financial transaction and perpetual existence of such Bank.

Understanding the concepts of IFRS adoption by Money Deposit Bank will significantly help

such Bank to make proper decision on appropriate measure to be put in place to ensure

efficient performance and Wealth of such Bank.

Lastly, Researchers will benefit from the outcome of this study as it serves as a

reference material when trying to assess the impact of IFRS adoption on the wealth of Money

Deposit Bank in Nigeria. Also, this study was of great importance and relevance to students

of accounting and other related courses for research purposes and personal development.

1.8 Limitations to the Study

This research work focused on significant of IFRS adoption on the corporate

performance and wealth of Money Deposit Bank in Nigeria, taken Wema Bank Plc, First

Bank Nig. Ltd, Union Bank Plc, and United Bank for Africa Plc, and Guarantee Trust Bank

Plc as a case study.

However, this research study has been limited to the only selected Money Deposit

Bank in Nigeria, with exclusion of public sector or any other listed company that is not
Money Deposit Bank in Nigeria such as manufacturing, construction and other companies

that cannot be trace to Banking sector.

1.1 Operation Definition of terms

Money Deposit Bank: This can be refers to as the financial institution licensed by the

regulatory authority to mobilize deposit from the surplus unit and channel the funds through

loans to the deficit unit and performs other financial services activities.

Shareholders’ Wealth: This is one of the objective of every business establishment, it is the

ability of an organisation to maximise profit which will significantly increase the value of the

shareholders of such company. It is when the company are able to increase the EPS, ROE,

MVPS and DPS.

Corporate Performance: This is a system of assessing how well a corporation is being

operated to achieve its most important parameters and objectives.

Return on Equity: Return on Equity can simply be defined as the net profit after tax which

is tends to be divided by shareholder’s equity, which is given by net worth. It is also noted

that the ratio depicts earnings power on share holders’ book value investment.

Accountability: This is the ability to be able to give account of stewardship of fund or

resources, with which one is entrusted and to ensure that it is used for the right purpose.

Accountability as the obligation to demonstrate that work has been conducted in accordance

with agreed rules and standards and the officer reports fairly and accurately on performance

results vis-à-vis mandated roles and or/plans.

Credibility: For the financial report of Money Deposit Bank to be relevant, it must be able to

be trusted by the users. So credibility is a terms that determine the quality of the financial

report produced, to enable the users of such to make proper economic result as at when due.
So adoption of IFRS ensure credibility of the financial report of Money Deposit Banks.

Reliability: This is another term that is used to measure the dependability of the financial

report produced by Money Deposit Banks. This enable the users of the report to make

informed decision on such report without prejudicing, whereas adoption of IFRS will help to

achieve this easily.

Integrity: This is another term that influence the Bank managers to discharge their duties in

accordance to moral ethic principle, by being honest and transparent in all their financial

transactions they engage in. And this will be quite achieving through the adoption of IFRS.

International Financial Reporting Standard: This is the standard established for all

business establishment all over the world, so as to ensure the Harmonization, Credibility,

Accuracy and Accountability of all entity, so as to ensure proper financial management.

Ethical Code/Standard: This is connected with morally correct or acceptable beliefs and

principles about what is right and wrong. The outlined behaviour expected of an

establishment, whether private or public sector.

Stakeholder: A person or organization with a legitimate interest in a given situation, action

of an establishment, whether private or public sector.

Transparency: Is a term that ensure the openness of financial report and it ensure that, there

is nothing hiding in the report and the report show true and fair view to enable the users make

informed economic decision as at when due. And this will be quite achieving through the

adoption of IFRS.

CHAPTER TWO
 LITERATURE REVIEW

2.0 Introduction

In this chapter we are going to examine various literature on the concept of

International Financial Reporting Standard and wealth of listed Money Deposit Bank in

Nigeria. However various published literature will be review to achieve the purpose of this

study. Whereas we are going to examine “Conceptual Clarification” which will be denoted by

2.1, and under this half we are going to examine various concepts of International Financial

Reporting Standard and wealth of listed Money Deposit Bank in Nigeria. And also in this

chapter we will consider “2.2 Empirical Review” while we are going to examine various

literature and journals related to the purpose of this study, in order to achieve the purpose of

this study. And also we will consider “2.3 Theoretical Framework” where we are going to

examine various related theories to achieve the purpose of this study. And in conclusion we

are going to consider “2.4 Conceptual Framework” where all variables to be used in this

research study will be well analyse and properly explained.

2.1 Conceptual Review

2.1.1 Accounting Standards

Accounting standard to Ogunmakin (2021) alludes to appropriate courses through

which information is obtained to assist financial, political and social practices. Accounting

principles improves the applicability and credibility of articulation of records of corporations,

in the sense that it remains as rules that characterize how organizations ought to show

exchanges and occasions in their financial reports. Despite the very fact that, researchers and

specialists distinguished principle consistence as a vital part of a viable company financial

reports, many researchers have argued that the degree that principles are forced and moreover
the speed resistance arraigned are just about as elementary as the actual standard. In this wise,

the significant benefit of accounting principles, its implementation and adherence to its

standards by players in the business, can to a large extent justify the worth of financial

information available to the final users.

Insufficiency of agreeable authorization, thus, lessens the most effective accountancy

norms, if imperative moves aren't created after the foundations are broken, the rule would

continue being simply a solicitation in paper. Accounting guidelines and principles is quite

huge, as in it assists with increasing consistency, equivalence, guideline, straightforwardness

and responsibility, that also improves how client’s decide quality in an economy. There are

difficulties in financial disclosure of the continual choice of the IFRS internationally. Various

countries make disclosure of financial information in accordance with the IFRS for several

years, and were more expected to return on stream from 2012. An essential most up-to-date

amendment is what proportion the IFRS is wedged by governmental problems mirrored by

the Greek obligation, banking space problems and more endeavours of lawmakers to work

out these inquiries has complete into tension on standard-setters to change these principles.

Ogunmakin (2021)

2.1.2International Financial Reporting Standard (IFRS)

International Financial Reporting Standards (IFRS) are body of prescriptive rules and

guidelines with Universal reach and attractiveness that offer direction and steerage on how

business enterprises in a globalised world may deliver the goal of correct record keeping,

transparency, uniformity, alikeness and enhancing public confidence in financial reports.

They're set of international accounting standards stating how explicit kinds of transactions

and different events ought to be disclose in financial statements. Ademola and Ajao (2019)
 IFRS are issued by the International Accounting Standard Board, and which they

specify significantly how accountants should maintain and report their accounts. IFRS were

established so as to have common language, so that business and account are often

understood from company to company and country to country. Thus, failure on the part of the

firm to make use of the requirement of IFRS would lead to inconsistencies, lack of

responsibility and transparency, distortion in financial reports, that successively results into

poor financial reports practices and dissemination of accounting information that's of less

value to any explicit group of users. this can be as a result of the preparation and presentation

of financial statements are going to lack objectiveness, reliability, credibility and

comparability, and so leads to fraudulent business practices which thereby result in business

failure and become devastating on the economy (Atu et al., 2014).

