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Procedia Economics and Finance 28 (2015) 92 101

7th INTERNATIONAL CONFERENCE ON FINANCIAL CRIMINOLOGY 2015

13-14 April 2015,Wadham College, Oxford, United Kingdom

Adoption of International Financial Reporting Standards and

Earnings Quality in Listed Deposit Money Banks in Nigeria
Shehu Usman Hassan, PhD*
Department of Accounting, Kaduna State University, Kaduna-Nigeria.

Abstract

Published accounting information in financial statements is required to provide various users - shareholders, employees,
suppliers, creditors, financial analysts, stockbrokers and government agencies with timely and reliable information useful for
making prudent, effective and efficient decisions. The widespread failure in the financial information quality has created the need
to improve the financial information quality and to strengthen the control of managers by setting up good firm structures. This
paper investigates firm attributes from the perspective of structure, monitoring, performance elements and the quality of earnings
of listed deposit money banks in Nigeria. The study adopted correlational research design with balanced panel data of 14 banks
as sample of the study using multiple regression as a tool of analysis. The result reveals that firms attributes (leverage,
profitability, liquidity, bank size and bank growth) has as significant influence on earnings quality of listed deposit money banks
in Nigeria after the adoption of IFRS, while the pre period shows that the selected firm attributes has no significant impact on
earnings quality. It is therefore concluded that the adoption of IFRS is right and timely.

2015
2015 The
The Authors.
Authors.Published
PublishedbybyElsevier
ElsevierB.V.
B.V.This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of ACCOUNTING RESEARCH INSTITUTE, UNIVERSITI TEKNOLOGI MARA.
Peer-review under responsibility of ACCOUNTING RESEARCH INSTITUTE, UNIVERSITI TEKNOLOGI MARA
Keywords: Firm attributes; Earnings quality & Listed Deposit money banks in Nigeria.

1. Introduction

It will be in the interest of the Nigerian economy for listed companies to adopt globally accepted, high quality
accounting standards, by fully converging Nigerian national accounting standards with International Financial
Reporting Standards (IFRS) over the earliest possible transition period, given the increasing globalization of capital

* Corresponding author. Tel.: +2348067766435, +2348057777085.

E-mail address:Shehu.hassanus.usman@gmail.com

2212-5671 2015 The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of ACCOUNTING RESEARCH INSTITUTE, UNIVERSITI TEKNOLOGI MARA
doi:10.1016/S2212-5671(15)01086-2
 Shehu Usman Hassan / Procedia Economics and Finance 28 (2015) 92 101 93

