International Financial Reporting Standards’ Adoption and Value Relevance of Accounting Information of Listed Deposit Money Banks in Nigeria

Abstract

Nigeria recently recognized the need to participate in opportunities offered by globalization and accordingly, adopted the International Financial Reporting Standards (IFRS). This paper examines post-IFRS adoption value relevance of accounting information using two models. First, a price model which used proxies such as market price per share, book value of equity per share, earnings per share and cash flow per share. Second, a return-model which used proxies such as annual return, earning per share, change in earning per share, were used.  The results show that the explanatory power R² for the price model specification is 84% for the total sample and that all coefficients are statistically significant. A comparison of coefficients indicates that the EPS of 3.47 has a higher explanatory power than any other variables. The results also demonstrate that explanatory power of accounting numbers increased from pre-adoption (60%) to post-adoption (78%). Similarly, Explanatory power (R²) for the return model specification is 13.4% for the total sample and just coefficient of EPS level is statistically significant. The explanatory power for the return model increased from pre-adoption (15.6%) to post-adoption (16.4%). According to both sub-samples just a coefficient of EPS level is statistically significant. So, the result of the return model also indicates adoption of IFRS improved relevance of accounting numbers in the deposit money banking sector. In view of these results, there is need for further study to explore the reasons for the superiority of EPS over BVEPS.

Keywords: Value Relevance, Accounting Information, Deposit Money Banks, Nigeria.