IFRS are accounting rules (“standards”) issued by the International Accounting

Standard Board (IASB), an independent organization primarily based in London, UK. Before

the origin of IASB, international standards delineated as International Accounting Standards

(IAS) were issued by the IASB’s predecessor organization, the IASC, a body established in

1973 through an agreement made by professional accountancy bodies from Australia,

Canada, France, Germany, Japan, Mexico, the Netherland, UK and Ireland, and also the

USA. In 1997 when nearly twenty-five years of accomplishment, IASC recognized that to

still perform its role effectively, it should find how to evoke convergence between national

accounting standards and practices and high-quality Global accounting standards. The new

Standards setting body was renamed as International Accounting Standards Board (IASB)

and since April 2001, it's been playacting the rule-making function. Parts of IASB structure

contain- IASB, IASC Foundation, International Financial Reporting Interpretations

Committee (IFRIC), formally Standing Interpretations Committee, SIC under IASC),

Standards Advisory Council (SAC) and Working Group. The IASB is well funded, better-

staffed and a lot of independent than its precursor.

The Nigeria’s Federal Executive Council (FEC) gave approval for the convergence of

Nigerian SAS with the IFRS from Jan 1st, 2012. The adoption was organized such that all

stakeholders use IFRS by Jan 2014. As to the IFRS adoption Roadmap Committee (2010),

Public Listed Entities and major Public Interest Entities are expected to adopt the IFRS by

Jan 2012. All different Public Interest Entities are expected to compulsorily adopt the IFRS

for statutory functions by Jan 2013, and little and Medium-sized Entities (SMEs) shall

compulsorily adopt IFRS by Jan 2014. Nigerian listed entities were needed to organize their

closing balances as at December 31, 2010 to IFRS. The closing figures of December 31, 2010

can become the gap balances as at Jan 1st, 2011 for IFRS primarily based financial

statements as at December 31, 2011. The gap balances for Jan one, 2012 are going to be the

primary IFRS full financial statements ready in accordance with the supply of IFRS as at

December 31, 2012. Ademola and Ajao (2019)

2.1.3 Nigeria and IFRS Adoption

Before 2012, the Statements of Accounting Standards was utilized in all accounting

practices in Nigeria. These native accounting standards are issued in Nigeria by the Nigerian

Accounting Standard Board (NASB) until 2011 in accordance with Section 335(1) of the

Company and Allied Matters Act of 1990. In the wake of economic crises in late 1990s, the

international community stressed the main role which the observance of international

standards and codes of best practices so as to strengthen international financial systems.

Though the Nigerian Statements of Accounting Standards (SAS) are almost like IFRS in

bound respects, several variations exist. SAS publicized by Nigeria Accounting Standard

Board (NASB) were for the most part supported past IAS publicized by IASC. Because of the
increasing quality of financial report’s needs, a number of the initial IASs were reviewed

leading to their modification or withdrawal. The SASs weren't reviewed or updated with the

IASs/IFRSs. the numerous disparities between the Nigerian SASs associated IFRSs have

resulted in the SAS being considered noncurrent and incomplete as an authoritative and

internationally accepted guide to the preparation of financial statements. This has

considerably diminished the degree of confidence on Nigerian Standards particularly by

international users of financial statements prepared in Nigeria. In supporting the premise of

NASB to promote general acceptable published financial reports and top quality accounting

standards that are in line with international practices, inaugurated a Stakeholders’ Committee

on the Roadmap to the Adoption of IFRS in Nigeria on October 22nd, 2009. In July 2010, the

Nigerian Federal Executive Council approved the Roadmap to the Adoption of IFRS in

Nigeria (NASB 2010)., it had been shown in the report that, that it'll be in the interest of the

Nigerian economy for reporting entities in Nigeria to adopt globally accepted, top quality

accounting standards by totally connexion Nigerian national accounting standards with

International Financial Reporting Standards (IFRS) by following a Phased Transition

effective Jan 1st, 2012.

The Nigerian banking sector is created from commercial banks and other financial

establishments like finance firms, micro-finance firms, discount houses and mortgage

institutions. The Central Bank of Nigeria (CBN) regulates their activities. The CBN has

licensed solely twenty-one commercial banks to interact business in Nigeria. Out of which

fourteen are listed banks. Nigerian listed banks and other public and vital public interest

entities were needed to adopt IFRS for years starting on or after Jan 1st, 2012. Among the

listed firms, the listed banks were the first to finish the transition and have adopted the

standard for reporting. Several alternative variations exist between NGAAP and IFRS

excluding Fair value orientation and non-controlling interest. Those embrace variations
associated with revenues, property, plant and Equipment, intangibles, financial instruments,

hedges, asset retirement obligations, worker future benefit, share-based compensation, leases,

income tax, foreign currency translation, and strategic investments (CICA, 2019).

This study is predicated on a positive/inductive approach: variations in the application

of standards are inferred through the examination of variations that transpire in actual

financial statements of reporting Nigerian Banks. Variations in the application are doable

because of the principle-based approach underlying each IFRS and NGAAP, as professional

judgment plays a serious role in the process of deciphering and applying principles. As an

example, the theoretical rational for impairment write-off (i.e. conservatism) is analogous in

IFRS and NGAAP, but the factors used for distinguishing things that need such a write-off

dissent. Since the quantity of impairment losses is also material in practice, the recongnition

versus non-recognition of impairment losses has the potential to considerably have an effect

on profit/loss disclosed in the income statement. This can be the empirical proof in the

application of standards and is critical to assess the important impact of variations between

IFRS and NGAAP. This is still true not just for variations consider to be elementary (such as

those associated with fair value accounting and non-controlling interest), however conjointly

for those considered as accessory or minor from a theoretical purpose of view. Ademola and

Ajao (2019)

2.1.4 Benefits of Adopting IFRS

The adoption of IFRS has many benefit. Ekwe et al (2020) highlight number of these

benefit as follows;
1. Promotion of the compilation of meaningful and significant data on the performance of

varied reporting entities at each public and private levels in Nigeria thereby encouraging

comparability, transparency, potency and reliability of financial reports in Nigeria.

2. Assurance of adequate and meaningful decision on investment portfolio in Nigeria.

Investors will simply compare financial results of corporation and make appropriate

investment decision.

3. Attraction of Foreign Direct Investment – countries attract investment through high level

of transparency and a lower cost of capital for potential investors.

4. Assurance of easier access to external capital for local firms.

5. Reduction of the high cost of doing business across borders by eliminating the requirement

for supplementary information from Nigeria firms.

6. Facilitation or easy consolidation of financial information of a similar company which

have different offices in many countries.

7. Easier regulation of financial information of entities in Nigeria.

8. Increased in knowledge of Global financial reporting standards by tertiary institutions in

Nigeria.

9. Higher quality of financial information for shareholders and supervisory authorities.

10. Government to be able to access properly the liabilities of multinational firms.

In addition, Ahmed (2019) stated that, adopting IFRS reduces information spatiality

which might lower cost of equity and debt finance, it smoothens the communications between
operators, shareholders, lenders and other interested parties leading to lower cost. IFRS

adoption, would offers comparability, lower transaction cost and larger international

investment and reduces accounting manipulations and completely impacts firms‟ stock return

and stock related financial performance measures.

