Proceedings of the 6th Economic & Finance Conference, OECD Headquarters, Paris

EFFECT OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) ON CORPORATE FINANCING IN NIGERIAN BANKING INDUSTRY

MARYAM AHMED JIBRIL, MODIBBO ABUBAKAR

Abstract:

National accounting differences has been responsible for increasing information asymmetry, increasing cost of investments, reducing understandability as a results of incomparable information, which are sum up as investor home bias. IFRS is aimed at improving reporting quality, increasing financial statement comparability within and across countries, which is expected to reduce information asymmetry among capital market participants, and facilitate cross-border cash flows, especially in terms of foreign equity investments. However, the opponents of accounting harmonization maintain that the characteristics of accounting problems, history, culture and institutional frameworks in a country determine the form and content of accounting standards, and thus, uniform standards could not lead to any positive benefits. This argument has led to different empirical researches on the economic consequences of uniform accounting standards. This study examined how the adoption of IFRS affects corporate financing in the deposit money banks in Nigeria during the period (2009-2014). The purpose is to investigate whether or not firm’s financing decisions in Nigeria have significantly improved after the adoption of IFRS. The study employed expiremental/correlational research design in a sample of 15 banks. Panel regression technique of data analysis was adopted and the study found that IFRSs have significantly improved financing in terms of equity and debt financing during the period. We conclude that there are possibilities that the adoption of IFRS in Nigeria potentially minimized information asymmetry and that corporate financing could be improved if IFRSs are carefully implemented. We recommend among others that, accounting regulators in Nigeria should increase efforts towards educating firms and investors about IFRSs, so as to enhancing corporate financing in Nigeria.

Keywords: Debt; Leverage; Equity; Returns; Financing

DOI: 10.20472/EFC.2016.006.003

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