Bank Earnings Smoothing During Mandatory IFRS adoption in Nigeria

Peterson Ozili and Erick R Outa

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the extent of bank earnings smoothing during mandatory IFRS adoption in Nigeria, to determine whether mandatory IFRS adoption increased or decreased income smoothing among Nigerian banks. We find that the mandatory adoption of International Financial Reporting Standards (IFRS) is associated with lower earnings smoothing among Nigerian banks, which implies that Nigerian banks do not use loan loss provisions to smooth reported earnings during the mandatory IFRS adoption period. We find evidence for earnings smoothing via LLP during voluntary IFRS adoption. Earnings smoothing is not significantly associated with listed and non-listed Nigerian banks during voluntary and mandatory IFRS adoption. Overall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of loan loss provisions estimate by discouraging Nigerian banks from influencing loan loss provisions for earnings smoothing purposes during the mandatory IFRS adoption. The findings of this paper are relevant to the debate on whether IFRS reporting improves the quality of financial reporting among firms in Nigeria. The implication of the study is that IFRS has higher accounting quality than local GAAP in Nigeria as it improves the quality and informativeness of accounting numbers (LLPs and earnings) reported by Nigerian banks during the period examined

Keywords: Loan Loss Provisions; Discretionary Accruals; Income Smoothing; Earnings Management; Nigeria; Banks; IFRS. (search for similar items in EconPapers)
JEL-codes: G2 G21 G28 M41 M42 M48 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-acc, nep-afr and nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://mpra.ub.uni-muenchen.de/92507/1/MPRA_paper_92507.pdf revised version (application/pdf)

Related works:
Journal Article: Bank earnings smoothing during mandatory IFRS adoption in Nigeria (2018)
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