2.1.1.4 Pre and Post IFRS Adoption in Nigeria

Prior to the implementation of IFRS in 2012, Nigeria makes use of the Nigerian

General Accepted Accounting Principle (NG-GAAP) in the preparation of their financial

statement. The Nigerian Accounting Standard Board (NASB) is seen as a body sovereign

charged with the duty to develop and issue Statement of Accounting Standards (SAS) for

financial statements preparers and users. The Federal government of Nigeria in 2010

designed the roadmap to be followed for a successful IFRS adoption in the country which

incorporates three (3) phases. Financial statement prepared in compliance to IFRS contains

the followings: Statement of financial Position, Statement of Comprehensive income,

Statement of Changes in Equity, Statement of cash Flows and Accounting Policies. The basic

theories supporting NG-GAAP and IFRS don't seem to be on the entire parallel. The origin of

IFRS has caused an excellent deal of responsibility on the part of IASB in setting

International Accounting Standards (IAS) that may match totally different business entities

across the world. Local professional accountants and auditors ought to follow the content of

the frameworks which structure the financial statement to enable them to provide clarification

to varied stakeholders once the necessity arises (Ekwe et al, 2020).

2.1.2 Adoption of IFRS and Quoted Banks in Nigeria

 In recent times, increase in globalisation and competition across borders has created it

important for countries and firms to return along and become additional competitive across

the world. Therefore, IFRS is committed to harmonizing the distinction accounting practises

across the globe by providing information that are comparable, reliable, relevant, consistent,

and reduce cost of capital of transacting businesses across borders (Essien-Akpa, 2017).

However, the successful implementation of IFRS depends on the flexibility of the general

public to translate native and international financial information into IFRS financial language.

Some studies like (Ogunmakin et al, 2021; Ademola and Ajao, 2019; Ekwe et al, 2020)

argued that the adoptions of IFRS would motivate additional comparable, reliable, relevant,

and consistent financial reporting information across the globe. Due to the planned

advantages of IFRS, it's predictable that the implementation of IFRS can give prime quality

of financial reports that are comparable, reliable and comprehendible for the reporting entities

in the financial sector (Adah, 2017).

Furthermore, the adoption of IFRS will improve the reliability and comparability of

financial reports disclose in the Nigerian banking sector. However, it's usually believed that

users of financial reports appreciate the importance of providing high quality of accounting

standards that are consistent and comparable in reflecting the financial reality of transactions.

Matthew (2018) urged that the Nigerian government should support the adoption of IFRS

notably in the space of implementation and compliance as a matter of urgency to modify full

realization of the country’s economic potential. Similarly, Nyor, (2020) argued that Nigerian

corporations ought to adopt the IFRS as a results of the actual fact that it'll pave the approach

for higher accountability, transparency and enhance the standard of reporting in Nigeria.

Hossain et al. (2015) investigated the adoption of IFRS in an emerging economy like

Republic of Bangladesh. The study found that the adoption of IFRS is probably going to

profit the People's Republic of Bangladesh economy through increased financial reporting
quality, improve access to international financial markets, attract foreign direct investment,

scale back cost of capital, and conjointly intensify the capability of organisations to secure

cross border listing. Sanyaolu, et al (2017)

2.1.2.1 Needs for Adoption of the IFRS in Banks

Ogunmakin (2021), posited that disappointments in the financial space have called the

executive and administrative bodies altogether to assess the insurance and dependability of

the banks by assessing the degree of consistence to the 159 adoption of International

Financial Reporting Standards (IFRS) International Accounting Standards Board. In addition,

lawful amendment methods centred towards sanctioning the board to cut all the additional

quickly with problems with hassle in the financial business. The provision of the consistence

of Standards to Banks and financial institutions is engaged towards advancing consistency in

financial reports of banks.

2.1.2.2 Challenges of IFRS Adoption by Banks in Nigeria

Number of reasons were provided for the low level of adoption of IFRSs for banks.

However, variety of explanations were brought forth including disposition to figure and settle

for more of principles-based set of accounting standards compared to the rules-based IFRS

(Ekwe et al (2020)).

1. Level of Awareness

The transition decision to IFRS and its implications for preparers and users of

financial statements, regulators, educators and other stakeholders got to be effectively

coordinated and communicated. This could embody raising awareness on the potential impact

of the conversion, characteristic restrictive synergies to be derived and communication of the

temporal impact of the transition on business performance and financial position. The

implementation of IFRS needs proper preparation both at the country and entity levels to

confirm coherence and supply clarity on the authority that IFRS can have in regard to other

existing national laws (Committee on Roadmap, 2010).

2. Accounting Education and Training

Practical implementation of IFRS needs adequate technical capability among

preparers and users of financial statements, auditors and regulatory authorities. Countries that

enforced IFRS moon-faced a spread of capacity-related problems, based on the approach they

took. One among the principal challenges Nigeria could encounter in the sensible

implementation method, shall be the shortage of accountants and auditors who are technically

competent in implementing IFRS. Usually, the time lag between decision date and the actual

implementation date isn't sufficiently long to train an adequate number of professionals who

could adequately apply international standards with competency (Adekoya, 2017).

3. Training Resources

Professional accountants are looked upon to confirm successful implementation of

IFRS. Together with these accountants, governance, financial analysts, auditors, tax

practitioners, regulators, accounting lecturers, stock-brokers, preparers of financial statements

and information officers are all chargeable for swish adoption process. Training materials on

IFRS don't seem to be pronto obtainable at reasonable cost in Nigeria to train such a large

group, that poses an excellent challenge to IFRS adoption (Adekoya, 2017).

4. Tax reporting
 The tax issues related to the conversion to IFRS, like alternative aspects of a

conversion, are complicated. IFRS conversion demand a close review of tax laws and tax

administration. Specific taxation rules would have got to be redefined to accommodate these

changes. for example, tax laws that limit relief of tax losses to four years ought to be

reviewed. This can be as a result of transition changes which could end in vast losses which

will not be recoverable in four years. Accounting problems which will show vital tax burden

on adoption of IFRS, embody determination of Impairment, Loan loss provisioning and

Investment in Securities/Financial Instruments (Adekoya, 2017).

5. Amendment to Existing

Laws in Nigeria, accounting practices are ruled by the Company and Allied Matters

Act (CAMA) 1990, and the Statement of Accounting Standards (SAS) issued by the Nigerian

Accounting Standards Board (NASB) and other existing laws like Nigerian securities market

Act 1961, Nigerian Deposit Insurance Act 2006, Banks and other establishment Act 1991,

Investment and Securities Act 2007, Company Income Tax Act 2004, Federal Inland

Revenue Services Act 2007. All these give some pointers on preparation of financial

statements in Nigeria. IFRS doesn't acknowledge the presence of those laws and therefore the

accountants got to follow the IFRS absolutely with no dominant provisions from these laws.

Nigerian law makers got to build necessary, amendments to confirm a swish transition to

IFRS (Adekoya, 2017).

