effect of international financial reporting standards adoption on value relevance of accounting ...

303 Pages·2017·2.78 MB·English

EFFECT OF INTERNATIONAL FINANCIAL REPORTING STANDARDS
ADOPTION ON VALUE RELEVANCE OF ACCOUNTING
INFORMATION OF NIGERIAN LISTED FIRMS

MUYIWA EZEKIEL ALADE

DOCTOR OF PHILOSOPHY
(Accounting)

JOMO KENYATTA UNIVERSITY OF
AGRICULTURE AND TECHNOLOGY

2018

Effect of International Financial Reporting Standards Adoption on Value
Relevance of Accounting Information of Nigerian Listed Firms

Muyiwa Ezekiel Alade

A thesis submitted in partial fulfilment for the degree of Doctor of Philosophy in
Accounting in the Jomo Kenyatta University of Agriculture and Technology

2018
DECLARATION
This thesis is my original work and has not been presented for a degree in any other
University.

Signature:……………………………… Date:…………………………..
Muyiwa Ezekiel Alade

This thesis has been submitted for examination with our approval as the University
supervisors.

Signature:……………………………… Date:…………………………..
Dr. Tobias Olweny, PhD
JKUAT, Kenya.

Signature:……………………………… Date:…………………………..
Dr. Oluoch Oluoch, PhD
JKUAT, Kenya.
ii
DEDICATION
I dedicate this Thesis to the Almighty God, my wife and children.
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ACKNOWLEDGEMENT
Special thanks to God Almighty for the gift of life and for His faithfulness over my life
this far in life. Also, I owe my supervisors, Dr. T. Olweny and Dr. O. Oluoch distinctive
appreciation for their painstaking efforts in adding value to my life especially through
this research. Qualitative attention you accorded me, pedagogical and ethical values you
impacted on me in the course of this study are considered eternal assets for me. You
shall continue to thrive in all your endeavours. Furthermore, I want to acknowledge the
Management of this University for giving me the privilege to pursue my PhD degree in
the University as well as direct and indirect special supports of all scholars and other
members of staff in the School of Business (SOB) towards attaining this doctoral degree
in life. I recognise directives and warm attention received from time to time from
Professor M. A. Oloko and Professor W. Muturi, the Dean (SOB) and the Chairman,
EAF Department respectively. Supportive services of the JKUAT Library unit rendered
in the course of this study are also specially acknowledged. Singular gratitude to my
employer, the Management of Adekunle Ajasin University, Akungba-Akoko (AAUA),
Ondo State, Nigeria through the Vice Chancellor Professor I. Ajibefun, for giving me
the opportunity to embark on this study through Tetfund support. Laudable supports
received from all staff members in the Department of Accounting (AAUA) through the
HOD, Dr. F. Olurakinse and the Dean of the Faculty of Social and Management
Sciences (AAUA) are of endless memory to me. I salute the courage and support of my
darling wife, Favour and understanding of my kids, Mercy, Daniel and Goodness in the
course of this study. Several forms of support and encouragement received from my
parents, siblings, relatives-in-law, individuals, families, Christian bodies that could not
the mentioned here and distinguished personalities especially Venerable Professor O. O.
Amu and the doyen of accounting profession Professor T. Asaolu are specially
appreciated. God bless you all in folds for being part of my progress in life.
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TABLE OF CONTENTS
DECLARATION ............................................................................................................. ii
DEDICATION ................................................................................................................ iii
ACKNOWLEDGEMENT ............................................................................................. iv
TABLE OF CONTENTS ................................................................................................ v
LIST OF TABLES .......................................................................................................... x
LIST OF FIGURES ..................................................................................................... xiii
LIST OF APPENDICES ............................................................................................. xiv
ACRONYMS ................................................................................................................. xv
DEFINITION OF KEY TERMS ............................................................................... xvii
ABSTRACT ................................................................................................................... xx
CHAPTER ONE ............................................................................................................. 1
INTRODUCTION ........................................................................................................... 1
1.1 Background of the Study ......................................................................................... 1
1.1.1 IFRS Adoption and Value Relevance of Accounting Information: Global
Perspective ............................................................................................................... 9
1.1.2 IFRS Adoption and Value Relevance of Accounting Information: Africa
Perspective ............................................................................................................. 12
1.1.3 IFRS Adoption and Value Relevance of Accounting Information: Nigeria
Perspective ............................................................................................................. 14
1.2 Statement of the Problem....................................................................................... 17
1.3 Objectives of the Study .......................................................................................... 20
1.3.1 General Objective .................................................................................................. 20
1.3.2 Specific Objectives ................................................................................................ 20
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1.4 Statement of Hypotheses ....................................................................................... 21
1.5 Significance of the Study ....................................................................................... 21
1.6 Scope of the Study ................................................................................................. 23
1.7 Limitation of the Study .......................................................................................... 25
CHAPTER TWO .......................................................................................................... 28
LITERATURE REVIEW ............................................................................................. 28