markets (IFRS Adoption Roadmap Committee, 2010). On 28 July 2010, the Nigerian Federal Executive Council
approved January 1, 2012 as the effective date for the convergence of Nigerian Statement of Accounting Standards
(SAS) or Nigerian GAAP (NG-AAP) with International Financial Reporting Standards (IFRS). The adoption was
organized such that all stakeholders use IFRS by January 2014. According to the IFRS adoption Roadmap
Committee (2010), Public Listed Entities and Significant Public Interest Entities are expected to adopt the IFRS by
January 2012. All Other Public Interest Entities are expected to mandatorily adopt the IFRS for statutory purposes
by January 2013, and Small and Medium-sized Entities (SMEs) shall mandatorily adopt IFRS by January 2014.
Nigerian listed entities were required to prepare their closing balances as at December 31, 2010 according to IFRS.
The closing figures of December 31, 2010 will become the opening balances as at January 1, 2011 for IFRS based
financial statements as at December 31, 2011. The opening balances for January 1, 2012 will be the first IFRS full
financial statements prepared in accordance with the provision of IFRS as at December 31, 2012.
In Nigeria the information disclosure requirements in the financial statements under NG-GAAP were grossly
inadequate to effectively bridge the information asymmetry between companies and the users of the financial
statements. However, reporting under the IFRS regime requires companies, especially in the Oil and Gas sector to
make more disclosures regarding their reserves, discoveries and other key variables necessary for investment
decision and to meet the objective of financial statements, which is to show a true and fair view of the activities of a
company. It is therefore envisaged that the companies will disclose more of their financial information with the
transition from the NG-GAAP to IFRS.
Financial information quality in Nigeria remains weak compared to many advanced jurisdictions. This resulted
in the hampering of the growth of efficient equity markets. A common complaint among investors in Nigeria is that
financial information on company performance is either unavailable or, if provided, lacks reliability (Shehu, 2011).
Analysts following in Nigerian market are far fewer than in the developed ones. Also, the Nigerian settings in terms
of accounting standards, institutional structure, and corporate governance are expected to be different from those in
the developed countries in terms of advancement and compliance. Given all these presumptions, it is not clear that
the evidence from Nigerian firms, especially deposit money banks in respect of financial information quality is
consistent with those in the developed or other developing nations (Shehu and Abubakar, 2011). Therefore, a
comprehensive study anchoring firms attribute after the adoption of IFRS and earnings quality is necessary which
will be of interest to investors.
This study will be of interest to investors since the level of pervasiveness of earnings management and associated
IFRS adoption using firm attributes can help investors assess the overall quality of earnings. Rational investors
make investment decisions that are primarily based on the expectation of firms future performance and quality of
earnings. Managers manage earnings and, in effect manage expectations of future earnings prospects, regardless of
whether earnings management is beneficial or harmful to investors. The main objective of this study is to examine
the impact of IFRS adoption on the quality of earnings of listed deposit money banks in Nigeria. It is therefore
posited that the adoption of International Financial Reporting Standards has no significant impact on the earnings
quality of listed deposit money banks in Nigeria.
The reason why banks manipulate earnings is supported by three arguments: signalling argument, income
smoothing or earnings management argument and capital management argument (Zhou and Chen, 2004). The
signalling argument suggests that banks use discretionary loan loss provision to insinuate that earnings will be
higher in subsequent periods (Wahlen, 1994). Contrary to the signalling argument, earnings management argument
holds that managers increase the provision for loan losses during periods when earnings are high, under the
assumption of income smoothing (Beatty, Chamberlain & Mogliolo, 1995: Collins, Shackleford & Wahlen, 1995:
Rivard, Bland & Morris, 2003). This implies that earnings management in this area can improve a banks cash flow,
capital adequacy, market value and overall performance. While the capital management argument suggests that
since an increase in loan loss provision increases regulatory capital, management exercises discretion over its
provision (Ahmed, Takeda & Thomas, 1999: Beatty et al., 1995). Regardless of the industry and the strings
attached, managers discretionary behavior to achieve personal gains undermines the shareholders wealth
maximization objective of the firm.
The motivation for this study hinged on a number of reasons. Nigeria is the largest market in Africa by the virtue
of her size. She also plays significant and dominant roles in the economics and politics of the region, both in the
ECOWAS and the African Union. The importance is more clearly highlighted in the case of internationalization of
standards and the impact of accounting standard differences on the value relevance of the information in the
financial statements for different users. The level of research interest in this area directly reflects the effect that the
94 Shehu Usman Hassan / Procedia Economics and Finance 28 (2015) 92 101

adequacy of earnings quality has on decisions making by the various users of financial statements of listed deposit
money banks in Nigeria. Therefore, the findings of this study are expected to have particular positive implications of
coming up with policies and measures that will improve the compliance of IFRS standards that will control
manipulative accounting by regulators responsible for ensuring high quality financial reporting such as the Financial
Reporting Council of Nigeria, Nigerian Securities and Exchange Commission and Corporate affairs Commission. In
addition, the financial analysts, stock market stakeholders and shareholders and management of Nigerian deposit
money banks stand to benefit tremendously from the outcome of this research.
The remaining parts of the paper cover four sections- section two contains theory and evidence where arguments
are presented and previous literatures are reviewed, methodology is discussed in section three. In addition, results,
policy implications and conclusion are presented in section four and five respectively.