2.1.3 Financial Reporting

Financial reporting may be a formal record of the financial activities and position of a

business or entity. Relevant financial information is given in an exceedingly structured

manner and in a way that is straightforward to grasp and it generally includes basic financial
statements, in the midst of a management decision and analysis (KPMG, 2013). The

statement contents of a group of financial statements are;

i. Balance Sheet: Shows the entity’s assets, liabilities and shareholders’ equity as of the

reporting date.

ii. Statement of Comprehensive Income: Shows the results of entity’s operations and

financial activities for the reporting period.

iii. Statement of cash Flows: shows changes in the entity’s cash flows throughout the

reporting period.

iv. Statement of changes in Equity or Equity statement: this reports on the changes in

equity of the corporate for a particular period.

It is worthy of note that financial reporting pundits are unanimous in their agreement

that financial reporting practice of a country depends on many factors that embrace the legal,

economic, cultural and historical background of a country. It may then be argued that

financial reporting isn't an end in its self; rather, it's supposed to produce information that's

employed in making reasoned decisions among alternative uses of scarce resources in the

conduct of business and economic activities. Therefore, this acknowledges the actual fact that

financial reports exist to satisfy the various information needs of various users like the

investors, management, employees, government, researchers, and so on.

2.1.3.1 IFRS and Financial Reporting Quality

The adoption of IFRS round the globe is persistently and rapidly result to

improvement of reporting quality through uniform set standards for financial quality.

Therefore, accounting reporting quality may be a function of the firm’s overall institutional

setting, as well as the legal and social group of the state during which the firm resides
(Adeyemi, 2018) Iyoha (2017) document that accounting reporting quality has magnified

worldwide since the start of the 1990s, and counsel that this might result to factors like

economic process and anticipation of international accounting harmonization. IFRS is

dependent on at least 2 factors; improvement of efficiency relies upon the premise that

amendment to IFRS constitutes changes to an assemblage that induces higher financial

reporting quality. For instance, Ademola and Ajao (2019) realize that firms that adopting

IFRS have less earnings management, more timely loss recognition, and more value

connexion for earnings, all of which they interpret as proof of higher accounting reporting

quality. Second, the system of accounting may be a complementary part of the country’s

overall institutional system and it is likewise determined by firm’s incentives for financial

reporting.

2.1.4 Adoption of IFRS and the Earnings of Nigerian Banks for wealth maximization

The Nigerian banking sector performs other vital roles besides providing credit

facilitates and granting loans to her customers. The Nigerian banking sector is a vital sector

of the Nigerian Economy, that carries out its functions effectively and with efficiency in

achieving the economic development of the nation (Sanusi, 2017). However, the industry can

function properly with success once there's a healthy financial structure put in place to ensure

the reliability, comparability and accuracy of financial information offered to all or any

financial report preparers and other stakeholders. The Nigerian Banking sector has step by

step developed over the last number of years, which is as a results of the varied reforms

administrated in the industry in the last number of decades by the regulatory authorities.

Following the 2008 banking sector crisis, the Central Bank of Nigeria planned many

programmes geared toward reforming the Nigeria industry and conjointly to boost the

earnings of financial sector normally. These reforms were geared toward eliminating the
inherent weaknesses in the banking setup, poor internal control system, and improving the

earnings of financial sector in the Nigerian economy (Sanusi, 2017).

Yahaya et al. 2015 investigated the post adoption of IFRS and value connexion of

accounting information of quoted banks in Nigeria. Using the price model and the return

model, the study found that the EPS magnified in the post adoption than in the pre adoption

periods. The study suggested that investors ought to perceive the IFRS adoption process in

order to avoid overvaluation of the economy once the financial markets is better off. Iorpev

(2019) investigated the qualities of IFRS adopters and non-adopters on the Nigerian securities

market from 2008 to 2011. Using exploratory research design of a sample of 10 banks out of

fifteen quoted banks in Nigeria, the study found that EPS aren't considerably connected with

the adoption of IFRS. The study urged that only specific corporations listed on the NSE ought

to adopt IFRS.

2.1.4.1 Profitability as an earning Objective of Banks for wealth maximization

Profitability is the ability of a company to get benefit from all its activities. It

measures management competency in making use of the structural means which helps in

adding value to the business. Profitability is also viewed as a relative term measurable in

terms of profit and its relation with alternative basics which will directly have an effect on the

profit. In line with Ekwe et al (2020), profitability is the variance between the cost of

providing goods or services and the revenue derived from the sale. A firm’s profitability is

seen as vital as traditionalist economists among others believe that profit maximization is the

sole objective of a company. Besides a company earning profit to survive and grow, sustain

its operations and contribute towards social overheads for the welfare of its society, other

stakeholders just like the creditors and shareholders among others are inquisitive about an

organization’s profitability.
 Profitability in regard to a bank is extremely vital as banks play the role of negotiator

between the excess and the deficit sides of a society, banks got to build a profit in alternative

to realize the confidence of depositors (whose cash they lend out) thus on recognize if their

deposits are safe and owed. Shareholders can wish to understand if there's reasonable return

on their investment, creditors would wish to establish the earned interest on reimbursement

of their principal amount, government would really like to understand banks performance so

as to collect enough tax for provision of social amenities, society would have an interest in

banks performance so that the bank are able to fulfil their social responsibilities, staff so as to

rest assured of their remunerations etc. profitability, in line with Sanni (2018) may be a

condition where the financial gain generated over a given time surpasses the expenditures

incurred within the same length of time for the solitary purpose of generating income.

Though multifariously, authors have given a special definition, essentially it's regarding

sustaining the power to own excess income over expenses. Profitability is thus vital because

it is the main (purpose) of business. Ekwe et al (2020)

2.1.4.2 Fair Values and the International Financial Reporting Standard (IFRS).

Recently, there's a worldwide trend towards adopting International Financial

Reporting Standards (IFRS) in the banking system using FVA (IFRS 13), this has been

supported by international organisations like World Bank, International Monetary Fund and

Financial Stability Board (Jayasekara, Perera & Ajward, 2018). This can enhance single high-

quality world accounting standards (World Bank 2017; FSB 2015). Fair value concept in the

banking system emerged as a results of introducing accounting standards for financial

instruments activity (IFRS 9 and IFRS 7) in 2010 to interchange IAS thirty-nine (Jayasekara

at al 2018). Nigeria being one among the 126 countries out of profiled a hundred and fifty

countries that have adopted IFRS (IFRS foundation, 2017) incorporated fair value in the
financial statements of banking system since 2012 that replaces the native Generally

Accepted Accounting Standards (GAAP) to boost comparison and modify them to raise fund

(debt and equity) within and outside them. Adoption of IFRS 13 brings quality to financial

statement of banking sector in terms of globalisation and are challenged with inactive market,

skill shortage, government control and weak regulatory environments among others.

