International Financial Reporting Standards (IFRS) and Financial Performance of Multinational Companies in Nigeria

Osho Augustine E.1, Olutayo Moyinoluwa Esther2, Emmanuel-Adeyefa Olayinka3

Abstract: This study examined the relationship between International Financial Reporting Quality and the financial performance in the context of listed multinational companies in the Nigerian Stock Exchange (NSE) with the use of cross-sectional, time-series data, and OLS regression techniques. Also, some control variables were introduced in order to reduce omitted variable bias. Nine (9) multinational companies were concentrated upon between the period of 2012 and 2020 (9 years). The finding in this paper indicates that the extent of corporate disclosure is significantly associated with financial performance because it showed a positive correlation and significant result. The study concludes that, the more company complies with IFRS disclosure guidelines, the more the investors are attracted to investing in such company and thereby improving their financial performances (return on capital employed). The study recommended that among other things, companies should also be concerned with the disclosure of relevant information at a possible minimal cost to stabilize the possible positive effect of mandatory and voluntary disclosure of financial performance.

Keywords: International Financial Reporting Standards (IFRS); Financial Performance; Disclosures; Multinational Companies

JEL Classification: G20

1. Introduction

Globalized capital markets require a unified set of global accounting, reporting and reporting standards. Due to the increased volume of cross-border capital flows and the growing number of foreign direct investment via mergers and acquisitions. In today's globalized world, the need to harmonize different accounting practices and accept global standards has emerged. The Global Standard is an International Standard Financial Statements. Although, there has been a series of contentions as regards the impact of these standards on the quality of financial statements, but this study will provide a clear understanding of their relationship. International Financial Reporting Standards (IFRSs) are designed as a common language for companies to make corporate accounts comprehensible, reliable, relevant and internationally comparable. They are the result of increased international ownership and commerce and are particularly important for companies with relationships in several countries. They have gradually replaced the numerous national accountancy standards. IFRS includes: IFRS published by the IASB; International Accounting Standards (IAS) published by the IASC, or revisions thereto published by the IASB; IFRS and IAS Interpretations prepared by the Interpretations Committee (IFRSIC) and approved for publication by the IASB and IAS interpretations drawn up by the SIC and approved by the IASB or the IASC International Financial Reporting Standards (IFRSs) represent the new dominant set of accounting standards developed through a rigorous due diligence process and now used in over 120 countries around the world, including Australia, Brazil, Canada, the European Union, South Africa, Nigeria and many more (Deloitte Touché Tohmastu, 2013). Each country adopting IFRSs are subject to a transition process during the year it is adopted. This can cause significant disruption to users of the financial statements.

Since accounting treatments for similar items may vary and hinder comparisons and trend analysis. Given that the quality of the financial statements is affected by the quality of the underlying accounting standards, users may benefit from understanding the impact of a shift from local generally accepted accounting principles (GAAP) to IFRS. In addition, economic changes may have implications similar to those in Land and Lang (2002), where the quality of accounting has improved around the world. Since the early 1990s, possibly due to factors such as globalization and anticipation of harmonization of international accounting. Due to the relatively recent presence of IFRSs in Nigeria and other sub-Saharan African countries, their adoption has not been taken seriously. Thus, only about 20% of the 54 countries in Africa have adopted IFRSs as a principle based financial reporting framework (Ismaila, 2010). This conforms with their lack of knowledge of the benefits that IFRS can bring to increased transparency and credible financial reporting practice or their refusal to participate in the global economy. Therefore, it may not be possible to accurately compare financial statements prepared under the IFRS framework with those that are consistent with our local standard only. Moreover, non-compliance with the legal and professional framework of IFRS may present an increased challenge for companies, especially banks.

Based on accounting theory, the purpose of financial reporting is essential to reduce Information mismatch between business managers and contracting parties (Ball, 2001). Financial reporting reduces the information asymmetry by making timely and relevant information available (Frankel & Li, 2004). Since accounting quality and economic efficiency vary greatly from country to country, International accounting systems offer an interesting framework for looking at the economic implications of financial reporting. Nigeria CGCP Comparison (NGAAP) to IFRS and the identification of differences between the two regimes is an important issue for users of financial statements. Much of the IFRS research has concentrated on the issue of financial reporting. However, financial reporting is an aspect of the total impact of the make-up of IFRSs. Far more significant is the impact of a set of standards on a company's organization, philosophy, and corporate structure conformance to standards, performance management, and internal control and so on. The purpose of the study is to examine whether financial reports prepared in accordance with the IFRS legal and professional improve best practices in the organization enhance best practices in business organizing in Nigeria. Consider the critical importance of globalization and the alignment of financial information with the strategic economic development plans of the Nigerian sector. The reality is that accountants and auditors are key individuals who understand and have basic financial reporting and preparedness skills.