2. Theory and Evidence

Several studies related to the adoption of IFRS have been published in recent years. Arum (2013) investigated
the impacts of the IFRSs adoption on the quality of financial information in Indonesia found that the adoption of
IFRSs has resulted to better, more relevant and reliable financial reporting quality capable of reducing moral hazard
in the financial statements to conduct earnings management through accrual policy. The global adoption to or
convergence with IFRSs is considered likely important determinant of the quality of accounting information
(Houqe, Zijl, Dunstan & Karim, 2012).
A related set of studies examines how firms comply with IFRS. Using IASCs list of IAS adopters, Cairns
(1999, 2000) examines firms adoption approaches (e.g., full adoption, dual reporting, and reconciliations)
and their compliance with IAS. Leuz and Verrecchia (2000) examine information asymmetry and market liquidity
proxies for German firms adopting IAS and U.S. GAAP. They find that IAS and U.S. GAAP firms exhibit lower
bid-ask spreads and higher turnover than German GAAP firms as well as a decrease in spreads and turnover around
IAS or U.S. GAAP adoption. Examining firms in Germanys New Market, Leuz (2003) finds that the differences in
spreads, turnover, and IPO underpricing are statistically and economically insignificant across IAS and U.S. GAAP
firms, suggesting that both sets of firms are characterized by similar information asymmetries.
More recent studies focus on the cost of capital effects of IFRS reporting and produce mixed evidence. Barth
et al. (2005) document a decrease in the cost of capital around IFRS adoption using expected returns from the Fama-
French three-factor model. Using implied cost of capital estimates, Cuijpers and Buijink (2005) do not find
significant differences across local GAAP and IFRS firms in the EU. Daske (2006) presents evidence that German
IFRS firms have a higher cost of equity capital than local GAAP firms. Covrig et al. (2007) document that foreign
mutual fund ownership is significantly higher for IFRS adopters compared to local GAAP firms and that the
difference in mutual fund holdings increases for firms in poor information environments and with
low visibility, suggesting that IFRS reporting can help firms attract foreign institutional investment.
Some studies gather evidence about changes in market liquidity and firms cost of capital, as a way of measuring
the impact of IFRS. In one of the first large scale studies of firms adopting IFRS in a mandatory setting, Daske et al.
(2008) conclude that market liquidity increases following introduction of IFRS. They also find evidence of a
decrease in firms cost of capital and an increase in equity value occurring prior to the official adoption date. In a
related study, the authors find benefits such as improved liquidity and lower cost of capital are more likely for firms
that are serious adopters of IFRS (defined as firms with a commitment to transparency) (Daske et al., 2011).
Li (2010) finds IFRS mandatory adopters benefit through reduced cost of capital in the immediate mandatory
adoption period, reflecting increased disclosure and enhanced information comparability. However, the reduction
occurs only in countries with strong legal enforcement. Palea (2007) considers costs of capital effects for financial
institutions. She reports lower cost of capital for EU financial firms using IFRS compared to others following
national standards and the Fourth and Seventh Directives, a result that is consistent with IFRS adoption objectives of
the European Commission (EC1606/1202).
Researchers have long used share prices to reveal information about the usefulness of financial data (Ball and
Brown; 1968 and Beaver, 1968). In this tradition, Beuselinck et al. (2009) investigate stock return synchronicity for
mandatory IFRS adopters in the EU. They conclude that IFRS adoption reveals new firm-specific information and
subsequently reduces the surprise in future disclosures. Landsman et al. (2011) consider the impact of the use of
IFRS on share prices and trading (abnormal return volatility and trading volume). They conclude that the
information content of earnings announcements has improved for IFRS reporters by reducing reporting lag,
 Shehu Usman Hassan / Procedia Economics and Finance 28 (2015) 92 101 95

