Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Regulatory Changes and Financial Reporting in Nigeria

Okpuzor, Jude Ogwali, Ofor, T.N. Ph D, Okpuzor, Victorial Ndudi

Abstract

This study analysed the effect of legislative modifications on financial reporting in the Nigerian banking industry between 2007 and 2023. Moreover, the legal provisions encompassed the adoption of the International Financial Reporting Standard, rotation of audit firms, standardization of accounting periods, and reduction in the duration required to produce audit reports. The control variables examined include corporate leverage and total bank size. Using the Autoregressive Distributed Lag (ARDL) model, both the long run and short run segments were estimated. Prior to applying the ARDL model, the stationarity of the variables of interest was assessed using the Argument Dickey Fuller (ADF) unit root test. Subsequently, a sequence of diagnostic tests was conducted to confirm the dependability of the findings. A discrete and unidirectional long-term correlation between the dependent variable and independent variables was quantified using the ARDL Cointegration test. The study results clearly provided evidence that the adoption of the international financial reporting standard (IFRS), the length of time audit companies were in operation, and the degree of financial leverage had a significant and positive effect on the financial reporting of banks in Nigeria at 5% level of significance. The investigation further indicated that the standard accounting period, sometimes known as the audit busy season, and the size of the bank had a negligible positive effect on the financial reporting of Nigerian banks at 5% level of significance. Finally, the deferral of the audit report had a negligible and statistically insignificant effect on the financial reporting of Nigerian banks at 5% level of significance. Therefore, the paper proposed that the banking sector should assess its existing monitoring responsibilities to establish explicit criteria for preventing management from perpetrating "window dressing behavior" in financial reporting.

Keywords

Regulatory changesfinancial reportingInternational Financial Reporting Standardrotation of audit firmsuniform accounting periodaudit report delay