Frankel and Li (2004)observe that the effect of IFRSs the best of monetary data is critically also as to: verify the impact of the necessary attractiveness of IFRS at the best of monetary statements in Nigeria. Besides, units of monetary statements are intended for various users; starting from management, owners, creditors, respondents, authorities, agencies, regulatory authorities, traders, analysts, etc. particularly, traders want to realize which objects with inside the monetary statistics are beneficial for funding decisions. Based on the want for the availability of comments on whether or not the external trade to IFRS has progressed to the high-satisfaction of monetary reporting, consequently this take a look at has a tendency to look at the effect of IFRS of the high-satisfactory of monetary reporting in Nigeria. The research in Hector and Julian (2014), Yahya et al. (2015), and Kerry, Reza and Patti (2015) checked out the impact of IFRS adoption on economic reporting exceptional and drawn a few conclusions however have now no longer taken into consideration IFRS variables such as: how its’ adoption reasons great practices in company organization; the way it beautify cross-border funding and create get right of entry to worldwide markets; additionally on how it’s going to enhance the company’s performances. Our examine investigated the affiliation among IFRS normal disclosure practices and sampled multinational firms’ overall performance in the post-IFRS duration 2012–2019, the use of RO E to degree the corporationsoverall performance. Company proportion charges and diverse enterprise attribute has been used as manage variables, to research the relationships. Return on capital employed (ROCE) is taken into consideration as one of the key overall performance signs which allows buyers to decide the general economic overall performance of the multinational companies. We take a look at targets at documenting the present day nation of disclosure of economic statistics below IFRS to help coverage makers to formulate regulations with the intention to decorate powerful IFRS implementation. It may also construct at the preceding research and make a contribution to the lack of literature on disclosure practices and overall performance of multi-country wide corporations in rising economies consisting of Nigeria.

2. Literature Review

2.1. International Financial Reporting Standard (IFRS)

International Financial Reporting Standards (IFRS) are standards, interpretations and the framework followed through the Council on International Accounting Standards; International Financial Reporting. Standards are a merchandise of personal area projects geared toward harmonizing and internationalizing economic records in reaction to the needs of enterprise globalization and local convergence. The International Auditing Standards Committee (IASC) is a. The expert accounting our bodies of unbiased countries, shaped in June 1973 through the International Federation of Accountants, produced the number one set of worldwide necessities referred to as the. International Accounting Standard (IAS) amongst 1973 and 2001, (Benson, 1976). The Following the 2007 change from the IASC, the IASB published its famous in a sequence of declarations entitled International Financial Reporting Standards (IFRS). The IASB has moreover accompanied all the necessities issued thru IASC approach, and staffing wishes to stay rates as “International Accounting Standards (IAS)”. IFRSs is a completely precise set of awesome and understandable necessities for preferred financial reporting, which might likely be primarily based totally, absolutely, mostly on requirements contrary to the rules-primarily based totally absolutely approach. IFRSs includes 4 patterns of documents, specifically IASs (41) and IFRSs (18); the Standing Interpretation Committee Declarations, SICS (II); and International Financial Reporting Outcomes Committee Statements, IFRICS (18), (Azobu, 2010). IFRSs are designed to inspire expert judgment and discourage reliance on specific rules (Doubnik & Perero, 2007). The adoption and implementation of International Accounting Standards have been greater thru persuasion, and in no way obligatory on any country’s expert accountancy our bodies whore contributors on those boards. These requirements have the trouble of automated adoption and with the useful resource of using all worldwide locations, attributable to variations in ancient past and subculture of worldwide locations, variations with inside the desires of, and with the useful resource of using diverse financial surroundings and the perceived annoying situations to sovereignty of states and implementing requirements (Frank, 1971).

