International Financial Reporting Standards (IFRS) Adoption and Short-Term Liquidity of Firms in Nigeria

Lucky Izobo Enakirerhi, Emmanuel A. L. Ibanichuka and Clifford O. Ofurum
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Lucky Izobo Enakirerhi: Department of Accounting, Faculty of Management Sciences, University of Port Harcourt, Choba, Rivers State, Nigeria
Emmanuel A. L. Ibanichuka: Department of Accounting, Faculty of Management Sciences, University of Port Harcourt, Choba, Rivers State, Nigeria
Clifford O. Ofurum: Department of Accounting, Faculty of Management Sciences, University of Port Harcourt, Choba, Rivers State, Nigeria

International Journal of Research and Scientific Innovation, 2020, vol. 7, issue 1, 154-157

Abstract: The study has the primary aim of examining the impact of IFRS adoption on the liquidity position of firms quoted on the floor of the Nigerian Stock Exchange. Short-term liquidity is measured by current ratio and the paired sample t-test measures the statistical difference between the mean of liquidity in pre-IFRS and mean of liquidity in post-IFRS periods. Using descriptive statistics to measure the mean of both periods, the results show that the mean of liquidity is lower in post-IFRS adoption period indicating a negative impact of International Financial Reporting Standards adoption in Nigeria. Furthermore, the paired sample t-test shows that there is difference between the mean of both periods and the difference is significant at 1% level. Thus, the study concludes that the adoption of IFRS has had a significant but negative impact on the short-term liquidity position measured by current ratio of firms. The study, therefore, recommends that managers should find a way to improve the liquidity position of firms and as adoption should have led to more transparency, openness and greater flexibility, there should be a new study to examine whether the reduction in liquidity is solely caused by adoption of IFRS or the economic recession which hampered the Nigerian economy in the year 2015.

Date: 2020
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