IFRS Adoption and Its Effect on Executive Compensation in Nigeria
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Background of the Study
Executive compensation refers to the financial remuneration provided to top-level executives, which may include salary, bonuses, stock options, and other benefits. In Nigeria, the structure and transparency of executive compensation have been subjects of considerable debate, particularly in relation to corporate governance and financial performance. The introduction of International Financial Reporting Standards (IFRS) has increased the level of transparency in corporate financial reporting, thereby influencing the structure and disclosure of executive compensation.
Under IFRS, companies are required to disclose detailed information about executive remuneration, which includes not only base salaries but also bonuses, stock options, and other performance-related incentives. This transparency ensures that shareholders and other stakeholders have access to clear, comprehensive information about how executives are compensated. As a result, the adoption of IFRS could influence the alignment of executive compensation with company performance, as it increases the pressure on firms to adopt compensation schemes that are transparent and linked to value creation.
This study investigates the effect of IFRS adoption on executive compensation practices in Nigeria, analyzing whether increased transparency has resulted in changes to compensation structures and better alignment with corporate performance.
Statement of the Problem
Despite the adoption of IFRS, executive compensation in Nigeria remains opaque and often disconnected from company performance. The lack of transparency and accountability in executive pay continues to be a significant corporate governance issue. This study explores how IFRS adoption has affected executive compensation, with a focus on its role in enhancing transparency and aligning pay with performance.
Aim and Objectives of the Study
The aim of this study is to investigate the effect of IFRS adoption on executive compensation in Nigeria. Specifically, the objectives are:
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To assess how IFRS adoption has affected the transparency of executive compensation in Nigeria.
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To analyze the relationship between IFRS adoption and the alignment of executive compensation with corporate performance.
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To evaluate the impact of IFRS adoption on the governance of executive pay in Nigerian firms.
Research Questions
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How has IFRS adoption affected the transparency of executive compensation in Nigerian firms?
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What is the relationship between IFRS adoption and the alignment of executive compensation with company performance in Nigeria?
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How has IFRS adoption influenced the governance of executive pay in Nigeria?
Research Hypotheses
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IFRS adoption significantly increases the transparency of executive compensation in Nigeria.
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IFRS adoption positively influences the alignment of executive compensation with company performance in Nigeria.
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IFRS adoption has a significant impact on the governance and regulation of executive pay in Nigerian firms.
Significance of the Study
This study will contribute to the understanding of how IFRS adoption influences executive compensation practices in Nigeria, with implications for improving corporate governance, enhancing stakeholder confidence, and aligning executive incentives with long-term organizational performance.
Scope and Limitation of the Study
The study will focus on Nigerian firms that have adopted IFRS from 2012 to 2025, analyzing their executive compensation structures. Limitations include challenges in obtaining consistent data across firms and the subjective nature of executive pay practices.
Definition of Terms
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Executive Compensation: The total remuneration provided to top-level executives, including salary, bonuses, stock options, and benefits.
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IFRS Adoption: The process of transitioning to International Financial Reporting Standards for financial reporting.
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Corporate Governance: The system by which companies are controlled and directed, involving policies on executive compensation and other governance issues.
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