2.1.1. International Financial Reporting Quality

Empirical research have investigated the outcomes of adopting IAS/IFRS in Europe on investors’ belief of accounting great previous to Regulation 1606/2002, imparting proof in favour in their adoption by the way of disclosure, great rankings furnished with the aid of using reputed experts, Daske and Gebhardt (2006) report, for instance, an boom in accounting great for a pattern of Austrian, German, and Swiss corporations switching to IAS/IFRS with inside the length previous to their obligatory adoption in Europe. Similar effects are furnished through value-relevance research which includes those through Bartov et al. (2005), which file a growth with inside the value-relevance of income for German corporations adopting IAS/IFRS. Barth et al. (2008) additionally evaluate home GAAP and IAS/IFRS throughout 21 countries, suggesting that corporations making use of IAS/IFRS show case much less income management, greater well timed loss recognition, and greater value-applicable accounting measures. However, these types of research, discuss the voluntary adoption of IAS/IFRS, which is probably the end result of company incentives to growth transparency. Ashbaugh (2001), For instance, files that the choice to record below IAS/IFRS is definitely associated with company size, the variety of overseas fairness markets on which the firm’s stocks are traded and the extra issuance of fairness stocks. Similar findings are pronounced through Cuijpers and Buijink (2005) and Gassen and Selhorn (2006). For a pattern of European non-economic corporations that voluntarily followed IAS/IFRS, Cuijpers and Buijink (2005) report that overseas list and geographical dispersion of operations are vital drivers. Gassen and Selhorn (2006) additionally display that size, worldwide exposure, dispersion of possession, and IPOs are vital determinants of voluntary IAS/IFRS adoption through publicly traded German corporations. Findings consequently endorse that organizations voluntarily moving to IAS/IFRS have incentives to enhance transparency and the greateconomic reporting. Along the equal lines, Covrig et al. (2007) argued that overseas mutual fund possession is extensively better amongst IAS/IFRS adopters, which indicates a voluntary transfer to IAS/IFRS aimed toward attracting overseas buyers through imparting them with each extra records and records this is extra acquainted to them. Further research has tested the results of the adoption of IFRSs on fantastic accounting. Goodwin and Ahmed (2006) studied the impact of IFRS in Australia as regards to the dimensions of entities. Small businesses had fewer adjustments to IFRS adoption and professional net income and equity growth. In contrast, big businesses had many adjustments, negligible will growth to net earnings, similar to a decrease in equity. Their stop is that the adoption of IFRS has been found to have little impact on the accounting fantastic of smaller businesses, and a larger impact on the accounting fantastic of big businesses. In a similar study, Goodwin, Ahmed and Heaney (2007) found that on average, IFRSs lead to an approximate growth in liability and leverage ratio and a decrease in equity and earnings. These findings are regular with the consequences of Hung and Subramanyam (2007), who focused on the appropriate financial statement consequences of adopting IFRS thru manner of the manner of the usage of a right away assessment of financial statements prepared underneath IFRS and German GAAP.

2.1.2. Issues and Challenges in International Financial Reporting Standards

The global Financial Reporting Standards (IFRS) is seemed as a worldwide GAAP and a fixed of principles –primarily based totally and globally well-known posted via way of means of the International Accounting Standards Board (IASB) to help the ones concerned with inside the instruction of monetary statements all around the international to put together and gift excessive quality, obvious and similar monetary statements. According to Akinmutimi (2011), the essential power of IFRS is that it gives a variety of advantages to company and public entities in phrases of cost; clean consolidation of monetary statements; higher control manipulate of inner consistencies of reporting; progressed get right of entry to worldwide monetary capital markets; capacity of global buyers to make significant comparisons of funding portfolios in one-of-a-kind international locations and advertising of exchange inside nearby financial groups. According to Izedonmi (2011), the want and feasibility for a uniform international monetary reporting framework has been on for plenty years. He diagnosed the subsequent elements helping the adoption of IFRS:

  1. Continuous integration of global wide economy;

  2. Increased interdependence of the worldwide monetary markets;

  3. Absence of limitations of capital flows throughout countrywide boundaries;

  4. Increased mobility of capital throughout country wide boundaries;

  5. Multiple list with the aid of using businesses in capital markets inside and out of doors their domestic jurisdiction;

  6. Continuous call for through stakeholders for first-rate statistics and more disclosures.

There are but a few inherent troubles with aligning worldwide accounting requirements, Ukpai (2002) mentioned that worldwide accounting absolutely has a language trouble. The phrase “asset” in French may additionally connote “active”. The German language has no affordable single-phrase counterpart for the time period for. Since accounting it isn't always easily translatable into Dutch, humans in Holland sincerely use the English phrase “accounting” as a part of their local language. Accounting phrases are some distance from universally comprehensible. More so, authorities’ coverage won't be in guide of worldwide requirements. Adams (2004) claimed that in which an accounting widespread conflict with authorities’ coverage, the same old is revised. For instance, LIFO isn’t always allowable for tax reason in inventory valuation. Another trouble inherent with the adoption of IFRS is the widespread tendency to face up to change. Too often, cooperation comes best from compromise and from time to time to the detriment of first-rate (NASB 2010). After few years of vacillation, Nigeria in 2010 officially determined to align her monetary and accounting computations and reporting requirements with what obtains in maximum futuristic economies the world over through putting January 1, 2012 because the graduation date for company and public entities to undertake the IFRS. Having weighted the demanding situations and advantages related to IFRS, a few reporting entities in Nigeria mainly people with international operations together with Guaranty Trust Bank, Access Bank, EcoBank, and Oando have taken steps towards its improvement and implementation to facilitate the adoption of IFRS the NASB, investors, business company establishments and authorities regulatory agencies, in collaboration with one-of-a-kind expert our bodies involved in financial reporting have organized series of workshops and seminars in the US as a detail in their efforts to create focus about IFRS task conversion. The implications of this desire are as numerous as they are profound. Akinmutimi (2011), stated that organization entities need to assemble functionality to energy the method and revisit their operational and internal manipulate systems. More so, the felony hints need to be amended and the transition approaches need to be treated successfully, successfully and professionally so that you can maintain the self warranty of clients of accounting services on the self warranty of clients of accounting services on the abilities of professional accountants. Gambar (2010) stated that the a achievement adoption of IFRS entails assessing the technical accounting, tax implications, internal approaches, and statutory reporting, generation infrastructure, and organizational issues.

