Impact of IFRS Adoption on Value Relevance of Accounting Earnings of Quoted Manufacturing Firms in Nigeria

Nwinkonzor Nornubari and Ndubuisi Odoemelam
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Nwinkonzor Nornubari: Department of Accounting, Faculty of Management Sciences University of Port Harcourt, Choba, Port Harcourt Rivers State, Nigeria
Ndubuisi Odoemelam: Department of Accounting, Faculty of Management Sciences University of Port Harcourt, Choba, Port Harcourt Rivers State, Nigeria

International Journal of Research and Scientific Innovation, 2024, vol. 11, issue 10, 931-953

Abstract: This study investigates the impact of International Financial Reporting Standards (IFRS) adoption on the value relevance of accounting earnings for quoted manufacturing firms in Nigeria. With the increasing adoption of IFRS globally, it is crucial to understand its effect on the relevance of financial information to investors, particularly in emerging markets. A sample of nine companies listed on the Nigerian Exchange Limited (NGX) from 2006 to 2022 was analyzed to evaluate how earnings per share (EPS) and book value per share (BVPS) responded to IFRS adoption. Ordinary Least Squares (OLS) regression models were deployed in data analyses. The results show that EPS has a significant (p-value 0.05) and negative relationship with share price, indicating that investors in Nigerian manufacturing firms may prioritize earnings over net asset values. Interestingly, adopting IFRS does not directly impact share prices, but switching off pre-IFRS adoption (IFRS*EPS) revealed a negative and significant relationship between EPS and SP, suggesting that IFRS adoption complicates investors’ interpretation of earnings. The IFRS*BVPS indicated an insignificant relationship with the share price. Similarly, the moderating effect of firm size (FS) on the relationship between IFRS adoption and the value reverence of accounting earnings was found to be insignificant (P-value > 0.05). The study concludes that while IFRS adoption enhances transparency, it may reduce the value relevance of earnings in the short term. The findings have implications for investors, firms, and regulators, and contribute to the limited empirical evidence on IFRS adoption in emerging markets. Recommendations include improved investor communication and further research into the long-term effects of IFRS on financial performance in Nigeria.

Date: 2024
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