References

Abed, I.A., Hussin, N., Haddad, H., Almubaydeen, T.H. & Ali, M.A. (2022). Creative accounting determination and financial reporting quality: the integration of transparency and disclosure. Journal of Open Innovation: Technology, Market, and Complexity, 8(1), Adams, G., S. Hayes, S. Weierter, S. & Boyd, J. (2007). Regulatory capture: Managing the risk. Paper presented at the Australian Public Sector Anti-Corruption Conference (Sydney, Australia). Adedokun, W. M., Gbadebo, A. D., Adekunle, A. O. & Akande, J. O. (2022). IFRS adoption and accrual-based managed earnings in Nigeria. Asian Economic and Financial Review, 12 (12),1041–1073 Ahmad, A.Y.A.B., Abusaimeh, H., Rababah, A., Alqsass, M., Al-Olima, N., & Hamdan, M. (2024). Assessment of effects in advances of accounting technologies on quality financial reports in Jordanian public sector. Uncertain Supply Chain Management, 12(1), 133-142. Ajayi-Owoeye, A. O., Akinwunmi, A. J., Olayinka, I. M., & Pelemo, M. A. (2022). Financial reporting quality and invest decisions: Evidence from listed manufacturing companies in Nigeria. Archives of Business Research, 10(9), 185-201. Alabi, F.Z. & Abdulrasaq, M. (2021). Impact of regulatory and supervisory framework on financial reporting quality of microfinance banks in Kwara State, Nigeria. Lafia Journal of Economics and Management Sciences, 6(1), 1-18 Asaolu, T. O., Ayoola, T. J. & Ologbenla, P. (2020). Regulatory interventions and financial reporting quality of banks: Evidence from Nigeria. African Journal of Corporate Governance Research, 1(1), 68-86 Becker, G. (1983). A theory of competition among pressure groups for political influence. Quarterly Journal of Economics, xcviii: 371-400. Bertrand, M., Black S.E., Jensen S. & Lleras-Muney, A. (2019). Breaking the glass ceiling? The effect of board quotas on female labour market outcomes in Norway. Review of Economic Studies, 86(1), 191-239. Bhasin, M. L. (2016). Corporate accounting fraud: A case study of Satyam Computers Limited. Open Journal of Accounting, 5(3), 45-60. Bhatia, M., & Mulenga, M. (2019). Value relevance of accounting information: Comparative study of Indian public and private sector banks. International Journal of Indian Culture and Business Management, 18(1), 12–33. Blessing, H., & Sakouvogui, G. (2023). Impact of liquidity and solvency ratios on financial performance: A comprehensive analysis. Indonesia Auditing Research Journal, 12(3), 102-115. Brown, R.L., Durbin, J. & Evans, J. (1975). Techniques for testing the constancy of regression relationships over time. Journal of the Royal Statistical Society Series B, 37, 149-192. Brown, P., Preiato, J., & Tarca, A. (2018). Measuring country differences in enforcement of accounting standards: An audit and enforcement proxy. Journal of Business Finance & Accounting, 45(1-2), 153-177. Cheung, K.S. (2024). Real Estate Insights Unleashing the potential of ChatGPT in property valuation reports: the “Red Book” compliance Chain-of-thought (CoT) prompt engineering. Journal of Property Investment & Finance, 42(2), 200-206. Donnellan, J.T., & Rutledge, W. (2016). Agency theory in banking -‘Lessons from the 007-2010 Financial Crisis. International Journal of Business and Applied Social Science, 2(3), 38- 49 Elliott, D.J., Feldberg, G. & Lehnert, A. (2013). The history of cyclical macroprudential policy in the United States. Finance and Economics Discussion Series 2013-29, Board of Governors of the Federal Reserve System (U.S.). Enekwe, C. I., Agu, C. I., & Eziedo, K. N. (2019). The effect of International Financial Reporting Standards (IFRS) adoption on financial performance of selected listed companies in Nigeria. International Journal of Scientific and Technology Research, 8(1), 45-53. Engle, R. and Granger, C. (1987). Cointegration and error correction: Representation, Estimation and testing. Econometrica, 55, 251-276. Gaffikin, M. (2006). Regulation as accounting theory. Faculty of Commerce - Accounting & Finance Working Papers. Gbadebo, A. D. (2024). Impact of regulatory change on income smoothing and earning distortions? Evidence from a Univariate Approach. Acta Universitatis Danubius. Œconomica, 20(3), 59–71. Ghazali, A.W., Shafie, N.A., & Sanusi, Z.M. (2015). Earnings management: An analysis of opportunistic behavior, monitoring mechanism and financial distress. Procedia Economics and Finance, 28, 190 – 201 Gujarati, D.N. (2004). Basic econometrics. 4th Edition, McGraw-Hill Companies. Harnay, S., & A. Scialom, A. (2015). The influence of the economic approaches to regulation on banking regulations: A short history of banking regulations. Cambridge Journal of Economics, 40: 401–26. Hasan, A., Aly, D., & Hussainey, K. (2022). Corporate governance and financial reporting quality: A comparative study. Corporate Governance: The International Journal of Business in Society, 22(6), 1308-1326. IFRS Foundation publishes 2023 Annual Report Igbinosa, S., Ogbeide, S. & Babatunde, A. (2017). Empirical assessment on financial regulations and banking sector performance. Journal of Central Banking Theory and Practice, 143- 155 Jensen, M.C. & Meckling, W.H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305-360. Johansen, S. (1988). Statistical analysis of cointegrating vectors. Journal of Economic Dynamics and Control, 12, 231-254. Johansen, S. & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52, 169-210 Johnson-Calari, J., & Strauss-Kahn, I. (2020). Good governance: Principles, pitfalls, and best practice. Asset management at central banks and monetary authorities: New practices in managing international Foreign exchange reserves, 305-321. Joshi, P., & India, U. (2023). Role of financial reporting standards in enhancing transparency and accountability: An empirical study. Joskow, R.L. & Noll, R.G. (1981). regulation in theory and practice: An overview. NBER Chapters, in: Studies in public regulation, pages 1-78, National Bureau of Economic Research, Inc. Koumbarakis, A. (2017). The economic theory of bank regulation and the redesign of Switzerland’s lender of last report regime for the twenty-first century. Unpublished doctorial dissertation. Universite de Fribourg . Laiho, T. (2011). Agency theory and ownership structure – estimating the effect of ownership structure on firm performance. Economics Master's thesis, Department of Economics, Aalto University. Levine, M. E., & Forrence, J. L. (1990). Regulatory capture, public interest, and the public agenda: Toward a synthesis. Journal of Law, Economics, and Organization, 6, 167-198. Maama, H., & Mkhize, M. (2020). Integration of non-financial information into corporate reporting: A theoretical perspective. Academy of Accounting and Financial Studies Journal, 24(2), 1-15. Nagarkar, J.J. (2015). Analysis of financial performance of banks in India. Annual Research Journal of Symbiosis Centre for Management Studies, 3, 26-37. Namazi, M. (2013). Role of the agency theory in implementing management control. Journal of Accounting and Taxation, 5(2), 38-47 Okoroigwe, E.S., Ukagha, N.L., Abalaka, D.F., Ibrahim, I. & Shaba, M. (2021). Impact of accounting regulatory framework on quality of financial reporting and corporate governance regulation: The Nigerian banking sector experience. Lapai Journal of Management Science (LAJOMAS), 101&2), 322-329 Olamide, O.O. (2024). Effect of accounting information system on the quality of financial reporting of listed companies in non-financial sector in Nigeria. International Journal of Management Technology, 11(1), 1-30 Olayemi O.O. (2024). Effect of accounting information sy

More Articles from JOURNAL OF ACCOUNTING AND FINANCIAL MANAGEMENT

Cashflow Management and the Performance of Commercial Banks in Nigeria

Author: Jeffrey Ayas Iyakonbogha, Clement E. Ozele

The Nigerian Code of Corporate Governance and Financial Performance of Deposit Money Banks in Nigeria

Author: i, Eneaniofu Daniel Mmaduakonam, ii, Azolike Nkiru Nkechi, iii, Emeter Patrick Okechukwu, iv, Okwor Emmanuel Ejimnkonye