2.1.3. Adoption of IFRS in Nigeria

Recently there has been a push within side the path of the adoption of IFRS developed and issued via the International Accounting Standards Board (IASB). The developing growth in global trade, flow border financial transactions and investments which always consists of the guidance and presentation of accounting opinions that is useful all through various country wide borders, has brought about the adoption of IFRS via every the developed and developing worldwide place (Armstrong et al., 2007). The technique of adoption received an extraordinary beautify in 2002 whilst the European Union, accompanied a regulation 1606/2002Require all public bodies within the territory to be converted into IFRSs from 2005. (Iyoha & Faboyede, 2011). A variety of African worldwide places consisting of Nigeria, Ghana, Sierra Leone, South Africa, Kenya, Zimbabwe and Tunisia among others have accompanied or declared intentions to adopt the standards. In particular, the Nigeria adoption of IFRS has become launched in September, 2010 via the Honorable Minister, Federal Ministry of Commerce and Industry – Senator Jubriel Martins Kuye (OFR) (Madawaki, 2012).

The adoption have become planned to start with Public Listed Companies in 2012 and via prevent 2014 all stakeholders would possibly have complied. As of today, banking vicinity has truly implemented. This is considered a welcome improvement for developing worldwide places specially some of those who had no property to installation private standards. There are proponents in addition to fighters who've arguments for and towards the worldwide adoption of IFRS. According to Barth (2007), the adoption of a not unusual place frame of worldwide requirements is anticipated to have the subsequent advantages: decrease the price of monetary facts processing and auditing to capital market place contributors as users, familiarity with one not unusual place set of worldwide accounting requirements in place of numerous neighborhood accounting requirements through Accountants and Auditors of monetary reports, comparison and uniformity of monetary statements amongst businesses and international locations making the paintings of funding analysts easy, appeal of overseas traders similarly to widespread capital marketplace liberalization. Ball (2006) said that many growing international locations in which the pleasant of neighborhood governance establishments is low, the selection to undertake IFRS can be beneficial. Lipsey and Chrystal (2003) referred to that FDI regularly generates fairly higher-paying jobs than would possibly in any other case be to be had to neighborhood citizens, it generates funding that might not be viable with the neighborhood assets only, it hyperlinks the recipient economic system into the arena economic system in manners that might be tough to gain through new companies of a simply neighborhood origin. According to Lipsey and Chrystal (2003) the FDI alters country’s comparative blessings and improves its competitiveness via era switch and consequences myriad externs, home funding, which could regulate a country’s quantity and sample of alternate in lots of profits improving directions. Countries that be afflicted by corruption, slow‐moving, or ineffectual authorities are possible to resist the change (LaPorta et al., 1999) however, in such international locations, the possibility and switching fees are decreasing which makes the opportunity of adopting IFRS advantageous. Kumar (2007) the overseas capital has the capacity to supply great advantages to growing nations. Similarly to supporting bridge the space among financial savings and funding in capital-scarce economies, capital regularly brings with it present day era and encourages the improvement of greater mature monetary sectors. Capital flows have tested powerful in selling increase and productiveness in international locations which have sufficient professional employees and infrastructure. Some economists consider capital flows additionally assist area governments’ macroeconomic policies. GAB (2012) said that one of the demerits to be able to be skilled with the aid of using nations adopting IFRS include: forgoing the advantages of any beyond and capability destiny improvements in nearby reporting requirements unique to their economies. Single set of accounting requirements can't replicate the variations in country wide enterprise practices bobbing up from variations in establishments and cultures (Armstrong et al., 2007). Nigeria's accounting regulations include: the Corporations and Related Matters Act, 1990, which stipulates the format, content and scope of financial statements, disclosure requirements and verification. It additionally calls for that monetary statement of organizations observe statements of accounting requirements (SAS) issued now and again with the aid of using the NASB and audit completed accord with usually standard auditing requirements.