2.2 Theoretical Review

2.2.1 Signaling Theory

Signaling theory is useful in describing behaviour when two (2) parties have access to

completely different information. Therein setting, the ender (communicator) chooses a way to

communicate or signal the information to the opposite party (the receiver), who chooses a

way to interpret the signal. Due to the role of information in structural growth and

competiveness, signaling theory is distinguished in management literature and has been

gaining momentum in recent years (Connelly, Cerrto, eire &Reutzel, 2019). Under signaling

theory, managers use the accounts to signal their expectations to investors who use

accounting information for decision. Managers who expect a high level of future growth

would signal that via published financial statements. Even managers of corporations with

poor financials would signal positive reporting to retain high rating among investors

(Godfrey, Hodgson, Tarca, Hamilton & Holmes, 2017). The adoption of IFRS provides

chance for corporations in developing countries to present financial statements by making use

of high quality accounting standards. In line with Signaling theory, some IFRS adopters

might send the right signals, whereas others might convey deceptive signals. Daske et al

(2019) found that some corporations adopt IFRS more in name only, whereas other adopters’

are omitted to ensure improvement of transparency in financial reporting. The authors

additionally found that the economic consequences of IFRS adoption disagree between the

‘label’ and ‘serious’ adopters.

2.2..2 Agency Theory

Agency theory was propounded by Jensen and Meckling in 1976. They explained that

agency relationship arises when the business owner(s) use another person and saddled such

with the responsibility of managing their business or performing a service on their behalf.

This entails delegation of some decision-making authority to the agent, it always results into

division of labour and could be advantageous in the advancement of resourceful and

productive economy (Hoitash, Hoitash & Bedard, 2018). The agents in according to Pauloni

(2017) are a unit expected to act in the best interests of the principals. In this study,

management is the agent with the responsibility of delivering high quality earnings that may

absolutely Olaoye, F.O. & Ibukun-Falayi, predict future earnings of Deposit Money Banks in

Nigeria to the principals (stakeholders), which can embrace the shareholders, creditors,

potential investors and others. In additiion, agency relationship exist so as to utilize the

special skills and personal information possessed by the agent and to relax constraints on the

principal’s time but because of rationality in human reasoning, agents tend to pursue a

personal goal which contradict the goal of the principal or that of the business as a whole. In

such scenario, there's need for proper examination and correct monitoring of the agents by the

principal by requiring the attention of expert in harmonizing the discrepancies of interests

between the principal and the agents (Herbohn, Ragunathan & Gardsden, 2017). This study is

developed on Agency theory and its hypotheses derive from it. The agency framework needs

that the standard of economic reports ought to mirror in the ability of earnings to guide the

principal in the use of his resources and in ascertaining to what extent, the management is

maximising shareholders’ wealth.

2.2.3 Value Maximization Theory

This study is hinged on the value maximization theory which opines that exist

essentially for two 2 main reasons. That is, to maximise profit in the short run or maximize

shareholder’s wealth in the long run, this suggests that management or drivers of

organizations business should make proper decision which will enhance shareholders’ wealth

in the long run. It's imperative to notice that wealth maximization during this context doesn't

imply increasing shareholders’ wealth alone; but extends to increasing the interest of other

financial claimants particularly the debt and warrant holders. The theory explains that all the

activities of the organization are profit or wealth driven even after they appear benevolent, as

corporate social responsibility or given to charity. It is further explains that the long run

wealth maximization objectives reach the maximization of different financial claimants like

debt and warrant holders. Following from this, it may be argued that Deposit Money Banks

disclosure of IFRS compliant financial statements can lead to maximising firm’s worth. This

assertion provides answers to our main analysis question and objective. This can be any

substantiated by the result derived from the computation of certain ratios (Profit after Tax &

Total Equity) for three selected banks between 2011 and 2013. It absolutely was discovered

that Zenith Banks PAT and ROE grew from N41.3 billion in 2011 to N83.4billion in 2013

and N372billion in 2011 to N472bilion 2013 respectively; Access Bank PAT rise from N5.2

billion in 2011 to N26.2 billion in 2013 and ROE grew from N187billion in 2011 to N245

billion in 2013. Within the same vein GTB Plc PAT and equity grew from N51.7 billion to

N85.5 billion and N234 billion to N329.6 billion in 2011 and 2013 respectively. It’s

necessary to note at this juncture that the value relevance is one amongst the measures

utilized in determining accounting quality of a firm.

2.3 Empirical Review

 According to Dzugwahi and Kighir (2018), in IFRS Adoption and Shareholders'

Wealth of Deposit Money Banks in Nigeria. In 2012, the Nigerian government adopted IFRS

due to inadequacies of the Nigeria GAAP and the needs to embrace international best

practices. This study examines the effects of IFRS Adoption on Shareholders' Wealth in

Deposit cash Banks in Nigeria. The study employs longitudinal research design and data were

collected from published financial statements of Deposit Money Banks (DMBs) listed on the

Nigerian Stock Exchange (NSE) for the period of 2008 to 2015. Multivariate Analysis of

Variance (MANOVA), Multivariate Analysis of Covariance (MANCOVA) and multiple

regression analysis models was used for the data analysis. The Dividend per Share (DPS),

market price per Share (MVPS), Earnings per Share (EPS) and Return on Equity (ROE)

serves proxies for shareholders' wealth whereas IFRS pre and post-treatments serve as a

categorical variable and inflation as a continuous control variable. The result of the study

shows that IFRS adoption compact considerably on DMBs investors wealth of DPS, on ROE

solely when it has been controlled for inflation. There is, however, no proof on market value

per Share (MVPS) and Earnings per Share within the same period under review even when

control for inflation. The study concludes that IFRS adoption has significant impact on

DMBs shareholders’ wealth in Nigeria.

In International Financial Reporting Standards (IFRS) Adoption and Performance of

Money Deposit Banks in Nigeria by Ademola & Ajao (2019). The focus of the study is to

look at the result of International Financial Reporting Standards (IFRS) adoption on the

performance of First bank plc, Guarantee trust bank and Zenith bank plc using some financial

ratios chosed from 3 major classes of financial ratios. The population comprise of twenty-

three industrial banks listed on the Nigerian Stock Exchange (NSE) as at 31 st Dec, 2018.

Three banks were selected supported accessibility of information needed for the

investigation. This study was conducted through the comparison of ratios that were computed
from IFRS based financial statements and Nigerian GAAP based financial statements. The

statistical tool used was regression analysis with the help of statistical package for social

sciences (SPSS) 20.0 version. The findings show that there's vital relation between IFRS

adoption and financial performance with reported coefficient estimates and probability values

of 0.000487(P=0.4922), -0.005935(P=0.4805), 0.009999(P=0.0696) liquidity ratio, capital

ratio and IFRS respectively. Therefore, the study counselled that there ought to be rather

more enlightenment on the potential effects of IFRS implementation by the regulatory

authorities, professional bodies and government before the impact in Nigeria gets worsened

and out of hand. In addition, firms ought to endeavour to use the chance conferred by the

adoption of IFRS to boost their business processes all ramifications in order to aid uniformity

and transparency.

