The Relationship Between IFRS Compliance and Financial Performance of Listed Nigerian Companies
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Background of the Study
The adoption of International Financial Reporting Standards (IFRS) has been a key initiative in improving financial reporting quality across countries, including Nigeria. The move towards IFRS is expected to enhance transparency, comparability, and consistency in financial reporting, which in turn should impact the financial performance of companies, especially listed firms. However, the exact nature of the relationship between IFRS compliance and the financial performance of Nigerian listed companies remains uncertain. This study aims to examine how compliance with IFRS affects the financial performance of these companies.
Statement of the Problem
Despite the benefits associated with IFRS adoption, including improved transparency and comparability, some firms in Nigeria have struggled with full compliance, resulting in challenges in their financial reporting practices. It remains unclear whether the implementation of IFRS has a direct or indirect impact on the financial performance of Nigerian companies listed on the Nigerian Stock Exchange (NSE). This study seeks to investigate the relationship between IFRS compliance and the financial performance of Nigerian listed companies.
Aim and Objectives of the Study
Aim:
To examine the relationship between IFRS compliance and the financial performance of Nigerian listed companies.
Objectives:
To analyze the impact of IFRS compliance on key financial performance indicators, such as profitability, liquidity, and asset management.
To assess whether full IFRS compliance results in improved financial performance for Nigerian listed companies.
To identify factors that influence the degree of IFRS compliance in Nigerian listed companies.
Research Questions
What is the relationship between IFRS compliance and the financial performance of Nigerian listed companies?
How does compliance with IFRS affect key performance indicators of Nigerian listed companies?
What factors contribute to the level of IFRS compliance in Nigerian listed companies?
Research Hypotheses
There is a positive relationship between IFRS compliance and the financial performance of Nigerian listed companies.
Companies that fully comply with IFRS exhibit better financial performance compared to those with partial or non-compliance.
The level of IFRS compliance is influenced by factors such as company size, industry, and financial resources.
Significance of the Study
This study will provide insight into the tangible benefits (or challenges) of IFRS compliance for Nigerian listed companies in terms of their financial performance. The findings will be valuable to regulators, investors, and corporate managers in understanding how IFRS adoption may improve (or hinder) company performance.
Scope and Limitation of the Study
The study will focus on Nigerian companies listed on the Nigerian Stock Exchange (NSE), as they are mandated to adopt IFRS. Limitations may include the difficulty in measuring the direct impact of IFRS compliance on financial performance due to other external factors influencing company performance.
Definition of Terms
IFRS Compliance: Adhering to the standards and principles set out by the International Financial Reporting Standards in the preparation and presentation of financial statements.
Financial Performance: The ability of a company to generate revenue and profit, typically measured using financial ratios such as return on assets (ROA), return on equity (ROE), and profitability margins.
Listed Companies: Companies whose shares are publicly traded on a stock exchange, such as the Nigerian Stock Exchange (NSE).
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