Second, the Nigerian Accounting Standards Board (NASB) Act No.22 of 2003 as the easiest. Impartial frame answerable for growing and issuing SAS for preparers and auditors of monetary statements of enterprise problem and authorities agencies (Madawaki, 2012). Although many nations have confronted demanding situations of their selections to undertake IFRS, its extensive unfold adoption has been promoted with the aid of using the argument that the advantages outweigh the costs (Iyoha & Faboyede, 2011). Economic researchers opined that funding waft is brought in via way of means of pull elements with inside the host nations; those include plant-based assets, infrastructure, human capital, market and macro-economic institutions (Asiedu, 2006; Dirk, 2006; Asiedu & Lien, 2011). From this, Gordon, Loeb and Zhu (2012) argue that IFRS adoption cannot tell funding influx without thinking about the extent of improvement of the affected nations. Hence, for IFRS adoption to enhance funding, the extent of improvement of the nations should be taken into consideration (Efobi et al., 2014). It is crucial to word that Gordon, Loeb and Zhu (2012) are a number of the maximum latest empirical research which have taken into consideration the IFRS/FDI nexus. The present theoretical fashions mean that Foreign Direct Investment (FDI) is useful for host United State’s monetary growth. According to the conventional monetary theory (regulation of diminishing returns), FDI will generally tend to pay attention in much less evolved nations, wherein there exist extra possibilities to obtain better returns. In order for FDI to end up effective in growing nations, the subsequent situations have to exist: (i) the lifestyles of a minimal threshold stage of human capital (Borensztein et al., 1998), advanced home infrastructures (de Mello, 1999), and an evolved neighborhood economic system (Alfaro et al., 2006). Out of all, the closing prerequisite appears to have greater weight so as for FDI to circulate any growing united states and feature a measurable effect on monetary growth. Lack of those necessities has ended in imbalanced with inside the FDI distribution throughout many growing nations. Some of the nations are dealing with problems in attracting overseas investors. FDI takes into consideration as a crucial channel for direct generation, distribution and can be the main essential conduit for generation switch due to the shortage of economic assets and the pressing want for reconstruction in lots of growing nations (Hossein & Yazdan, 2012). Within this framework, it's far anticipated that FDI will make contributions to monetary growth, in a roundabout way via way of means of accelerating the diffusion of widespread motive technologies (Hossein & Yazdan, 2012).

2.1.4. Challenges to Nigerian uptake of IFRS.

The realistic, demanding situations that can be confronted in Nigeria due to imposing the IFRS want to be diagnosed and addressed so as to advantage completely from the creation of IFRS. These demanding situations were evidenced with the aid of using preceding research performed with the aid of using students such as: (Alp & Ustundag, 2009): ability understanding shortfall, (Li & Meeks, 2006): felony machine effect, (Shleifer & Vishny, 2003): tax machine effect, (Irvine & Lucas, 2006): schooling and training, (Martins, 2011): enforcement and compliance mechanism. The demanding situations are mentioned as follows: Level of Awareness

The transition plan to IFRS and its implications for preparers and customers of monetary statements, regulators, educators and different stakeholders need to be efficaciously coordinated and communicated. This must encompass elevating recognition at the ability’s effect of the conversion, figuring out regulatory synergies to be derived and speaking the brief effect of the transition on enterprise overall performance and monetary position. The implementation of IFRS calls for full-size practice each on the United States and entity degrees to make certain coherence and offer readability at the authority that IFRS can have in terms of different present country wide laws. Accounting Education and Training

Practical implementation of IFRS calls for the good enough technical capability amongst preparers and customers of monetary statements, auditors and regulatory authorities. Countries that carried out IFRS confronted loads of capability-associated issues, relying on the method they took. One of the fundamental demanding situations Nigeria may also stumble upon with inside the realistic implementation process will be the death of accountants and auditors who're technically equipped in imposing IFRS. Usually, the time lag between the selection date and the real implementation date isn't always sufficient longer thy to educate a very good wide variety of specialists who ought to safely observe worldwide standards. Training Resources

Professional accountants are regarded upon to make sure a successful implementation of IFRS. Along with those accountants, authority officials, economic analysts, auditors, tax practitioners, regulators, accounting lecturers, stockbrokers, preparers of economic statements and records officials are all chargeable for easy adoption process. Training substances on IFRS aren't effortlessly to be had at lower priced expenses in Nigeria to teach this sort of big institution which poses a super mission to IFRS adoption. Amendment to Existing Laws