In the impact of International Financial Reporting Standard Adoption on financial

Performance of Listed Money Deposit Banks in Nigeria by Emeka et al (2017). The

motivation of the study springs from previous studies that relate to the investigation of IFRS

impact on the financial performance of money deposit banks listed on NSE. It examines the

impact of the adoption of the International financial reporting Standards on the financial

performance of money deposit Banks. A Wilcoxon model is explored using pooled data that

fitted with the variables. The results show that IFRS adoption has absolutely wedged some

variables in the finances of money deposit banks, for instance, profitability and growth

potential. The evidence in support of modernization theory, government ought to encourage

and support money deposit banks in the adoption and application of IFRS so as to enhance

their performance. Future analysis study might also determine the precise provisions of IFRS

that are accountable for the positive impact on financial performance measures. Such detailed

information is helpful to standard setters who might need to enhance existing accounting
standards. Further research study ought to extend the sample size and the time horizon of the

study so as to feature to the findings reported here.

According to Hameedi et al (2021), on Financial Performance Reporting, IFRS

Implementation, and Accounting Information: Evidence from Iraqi Banking Sector. The

study explores the result of IFRS on the financial performance of Iraqi commercial banks. It

conjointly investigates the worth significance of financial performance statements using the

Ohlson model, which has been used for the stock value relevancy test in variety of studies.

The study employed a sample of sixty-six listed banks on the Iraq stock market over 3 years

of IFRS pre adoption (2011–2013) and 3 years of IFRS post-adoption (2016–2018), they

discover financial performance components EPS and BVS value relevant to the stock returns.

The findings conjointly indicate that the implementation of IFRS show a major positive result

on the value relevancy of the BVS, whereas the adoption of IFRS doesn't have a major

impact on the value relevancy of the EPS reported by Iraqi banks. Their results indicate that

the value of the bank rises dramatically with increased financial performance reporting.

Additionally, the implementation of IFRS shows a major result on the financial performance

measures and the value relevancy of financial reporting in the Iraqi banking sector. This

paper adds to previous value relevancy literature and IFRS by throwing light-weight on the

banking sector in a developing country that has recently move from applying native

accounting standards to IFRS.

Ayodeji, Nyikaa and Nyikaa (2019) inspected the impact of the reception of

International Financial Reporting Standards on the Performance of banks in Nigeria and

Canada. The examination expressly explored the impact of IFRS on return on resource, return

on value and income per portion of banks in Nigeria and Canada. The study collect data for

the period 2013 to 2017 for five banks each in Nigeria and Canada. The investigation at that
time skint down information with illustrative measurements and relapse study. The

examination uncovered that the impact of IFRS on return on resource was negative and

significant in Nigeria but certain and large in Canada. The investigation also showed that the

impact of the IFRS on value was negative but unimportant in the 2 nations. The examination

also shows that the impact of IFRS reception on procuring per share was negative and

inconsequential for the Nigerian banks but sure and significant in the Canadian banks. Thus,

the investigation presumed that the impact of the IFRS wasn't exceptional in Nigerian banks

but exceptional on account of Canadian banks.

2.4 Conceptual Framework

This section provides a conceptual frame work for this study based on literature

review. It explains the key variables and relationships among theories and models. The

conceptualization helps to answer the study’s research questions. Hence; the following

conceptual framework will be developed to serve as a road map to analyze the entire study. In

these model variables such as International Financial Reporting Standard (IFRS), will be

represent as the Independent variable for this study. Whereas dependent variables will be

Returns on Equity, Market Value per Share and Earning per share wealth of listed Money

Deposit Bank in Nigeria (Wealth). And this will be representing by Figure 1 below;
 Source: construction Own (2022)

Figure 1 conceptual framework of the study

CHAPTER THREE

METHODOLOGY

3.1 Area of Study

In this chapter focus will be on the type of research design and methodology to be

used to fulfil the aims and objectives of this research study. Section 3.1 discusses the research

design and this will justify the chosen design, section 3.3 to 3.7 describe the target

population, sampling and sampling technique and the sample size, data collection methods,

data analysis and presentation. This chapter will further explain technical procedures in a

manner appropriate for the audience, it achieve this by addressing the research and sample

design used for the study, the data collection and field work conducted for the study and the
analysis done to the collected data.

3.2 Research Design

This study is set out to examine the effect of IFRS adoption and it’s significant on

Wealth of listed Money Deposit Banks in Nigeria, with the extent to which IFRS affect

Return on Equity of listed MDBs in Nigeria and the link between IFRS adoption and Market

Value per Share and Earning per share of listed Money Deposit Banks in Nigeria.

Research design can be seen as the plan and structure of investigation so conceived as to

obtain answers to research questions. It includes an outline of what the investigation will do

from this study, while non-experimental design was used by secondary data sourcing through

the use of financial statements of listed Money Deposit Banks in Nigeria, while Wema Bank

Plc, First Bank Nig. Ltd, Union Bank Plc, United Bank for Africa Plc and Guarantee Trust

Bank Plc will be used as a case study for the period of five (5) years, range from 2007 to

2011 before adoption of IFRS and five (5) years after adoption of IFRS range from 2013 to

2017.

In order to assess the impact of IFRS, this study adopts causation and effect approach using

regression analysis. The study adopts (wealth of Money Deposit Banks in Nigeria), Returns

on Equity, Market Value per Share and Earning per Share of listed Money Deposit Banks in

Nigeria as the dependent variable and IFRS adoption as independent variable, and it will be

used in the ordinary least squares (OLS) regression model. The method has a lot of attractive

qualities or properties. It is noted that, it is best, linear, unbiased and efficient (BLUE). This

means that the method has minimum variances among all class of linear estimators and it is

unbiased in the sense that its estimates of coefficients are true parameters of the population

parameters.

3.3 Population, Sample Size and Sampling Techniques

The target population in this study involves all listed Money Deposit Banks in Nigeria
and their published financial statements, population of 33 listed Money Deposit Banks in

Nigeria as at 2020 report from Central Bank Nigeria will be consider.

The sample size selected was the financial statement of the selected listed Money

Deposit Banks in Nigeria, while Wema Bank Plc, First Bank Nig. Ltd, Union Bank Plc,

United Bank for Africa Plc and Guarantee Trust Bank Plc will be used as a case study for the

period of five (5) years, range from 2007 to 2011 before adoption of IFRS and five (5) years

after adoption of IFRS range from 2013 to 2017, with the view to assess the impact of IFRS

and its significance on Wealth of listed Money Deposit Banks in Nigeria, with the extent to

which IFRS affect Return on Equity of listed Money Deposit Banks in Nigeria and the link

between IFRS adoption and Market Value per Share and Earning per Share of listed Money

Deposit Banks in Nigeria.

3.4 Sources and Collection of Data

The relevant data collected for this research study was through secondary data from

financial statement of selected listed Money Deposit Banks in Nigeria, while Wema Bank

Plc, First Bank Nig. Ltd, Union Bank Plc, United Bank for Africa Plc and Guarantee Trust

Bank Plc will be used as a case study for the period of five (5) years, range from 2007 to

2011 before adoption of IFRS and five (5) years after adoption of IFRS range from 2013 to

2017, with the view to assess the impact of IFRS adoption and its significance on wealth of

listed Money Deposit Banks in Nigeria, with the extent to which IFRS adoption affect Return

on Equity of listed Money Deposit Banks in Nigeria and the link between IFRS adoption and

Market Value per Share and Earning per Share of listed Money Deposit Banks in Nigeria over

those years.

