Quantitative Analysis of the Relationship Between IFRS and Shareholder Value in Nigerian Firms
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Background of the Study
The adoption of IFRS has brought significant changes to the accounting and financial reporting landscape for firms worldwide, including in Nigeria. One of the key questions raised in the context of IFRS adoption is its impact on shareholder value. Shareholder value is typically assessed using stock price performance and profitability measures, and the transparency offered by IFRS is believed to affect investor perceptions and, ultimately, stock prices. The shift from local accounting standards to IFRS aims to make financial reporting more reliable and comparable across borders, which could potentially increase investor confidence and enhance shareholder value. This study aims to quantitatively analyze the relationship between IFRS adoption and shareholder value in Nigerian firms.
Statement of the Problem
While IFRS adoption is designed to improve the transparency and comparability of financial reporting, its actual impact on shareholder value is still not well-understood in the Nigerian context. Some argue that IFRS adoption can enhance shareholder value by improving financial transparency and reducing information asymmetry, while others believe that the changes in accounting practices may lead to volatility in stock prices and reduced investor confidence. Thus, the actual effect of IFRS adoption on shareholder value remains unclear, necessitating further research.
Aim and Objectives of the Study
Aim:
To quantitatively analyze the relationship between IFRS adoption and shareholder value in Nigerian firms.
Objectives:
To assess the impact of IFRS adoption on stock price performance of Nigerian firms.
To evaluate whether IFRS adoption influences the perceived value of Nigerian companies by investors.
To investigate the effect of IFRS adoption on the volatility of stock prices of Nigerian firms.
Research Questions
How does IFRS adoption impact the stock price performance of Nigerian firms?
What effect does IFRS adoption have on investor perceptions of Nigerian companies’ value?
Has IFRS adoption led to greater volatility in the stock prices of Nigerian firms?
Research Hypotheses
IFRS adoption has a significant positive impact on the stock price performance of Nigerian firms.
IFRS adoption has a significant effect on the perceived value of Nigerian firms by investors.
IFRS adoption has increased the volatility of stock prices in Nigerian firms.
Significance of the Study
This study will contribute to the understanding of how IFRS adoption impacts shareholder value in Nigerian firms, providing valuable insights for investors, policymakers, and financial analysts. The results can guide future investment decisions and regulatory policies aimed at enhancing corporate transparency.
Scope and Limitation of the Study
The study will focus on publicly listed firms in Nigeria that have adopted IFRS. Limitations include the potential challenges in controlling for external factors that could also affect stock price performance, such as macroeconomic variables and global market trends.
Definition of Terms
Shareholder Value: The value delivered to shareholders as a result of a company's ability to generate earnings and capital gains.
Stock Price Volatility: The degree of variation in a stock’s price over time, often used as a measure of risk.
Investor Perception: The way investors view or assess the financial health, performance, and potential of a company.
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