In Nigeria, accounting practices are ruled with the aid of using the Companies and Allied Matters Act (CAMA) 1990, and the Statement of Accounting Standards (SAS) issued with the aid of using the Nigerian Accounting Standards Board (NASB) and different current legal guidelines inclusive of Nigerian Stock Exchange Act 1961, Nigerian Deposit Insurance Act 2006, Banks and Other Financial Institution Act 1991, Investment and Securities Act 2007, Companies Income Tax Act 2004, Federal Inland Revenue Services Act 2007. All those offer a few hints on instruction of economic statements in Nigeria. IFRS does now no longer understand the presence of those legal guidelines and the accountants need to comply with the IFRS completely and not using an overriding provision of those legal guidelines. Nigerian regulation makers need to make an important change to make sure an easy transition to IFRS.

2.1.5. IFRS (Basic Disclosures) and Firms Overall Performance

This study's objective is to research the effect of IFRS in phrases of basic disclosure on a firm’s overall performance in Nigeria, mainly on the extent of going back on capital hired (ROCE). ROCE is one of the profitability ratios that allow buyers to decide how performance the control of an agency generates income at the funding made through shareholders and in all likelihood the creditors. It is similarly utilized by managers for numerous monetary decisions. When ROCE will increase, it indicates a fine engagement of capital, hired with inside the enterprise. Accurate evaluation of the agency’s ROCE through buyers should to a degree rely majorly on the extent of the facts disclosed with inside the monetary statements. Several earlier varieties of literature have discovered that the fee relevance of accounting facts has declined in current years because of inappropriate disclosures. PriceWaterCoopers (PWC) (2013) posited that evaluation of ROCE is a critical part of buyersevaluation of agency overall performance and stewardship. Investors frequently, meet with demanding situations in seeking to verify the ROCE of businesses they target. The demanding situations they will come across hinge on insufficient disclosure of applicable accounting facts. The hassle regions encompass truthful fee measurement, funding regarding the purchase of some other enterprise specially at the disclosure of the quantity and composition of attention paid to former proprietors of the received enterprise; consistency with facts disclosure, transparency on how control computes their ROCE; segmental facts approximately capital, hired (PWC, 2013). Investors agree with that businesses that generate a ROCE this is nicely above their fee of capital on a constant foundation are the high-quality while score overall performance evaluate to their opposite numbers and could appeal to extra-funding. Hence, the extra the disclosure of monetary facts, the extra ROCE will increase furnished the fee disclosure does now no longer growth above the income. Though, Celik, Ecer, and Karabacak (2006) concluded that Profitability is an essential detail in the Total Disclosure Index however now no longer in the Financial Disclosure Index.

2.1.6. Conceptual Framework of International Financial Reporting Standards (IFRS) and Financial Performance of Multinational Companies in Nigeria


2.2. Theoretical Review

This study was centered on the stewardship theory.

2.2.1. Stewardship Theory

The stewardship theory emphasizes the principal- steward courting believed to have its roots with inside the fields of psychology and sociology. It grew out of the seminal paintings of Donaldson and Davis (1989, 1991) and became evolved as a version wherein senior executives act as stewards for the business enterprise and with inside the pleasant hobbies of the principals (Olson, 2008). The principal- steward courting is a courting of agree with and became evolved as an opportunity to the company idea. In the mildest of company governance, Donaldson & Davis (1991) advocate that stewardship idea focuses basically on empowering structures, and helps the mechanism of CEO duality so one can decorate effectiveness and produce, as a result, advanced returns to shareholders than separation of the jobs of chair and CEO. The software of the steward represented via way of means of the Chief Executive Officer is maximized while organizational goals are completed in preference to self -serving goals (Garcia-Meca & Sanchez-Ballesta, 2009).

2.3. Reviews of Empirical Studies

Only a few research offers initial empirical proof of variations among IFRS and first-class of monetary reporting the company. Blanchette, Racicot and Girard (2011) file an appreciably better variance numerous ratios in IFRS in comparison to the equal ratios in Canadian GAAP for a pattern of corporations that followed IFRS earlier than 2010 (i.e. Early adopters). Interestingly, the file additionally reveals that a ratio primarily based totally on coin waft figures does now no longer display a sizeable difference, constant with the concept that money flows are normally now no longer stricken by versions with inside the utility of accounting standards.