3.5 Research Instrument

Research instrument used for this research study is existing data of Money Deposit

Banks in Nigeria. And this is secondary data that will be extracted from the financial
statement of Money Deposit Banks in Nigeria, with the view to assess the impact of IFRS

adoption and its significance on wealth of listed Money Deposit Banks in Nigeria, with the

extent to which IFRS adoption affect Return on Equity of listed Money Deposit Banks in

Nigeria and the link between IFRS adoption and Market Value per Share and Earning per

Share of listed Money Deposit Banks in Nigeria over those years.

3.5.1 Validation of Research Instrument

To a large extent, the financial report used for this study met the checklist of

understandable, relevance and answerability, so it is quite reliable for this study In order to

test the validity of the data collected, the published financial report of selected listed Money

Deposit Bank in Nigeria, while Wema Bank Plc, First Bank Nig. Ltd, Union Bank Plc, United

Bank for Africa Plc and Guarantee Trust Bank Plc will be used as a case study for the period

of five (5) years, range from 2007 to 2011 before adoption of IFRS and five (5) years after

adoption of IFRS range from 2013 to 2017.

3.6 Model Specification

The study used simple linear regression by employing ordinary least squares

technique to examine the relationship between the variables for the period under review. The

functional form of a simple linear regression model adopted in this study is given by; Y = f(x)

In accordance with the study objectives, the explicit form of the equation was adopted

ROE = β0 + β1IFRS + e…..…............................................................….................... (1)

MVPS= β0 + β1IFRS + e...………….….....................................................…............ (2)

EPS = β0 + β1IFRS + e……...…............................................................…................. (3)

Where;
ROE = Returns on Equity (Dependent variable)

MVPS = Market Value per Share (Dependent variable)

EPS = Earnings per Share (Dependent variable)

β0 β1 = Coefficients of the estimated variables. (Dependent variable)

IFRS = International Financial Reporting Standard (Independent variable)

e = Error term.

3.7 Measurement of Variables

The variables constructed for this model are dependent, independent variables and error term.

For the purpose of this research work, the independent variable was the IFRS adoption while

the dependent variables were Returns on Equity, Market Value per Share and Earning per

share of listed Money Deposit Bank in Nigeria (Wealth).

CHAPTER FOUR

DAT ANALYSIS AND INTERPRETATION

4.0 Introduction

This chapter presents the analysis and interpretation of data collected for this study.

This study examines the impact of IFRS adoption on the wealth of deposit money banks in

Nigeria. It helps to determine how adopting IFRS contributes to wealth creation by the banks.
The wealth of the banks was measured based on three variables. These are; return on equity

(ROE), the market value per share (MVPS), and earnings per share (EPS). Data for this study

are generated over ten years between 2007 and 2017. 2007 to 2011 represent years before the

adoption of IFRS, while 2013 to 2017 represent years after its adoption. 2012 was omitted

because that is the year the government announced the adoption, and the banks may not fully

comply with the standard due to its new introduction. So a gap of one year was left, which is

assumed to be enough for the banks to comply with the laws fully. More so, five banks are

randomly selected for the study. These banks met the selection criteria: (i) they are quoted on

the Nigerian stock exchange, and (ii) they publish audited financial statements between the

years under review.

The ROE and EPS are calculated based on the data generated from the annual audited

reports of the banks. This is to ensure the validity of the data, which contributes to the

reliability and generalization of results. MVPS was generated from investing.com, an

accredited data bank for financial data analysis. The IFRS was represented by a dichotomous

variable that takes '0' for years before the adoption and '1' for years after the adoption.

Descriptive and inferential statistics were used for the analysis. Descriptive statistics describe

the data, which helps to understand the nature of the data. This guides us in choosing the

appropriate model for the analysis. On the other hand, inferential statistics help to draw

inferences that determine the impact of one variable on the other—this help to achieve the

main objective of this study.

4.1 Descriptive Statistics

In this section, the descriptive statistics of the data were presented to show the

characteristics of the data. The results are presented in table 4.1 below. It shows a mean value

of 0.1448 for ROE with a minimum of 0.004, while the maximum is 0.4302. The standard
deviation is 0.0847, which indicates that the data is widely distributed. It has a positive

skewness, indicating that the data have more values on the upper side of the mean than on the

lower side. The p-value of the Jarque statistics is less than 0.05, indicating that the data is not

normally distributed. For MVPS, the mean value is 10.47 with a minimum of 0.93, while its

maximum is 34.4. The standard deviation is 8.104, and the skewness is 1.03, which shows

that the data have a long tail to the right. The p-value of the Jarque-Bera statistics is less than

0.05, which indicates that the data is not normally distributed. The mean value of EPS is

0.9985 with a minimum of 0.0002, while the maximum is 4.87. The standard deviation is

1.31, and the skewness is 1.37, while the p-value of its Jarque-Bera is also less than 0.05.

Table 4.1: Descriptive Statistics

  ROE MVPS EPS
Mean 0.1448 10.4659 0.9985
Median 0.1396 8.0429 0.3631
Maximum 0.4302 34.3958 4.8733
Minimum 0.0040 0.9300 0.0002
Std. Dev. 0.0847 8.1043 1.3146
Skewness 0.7176 1.0344 1.3745
Kurtosis 3.9788 3.4246 4.0620

Jarque-Bera 6.2872 9.2928 18.0936

Probability 0.0431 0.0096 0.0001

Sum 7.2402 523.29 49.93

Sum Sq. Dev. 0.3517 3218.31 84.68

Observations 50 50 50
Source: Author's Computation, 2022

The chart below shows the average wealth of the banks based on ROE, EPS, and

MVPS on a yearly bases. It shows that the movement of EPS and MVPS significantly varies

over the years, indicating unstable or inconsistent values while the ROE is relatively stable.
The chart also shows a demarcation between the years of non-adoption of IFRS and the years

when it was adopted.

 In the chart presented below, the average value of the banks is shown using the ROE,

EPS, and MVPS. The results imply that the performance of the banks is different from each

other over the period. GTB has the highest ROE and MVPS over time, while the first bank

has the highest EPS.

4.2 Correlation Analysis

This section presents correlations, which help understand the variables' relationship.

Correlation values range from -1 to +1, indicating the relationship's direction and strength. A

positive coefficient indicates that these two variables have a positive relationship, i.e., they

both move in the same direction. In contrast, a negative coefficient indicates that the

relationship between the two variables is inverse, i.e., they both move in the opposite

direction. A zero coefficient indicates that the two variables have no relationship and a value

close to zero indicates a weak relationship. The results are presented in table 4.2 below. It

shows that the correlations between all the variables are positive, indicating that they all have

a positive relationship.