increasing analyst following and increasing foreign investment. They also find the IFRS effect depends on the level
of enforcement in a country.
Other studies explore the impact of IFRS for market participants. In relation to investors, studies provide
evidence of various benefits that can be linked to firms use of high quality, comparable standards. Brggemann et
al. (2009) consider the investments in foreign firms made by individual investors on the Open Market at the
Frankfurt Stock Exchange (4,869 firms from 31 countries). They report an increase in trading activity following the
adoption of IFRS. Thus the authors conclude IFRS have the potential to promote more foreign equity investments by
individual investors.
In sum, there are a number of studies suggesting that firms reporting under IFRS enjoy
substantial benefits. The evidence, however, is far from conclusive and in many cases mixed.
Further, it is not clear that the documented benefits can be attributed to the adoption of IFRS, i.e., to the standards
themselves. For instance, the benefits could stem from broader commitments to more transparency by some firms.
Moreover, the studies generally focus on the average effects of IFRS adoption and do not examine the
cross-sectional differences in adoption quality and compliance.
Adebimpe and Peace, (2011) examines the association between corporate governance, company attributes and
voluntary disclosures among Nigerian listed companies. In order to examine this association, two disclosure indexes
were built using a sample of 50 listed companies in Nigeria. The first index contains twenty items which are
mandatory according to a number of selected IFRSs but which are voluntary in Nigeria for the year 2008.The
second index contains sixty voluntary accounting and non-accounting items. The study uses univariate, multivariate
and cross-section models to explore the relationship between each disclosure index and corporate attributes. The
corporate attributes are the independent variables comprising corporate governance and company characteristics.
The results of the regression analysis reveal that only board size has a significant positive relationship with the
extent of voluntary disclosures on the sample companies.
The Board composition, leverage, company size, profitability, and auditor type have statistically positive and
insignificant impact on disclosures. The effect of Board ownership is positive for IFRS disclosures but negative and
insignificant for Non-IFRS disclosures while sector is negative for both disclosures but has a significant effect on
Non-IFRS disclosures. The limitations encountered in this study include the insufficient weighting of scores for
disclosure criteria in the sense that companies were awarded 1 for disclosure of an item and 0 for non-disclosure
without considering the depth of the disclosure of such item in the annual report. Also, the inability to access annual
reports covering longer periods rather than just a year inhibits the generalization of the findings to an extent.
Economic theory suggests that voluntary disclosures and increased information quality reduce information
asymmetries (either between the firm and market participants or between informed and uninformed investors). This
reduction in information asymmetries increases the firms liquidity (Klein, 2002b; Ferguson, Lam, and Lee, 2002;
Ahmed and Mansor, 2009). Early empirical work by (Ahmed and Mansor, 2009) reports that firms that provide
more public information can reduce the adverse selection component of the bid-ask spread, and thus potentially
reduce their cost of equity capital. Overall, the empirical evidence suggests that disclosures and accounting
information of higher quality are related to improved liquidity. Thus, it is unclear whether the association between
disclosures and liquidity is attributable to voluntary or mandatory disclosures, or some interaction of the two.
Finally, the contribution of this study to the literature consist among others that larger and more leveraged
Nigerian listed deposit money banks reports most reliable accounting information in their financial statement if
IFRS is adopted. In addition, the adoption of IFRS plays a prominent role in preventing managers of Nigerian listed
deposit money banks from opportunistic behaviour in preparing financial reports. Again, the most profitable and fast
growing Nigerian deposit money banks reports the most reliable, faithful and verifiable accounting numbers in their
financial statement. While, liquidity under IFRS adoption is strongly associated with quality of financial information
of listed deposit money banks in Nigeria.
Three theoretical explanations have been advocated in literature to establish the relationship between earnings
quality and firm attributes. Bowen, Rajagopal and Venkatachalam (2008) find that the efficient contracting theory
associates managers to exercising accounting discretion in an efficient manner such that in the long run firm value is
maximized. The opportunist theory, assumes that managers have a short-term self interest as an incentive to form
poor firm structure to manage earnings for their own benefit (Klein (2002). While the agency theory advocates that
the nature of ownership has positive association with good earnings quality. The efficient contracting theory
suggests a positive association between accounting discretion and long term firm performance and quality of
financial information. Therefore, in this study the opportunist theory and efficiency contracting theory are selected
96 Shehu Usman Hassan / Procedia Economics and Finance 28 (2015) 92 101

to link bank attributes with earnings quality before and after the adoption of International Financial Reporting
Standards in the Nigerian banking sector as theoretical framework.