A look at primarily based totally on facts posted via way of means of Canadian actual property corporations in 2011 confirms that IFRS adoption has created volatility in income and variability in key metrics (Salman & Shah, 2011). This look at reviews that actual property, belongings growth in IFRS with the use of cutting-edge marketplace values; and debt balances are likewise better in IFRS. But seeing that belongings have normally improved greater than liabilities beneath the brand new reporting regime, the effect of IFRS adoption manifests through a discounted stage of the common debt-to-really well worth ratio. Furthermore, internet income of actual property corporations is better on common in IFRS even as no sizeable effect on coin flows is found.

Iatridis (2012) looked at the impact of voluntary IFRS information in the context of pre-adoption on the relevance of accounting figures. The take a look at followed logistic and linear regressions and built a disclosure index. The review suggested that companies that provided voluntary information on IFRSs prior to the duration of IFRSs confirmed a larger equity and earnings extra. On the opposite hand, non-voluntary IFRS disclosures found out an extra extrude in leverage and a lower liquidity. Iatridis (2012) similarly documented that voluntary IFRS companies are audited through a massive auditor are tending to be cross-listed. Earlier, Iatridis (2008) found out that considerable disclosure of accounting, statistics, notably related to better size, growth, and leverage measures. The take a look at has the same opinion that companies that offer informative disclosure display proof of better profitability.

The European Union followed IFRS in 2005. Lantto and Sahlström (2009) take a look at the effect of IFRS adoption on key monetary ratios of a continental European country – Finland. They locate that liquidity ratio, reduced beneath IFRS, even as leverage and profitability ratios increased. Additional liabilities arose, especially from rent accounting, worker advantage duties and monetary instruments, and better income has been generally because of enterprise combinations.

Finally, Marchal, Boukari and Cayssials (2007) examines the effect of IFRS adoption in France and reveals small versions of shareholders’ fairness, following the adoption of IFRS, however a boom in monetary leverage and profitability. The take a look at the notes that truthful price accounting changed into now no longer followed for long-lived property besides for one-time changes on transition (in keeping with IFRS 1), funding assets and monetary instruments.

3. Methodology

The population of this study constitutes nine (9) quoted multinational businesses on the go with the drift of the Nigerian Stock Exchange (NSE) as at 21 December, 2020. Importantly, the chosen businesses met the standards they've whole statistics for the duration of 2012 to 2020 monetary reviews. In line with previous research (e.g. Tatiana et al. 2013; Wang & Claiborne, 2008), we evolved a checklist. Checklist gadgets have been used to degree the quantity of compliance to the disclosures mandated through the pattern businesses. The annual document of the pattern businesses for the years 2012 to 2019 have been used for the research. It is the maximum latest statistics primarily based totally on the annual reviews that are the secondary supply of statistical series this is broadly common as credible. Coding of the gadgets to generate a statistics set is in line with, e.g. Gray, Kouhy, and Lavers (1995) primarily based totally on a degree of disclosure quantity through the scoring system. Despite the grievance that un-weighted index (dichotomous scores) of the 1 if the object is disclosed and 0, if now no longer disclosed, negate the opportunity that everyone the factors aren't similarly important (Barako et al., 2006). The un-weighted index is common for measuring the variety of disclosures (Bozzolan, Trombetta & Beretta, 2009) and former research have used dichotomous score. Hence, we used the equation (1) for the computation of the general disclosure amount for every business enterprise. In order to restrict the not noted variable bias, the take a look at the added organization size, leverage and age of the business enterprise manipulate variables. Ordinary least changed into used because the approach of statistical analysis.

3.1. Model Specification

The dependent variable for this study was Financial Performance (FAP). The independent variable International financial reporting quality (IFR). The control variables are firm size (FMS), leverage (LEV) and age (AGE).

The following model is specified in accordance with the objective and formulated hypothesis in other to guide and capture the effect of independents variable the dependent variable in this study:

FAP = f (IFR, FMS, LEV, AGE) ------------------------------------------------------------------------- i

FAPit = βo + β1IFRit + β2FMSt+ β2LEVt + β4AGEit + Uit -----------------------------------------------ii

Table 3.1. Measurement of Variables





Apriori Sign


Financial Performance (FAP)

Measures financial Performance using the ratio of operating profit over the company capital employed

Ofoegbu & Odoemelam (2018)



International financial reporting quality (IFR)

Overall Disclosure Index (mandatory and voluntary disclosures, dichotomous disclosure index approach, each disclosure item receives equal weighting)

Ofoegbu & Odoemelam (2018)



Firm size (FMS)

Assets (Logarithm of Total Assets)

Tatiana et al. (2013)



Leverage (LEV)

= Leverage is the company’s total liability divided by total assets

Barako et al., (2006)



Age (AGE).