Table 4.2: Correlation Matrix

  ROE MVPS EPS IFRS

ROE 1

0.300
MVPS 1
(0.034)

0.197 0.374
EPS 1
(0.171) (0.008)

0.076 0.022 0.034

IFRS 1
(0.601) (0.880) (0.816)

Source: Author's Computation, 2022

4.4 Regression Analysis

This section presents the regression analysis, which helps to achieve the study's main

objective, which is to examine the impact of IFRS on the wealth of quoted money deposit

banks in Nigeria. The analysis was divided into three because we have three dependent

variables (ROE, MVPS, EPS) representing the banks' wealth or value. The analysis was

conducted using an OLS regression estimate, and the results are presented in the sub-sections

below.

4.4.1 Regression Analysis on ROE

This section presents the regression results using ROE as the dependent variable. The

results, as shown in table 4.4.1 below, indicate a coefficient value of 0.038 for IFRS, which is

positive and significant since its p-value is 0.024, less than 0.05. This indicates that adopting

IFRS has a significant positive impact on ROE. i.e., IFRS contributes significantly to ROE.

The R2 of the model is 0.496, which indicates that adopting IFRS can explain about 49.6% of

the total variance in ROE. The p-value of the F-statistics is less than 0.05, indicating that the

model is significant.

Table 4.4.1 Regression Analysis on ROE

  Coefficient Std. Error t-Statistic Prob.
IFRS 0.038 0.016 2.334 0.024
C 0.126 0.011 11.021 0.000

Weighted Statistics
R-squared 0.496 Mean dependent var 0.183
Adjusted R-squared 0.439 S.D. dependent var 0.121
 S.E. of regression 0.072 Sum squared resid 0.226
F-statistic 8.661 Durbin-Watson stat 1.444
Prob (F-statistic) 0.000      

4.4.2 Regression Analysis on MVPS

This section presents the regression results using MVPS as the dependent variable. The

results are presented in table 4.4.2 below, and it shows a positive coefficient of 0.56 with a

significant value of 0.021, indicating that the IFRS has a significant positive impact on

MVPS. The R2 of the model is 0.775, which indicates that adopting IFRS can predict about

77.5% of the changes in MVPS. More so, the p-value of the F-statistics is less than 0.05,

indicating that the model is significant.

Table 4.4.2 Regression Analysis on MVPS

  Coefficient Std. Error t-Statistic Prob.

IFRS 0.560 0.204 2.744 0.021

C 10.186 0.368 27.682 0.000

Weighted Statistics
R-squared 0.775 Mean dependent var 13.91

Adjusted R-squared 0.749 S.D. dependent var 7.10

S.E. of regression 5.183 Sum squared resid 1182

F-statistic 30.273 Durbin-Watson stat 1.07

 Prob (F-statistic) 0.000      

4.4.3 Regression Analysis on EPS

In this section, the regression analysis on EPS was presented. It helps to determine the

impact of the adoption of IFRS on EPS. The results are presented in Table 4.4.3 below, and it

shows a coefficient value of 0.297 for IFRS with a p-value of 0.045, indicating that its impact

is positive and significant. The R2 is 0.489, indicating that adopting IFRS can predict about

48.9% of the variance in EPS. The p-value of the F-statistics is also less than 0.05, which

further confirms the significance of the impact of IFRS on EPS.

Table 4.4.3 Regression Analysis on EPS

  Coefficient Std. Error t-Statistic Prob.
IFRS 0.297 0.144 2.061 0.045
C 1.147 0.102 11.250 0.000

Weighted Statistics
R-squared 0.489 Mean dependent var 0.953
Adjusted R-squared 0.431 S.D. dependent var 1.093
S.E. of regression 0.984 Sum squared resid 42.6
F-statistic 8.428 Durbin-Watson stat 1.123

Prob (F-statistic) 0.000      

4.5 Discussion of Findings

Results from this study show that adopting the IFRS standard impacts quoted

Nigerian banks' wealth. This is shown as it has a positive coefficient from all the analysis
results. The coefficient is also significant, which indicates that IFRS adoption has a

significant impact on the wealth of the banks. This result is similar to Tanko (2012), who

found that firms adopting the IFRS standard tend to show a higher value on different

profitability measures like earning per share EPS, which shows that adopting the IFRS

standard contributes positively to the performance of firms in Nigeria. He further emphasized

that adopting IFRS helps companies identify losses quickly, which will help them swiftly

take necessary action to curb further loss and help them lead in value creation. More so, Alu

& Jelil (2017) noted that adopting IFRS contributes to the performance of quoted

manufacturing firms in Nigeria as it enhances accountability and transparency, which curb

fraud and other forms of management sharp practices and help to improve value creation for

the firms.
 CHAPTER FIVE

SUMMARY, CONCLUSION, AND RECOMMENDATION

5.0 Introduction

This chapter presents a summary of the study from chapter one to the last chapter. It

also presents the findings from the study in relation to past similar studies. Conclusions are

drawn based on findings and recommendations based on the findings and conclusions from

the study.

5.1 Summary

This study was conducted primarily to focus on the impact of IFRS adoption on the

wealth of listed money deposit banks in Nigeria. It aims to investigate how adopting IFRS

has helped banks increase their wealth and value. Chapter one presents the background of the

study. It includes the statement of the problem, which form the research questions and

objectives of the study. It also presents the significance of the study and how the results will

benefit different stakeholders. Chapter two presents a review of pieces of literature from past

related studies. This helps to know the existing facts and theories established by past authors,

which serve as a framework for this study. This also helps to identify the gap in the literature,

i.e., the untouched areas or areas which have not to gained enough attention from past

studies, which this study set to explore. This form the justification of the study and why this

study is important. Chapter three presents the research methodology, i.e., the method adopted

by this study in achieving its objectives. It discusses the adopted research design, the

population of the study, sources of data, the method of data collection, and the data analysis

techniques. Chapter four presents the analysis and interpretation of the generated data. The
analysis was conducted using descriptive and inferential statistics to understand the nature of

the data and how one impacts the other. The analysis was presented in sections to answer the

questions contributing to the study's overall objective.

5.2 Conclusion

Based on the findings from the study, it is concluded that Nigeria's ROE, MVPS, and

EPS-listed banks change over time. It sometimes records high values, while it is significantly

low in some years. This shows that the values are unstable, and management should devise

means to improve and maintain a high level of value for the banks. More so, the results show

that the banks' values significantly differ from each other. This implies that banks with the

least performance should devise means to increase their value to meet their industrial

average. This can mean adopting strategies that significantly boost their performance and

contribute to their values. The results show that the adoption of IFRS has contributed

significantly to ROE, MVPS, & EPS which means that its adoption has contributed to the

banks' wealth, and the banks should continue to adopt the standard to reap its benefits

continuously.

5.3 Recommendations

Based on the findings and conclusion of the study, the following recommendations

were made;

1. The management of money deposit banks in Nigeria should continue to adopt the IFRS

standard since it contributes to their wealth.

2. Government and the appropriate authority should enforce strict compliance with the IFRS

standard to ensure fair benefits for all stakeholders

3. Management of money deposit banks in Nigeria should ensure the adoption of IFRS to

enhance accountability and transparency of accounting records which will help to achieve

quality financial reports.

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