2.1 Introduction............................................................................................................ 28
2.2 Theoretical Background......................................................................................... 28
2.2.1 Signalling Theory .................................................................................................. 29
2.2.2 Efficient Market Hypothesis .................................................................................. 33
2.2.3 Agency Theory ...................................................................................................... 38
2.2.4 Stakeholder Theory ................................................................................................ 42
2.3 Conceptual Framework .......................................................................................... 45
2.4 Review of Empirical Literature ............................................................................. 48
2.4.1 Influence of IFRS Adoption on Value Relevance of Combined Accounting Data48
2.4.2 Income Statement Information and Value Relevance under IFRS ........................ 59
2.4.3 Statement of Financial Position Information and Value Relevance under IFRS .. 62
2.4.4 Cash Flows Information and Value Relevance after IFRS Adoption.................... 64
2.4.5 Extent of Compliance with IFRS and Value Relevance of Accounting
Information.. .......................................................................................................... 67
2.4.6 Firm-Specific Attributes and Value Relevance under IFRS.................................. 70
2.5 Review of Empirical Models ................................................................................. 72
2.6. Critique of Empirical Studies ................................................................................ 74
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2.7 Research Gaps ....................................................................................................... 78
2.8 Summary ................................................................................................................ 85
CHAPTER THREE ...................................................................................................... 86
RESEARCH METHODOLOGY ................................................................................ 86
3.1 Introduction............................................................................................................ 86
3.2 Research Philosophy .............................................................................................. 86
3.3 Research Design .................................................................................................... 87
3.4 Target Population................................................................................................... 87
3.5 Sampling Frame ..................................................................................................... 88
3.6 Sample Size and Sampling Techniques ................................................................. 89
3.7 Data Collection Instrument and Procedure ............................................................ 90
3.8 Pilot Test ................................................................................................................ 94
3.8.1 Validity Test .......................................................................................................... 94
3.8.2 Reliability Test....................................................................................................... 96
3.9 Data Processing and Analysis ................................................................................ 97
3.10 Ethical Consideration........................................................................................... 107
CHAPTER FOUR ....................................................................................................... 108
RESULTS AND DISCUSSION ................................................................................. 108
4.1 Introduction.......................................................................................................... 108
4.2 Pilot Testing ......................................................................................................... 108
4.3 Descriptive Statistics of the Sampled Firms ........................................................ 114
4.3.1 Descriptive Statistics of Price Model Variables for the Entire Period ................ 116
4.3.2 Trend Analysis of the Price Model Variables...................................................... 124
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4.3.3 Descriptive Statistics for Extent of Compliance with IFRS ................................ 126
4.4 Share Price Valuation Inferential Statistics and Test of Hypothesis ................... 131
4.4.1 Diagnostic Tests Results and Discussion ............................................................. 132
4.4.2 Preliminary Price Valuation Model Regression Analysis .................................... 136
4.4.3 Cross-sectional Trend Regression Analysis ......................................................... 143
4.4.4 Effect of Income Statement Information under IFRS on Value Relevance ......... 145
4.4.5 Effect of Financial Position Statement Accounting Information under IFRS on
Value Relevance .................................................................................................. 152
4.4.6 Effect of Cash Flows Statement Information under IFRS on Value Relevance.. 158
4.4.7 Effect of Extent of Compliance with IFRS on Value Relevance ........................ 163
4.4.8 Moderating Effect of Firm-specific Factors on Value Relevance of Accounting
Information .......................................................................................................... 169
4.5 General Model Inferential Statistics .................................................................... 182
CHAPTER FIVE ......................................................................................................... 188
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS ............................ 188
5.1 Introduction.......................................................................................................... 188
5.2 Summary .............................................................................................................. 188
5.2.1 Value Relevance of Income Statement Accounting Information under IFRS .... 190
5.2.2 Value Relevance of Financial Position Statement Accounting Information under
IFRS ..................................................................................................................... 192
5.2.3 Value Relevance of Cash Flows Statement Accounting Information under
IFRS….. ............................................................................................................... 194
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