BOARD ATTRIBUTES, OWNERSHIP STRUCTURE AND REPORTING QUALITY IN A POST-IFRS REGIME: A DIFFERENCE-INDIFFERENCE REGRESSION TECHNIQUE
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ABSTRACT
The study examined board attributes, ownership structure and reporting quality in a post-IFRS regime. The difficulties to control for confounding factors on accounting quality in IFRS reporting regime and the sensitivity of different measures of reporting quality motivated this study. The study employed a longitudinal research design while the population comprised the entire thirteen (13) Deposit Money Banks (DMBs) listed on the Nigerian Stock Exchange (NSE) as at 31st December, 2019. The study used a fifteen-year time frame (2005 to 2019) to enable the researcher to split the samples into two groups: pre-IFRS regime samples, otherwise called the control group (2005- 2011); and post-IFRS regime samples, otherwise called the treatment group (2013 – 2019). Due to the finite and exhaustive number of the population size, the study took a census of the entire thirteen (13) DMBs as its sample size. The secondary data were sourced from the audited annual reports of DMBs for the period 2005-2019 financial year. Using the Difference-In-Difference (DD) estimation, result shows that generally, IFRS adoption improves reporting quality using QUA-FRQ (0.0550, p=0.000). For DACC, the result revealed significant impact (0.3509, p=0.000), however the positive coefficient is at variance with theoretical expectation, hence reporting quality is not enhanced. For VREL, it did not improve reporting quality using VREL (8.5416, p=0.3407). For the specific variables, in the post IFRS regime, based on the three measures (qualitative characteristics [QUA-FRQ], discretionary accruals [DACC] and value relevance [VREL] measures) of financial reporting quality used in this study, board size was found to have an insignificant impact across all measures (QUA-FRQ= (-0.00115, p=0.5851; DACC= (-0.006, p=0.7260; VREL= (-0.4814, p=0.7260), board independence was found to have a significant impact across all measures (QUA-FRQ= 0.1067, p=0.033; DACC= 1.4173, p=0.006; VREL= (- 26.338, p=0.000), board financial expertise was found to have a significant impact for at least one; QUA-FRQ (0.0748, p=0.0034). Furthermore, institutional ownership was found to have a significant impact for at least one; VREL (-0.17926, p=0.000), managerial ownership was found to have an insignificant impact across all measures (QUA-FRQ=0.0005, p=0.2696; DACC= 0.0018, p=0.7849; VREL= 0.0129, p=0.6857), foreign ownership was found to have an insignificant impact across all measures (QUA-FRQ=0.0009, p=0.0153; DACC= 0.008, p=0.1715; VREL= 0.0852, p=0.0401) and block ownership was found to have a significant impact across QUA-FRQ (-0.0006, p=0.0233) and VREL (0.1485, p=0.0003) measures. The study concluded that IFRS adoption improved reporting quality although the impact was not without variation across the reporting quality proxy used and the specific corporate governance variables. In the light of the findings, the following recommendations were made. First, stakeholders should ensure that the information on annual reports is critically in line with the IASB qualitative characteristics of financial information. Second, there is the need for the board size of Nigerian banks to be looked at more critically. Though there is yet no consensus regarding what constitutes an optimal board size, there is the need to ensure that the present board size is efficient in improving corporate monitoring and then financial reporting quality. Third, a substantial proportion of corporate board should be nonexecutive directors with integrity and a reputation for transparency. In addition, such individuals should be involved in sensitive responsibilities that relate to improving reporting credibility. Fourth, there is the need for more financial literacy board members and also the process of financial skill development, a continuous one and, as such, with advances in the techniques of managerial manipulation, board members needed to update and upgrade their financial literacy levels especially incorporating forensic techniques and machine learning abilities which are the new approaches to fraud detection. Fifth, there is the need for more institutional presence to be actively involved in ensuring corporate transparency.
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