Age (1 if the company’s leverage is equal or greater than 20% and 0 otherwise)

Bozzolan, Trombetta, & Beretta, (2009)


Source: Researchers’ Compilation, (2021)

4. Results

The data set is summarized in the tables below:

Table 4.1.



Std. Deviation

































Source: Researchers’ Computation, (2021)

4.1. Descriptive statistics (Table 4.1)

Of the nine multinational groups studied, the suggest firm’s age is set is the best which indicates that multinational groups in Nigeria have quite a slight age that may have an effect on their overall performance because the suggest cost 1.01148 is greater. Standard deviation of 2.47319, it means that multinational groups in Nigeria have quite been complying with IFRS obligatory and voluntary disclosures. Generally, the summary of the standard deviation exhibits that elements that have an effect on overall performance are lightly allotted throughout all of the multinational groups. Financial overall performance was definitely skewed with a skewed cost of zero five which indicates it's miles generally allotted. All the explanatory variables also are definitely skewed.

Table 4.2. The Computation of (OLS) Result



Standard error.




























R2=0.682, R2 bar=0.634, F-stat., (4,81)=31.172, Pro(F-stat.,)=0.000

D.W = 2.131

Source: Researchers’ Computation, (2021)

OLS Analysis (Table 4.2)

FAP = 3.574 + 2.165 + 1.242 + 2.636 + 2.254 + U

S.E = (0.247) (0.120) (0.257) (0.456) (0.432)

T-Stat = {8.968} {3.865} {0.876} {0.465} {4.256}

The intercept value shows 3.574 which means financial performance (FAP) has 3.574 units when other variables are held constant. IFR shows that one percentage increase in compliance with IFRS disclosures will bring 2.165 percent increase in financial Performance (FAP), and this it’s significant at 0.017, because it is less than 0.05 level of significance. Both FMS and LEV displayed positive correlations but are not significant in influencing both financial and performance (FAP) and disclosures since they are control variables, meanwhile, age of the company is significant and with positive correlation. The R-squared stand at 0.682 which indicates the explanatory energy of the version which may be visible as 68.2%, method 68.2% of modifications in economic Performance (FAP) may be defined leaving 31.8% unaccounted for. The F – statistic indicates the robustness of the version through evaluating F-calculated to F-essential to be able to give an explanation for the effect of complete explanatory variables on defined variable, and this become proven through searching at it from the attitude of 0.01 and 0.05 stage of importance which might be 3.seventy eight and 2.60 and are much less than 31.172 calculated respectively, in sentences of moderate importance, all impartial variables confirmed an appreciable dating with the based variable with the prob. (F-statistic) of 0.000. The Durbin Watson cost of 2.131 is a sign of the absence of autocorrelation withinside the version.

4.2. Discussion of Findings

Our results in the context of indexed multinational agencies in Nigeria, particularly indicate a sizeable dating among average disclosure and agencies’ economic overall performance, which helps the view of Iatridis (2008); Iatridis (2011); Marfo and Atsunyo (2014), they observed that better profitability is related to extra distinct accounting obligatory and voluntary disclosure with the reason of elevating capital with inside the inventory market. This locating is opposite with the findings of Barako et al. (2006) and Tatiana et al. (2013) who suggested a mere association. They cited that unprofitable groups will drastically divulge extra facts to justify their bad overall performance. The implication of the end result is that the facts disclosed withinside the economic document might be powerful and appealing sufficient to traders’, whose extra investments ensures extra earnings to the organization, subsequently enhancing their performances. Therefore, multinational agencies’ economic overall performance could grow the extra they divulge required and essential facts to useful resource traders and different segments of the society in taking financial decisions.

5. Conclusion

This look at investigates the connection between International Financial Reporting Quality and the economic overall performance within the context of indexed multinational agencies with inside the Nigerian Stock Exchange (NSE) with the usage of cross-sectional, time-collection data, and OLS regression techniques. The look at concludes that, the extra business enterprise follows IFRS disclosure guidelines, the extra the traders are interested in making an investment in such business enterprise and thereby enhancing their performances (go back on capital employed).

This research work finding show that the level of company disclosure considerably partner with economic overall performance. This end result shows that amongst different things, agencies ought to additionally be involved with the disclosure of applicable facts at a probable minimum fee to stabilize the viable fine impact of obligatory and voluntary disclosure of economic overall performance. The look at additionally well-known shows the want for the Financial Reporting Council of Nigerian as a regulatory frame to constantly inspire education and retraining of the agencies’ body of workers on practice of economic reporting that complies with IFRS applicable and obligatory disclosures.

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1 PhD, Department of Accounting, Achievers University, Owo, Corresponding author:

2 Department of Accounting, Achievers University, Owo.

3 Department of Accounting, Achievers University, Owo.