3. Methodology and Robustness Tests

For this study correlational research design is used to describe the statistical association between two or more
variables. It is therefore, most appropriate for this study because it allows for testing of expected relationships
between and among variables and the making of predictions regarding these relationships. The population of the
study comprises of all 14 listed deposit money banks in the Nigerian Stock Exchange as at 31st December 2013 and
making up the sample of the study using census sampling technique. The period of the study covers six years of
2008 to 2013 and divided into 2 of 3 equal years representing pre and post respectively. The source of data for the
study is secondary only extracted from the audited financial statements of the sampled banks. The study used
longitudinal balanced panel data using two steps multiple regression to examine the model of the study.
Longitudinal panel data is used to account for individual heterogeneity of the sampled banks in determining the
quality of financial reports of the listed deposit money banks in Nigeria adopting Chang et al. (2008) model.
Various models have been advanced by different researchers in identifying the accruals that is discretionary in
the banking sector. Most of these models largely emanate from McNichols and Wilson (1988) who used estimated
residuals of bad debts regression model as a surrogate of discretionary accruals. This study adopts a method that is
consitent with Chang et al. (2008) in estimating the discretionary component of loan loss provisions.
Loan loss provision (LLP) is a linear function of loan charge-offs (LCO) and the beginning balance of allowance for
bad and doubtful debts (BBAL) for that year. Mathematically, it is expressed as follows:

.. (i)

The intuition underlying the choice of these variables is that In practice most bank managers decide the amount
of loan loss provisions every month according to individual risk assessment on potential uncollectible loans and
loans write-offs. (Chang et al., 2008:13).

 (ii)

Since discretionary accruals can not be observed directly, it is estimated by regressing LLP on the independent
variables in equation (ii). The discretionary loan loss provision (DLLP) is the error term which is the difference
between LLP, on the one hand and LCO for the year and the BBAL, on the other. All variables are scaled by the
beginning balance of total assets ( ) in order to avoid heteroskedasticity. Some studies, such as Grey and
Clarks (2004) and Zhou and Chen (2004), have included change in non-performing loans as one of the explanatory
variables. This study ignores it for the reason that our preliminary test for decision influencing factor reveals that the
coefficient significant of the variable is not robust. This approach is also consitent with Chang et al. (2008). DLLP
(earnings management) is therefore estimated as follows:

  .. (iii)

The results of robustness tests (multicollinearity, normality, heteroscedasticity, cross-sectional dependence, and
histogram test of residuals) conducted in order to improve the validity of all statistical inferences for the study reveal
favourable but not reported for brevity.

4. Result and Discussion

This section presents the regression result of the three models of the study. It follows with analysis of the
association between dependent variable and each independent variable individually and cumulatively.

The summary of the regression result obtained from the model of the study (EQ = 0 + 2LEV+ 5PROF + 6LIQ +
1SIZE + 7GRWTH + ) is presented in Table 1 below:
 Shehu Usman Hassan / Procedia Economics and Finance 28 (2015) 92 101 97

Table 1: Regression Results

Statistics Beta Coefficients Beta Coefficients t-values for Pre t-values for Sig (Pre Sig (Post
Variables (Pre IFRS) (Post IFRS) IFRS Post IFRS IFRS) IFRS)
Leverage -0.0000149 0.0000104 -0.95 0.16 0.347 0.877
Profitability 0.0000378 0.0000492 1.37 2.08 0.178 0.045
Liquidity 0.0000115 0.0000761 0.90 1.73 0.374 0.093
Bank Size -0.0000139 0.0000174 -1.64 4.14 0.109 0.000
Bank Growth 3.7100006 4.9900006 1.28 2.50 0.209 0.017
Constant 0.0004573 -0.0002214 2.30 -2.22 0.027 0.033
R2 0.1699 0.3944
Adj R2 0.0546 0.3103
F. Statistic 1.47 4.69
Sig. 0.2226 0.0021
Hettest Chi sig 0.3221 0.7549

The result in respect of leverage and earnings quality of pre IFRS adoption shows a coefficient value of -
0.0000149 and a t-value of -0.95 which is insignificant, while for post IFRS recorded a coefficient value of
0.0000104 and a t-value of 0.16 which is insignificant at any acceptable level. This shows that leverage has no
significant influence on earnings quality of bank before and after the adoption of international financial reporting
standard. But, it is important to note that the post IFRS leverage is better because it recorded a positive direction as
against the pre IFRS adoption that was negatively related. This implies that for every change in the proportion of
debt maintain by banks may not necessarily affect the earnings quality of the listed Deposit money banks in Nigeria
for both periods. However, it is important to note that if the leverage of the post period is improved upon, it may
influence the earnings quality positively and significantly as such fund can be used to support long term growth for
the firm so it can earn a profit and this suggests that the firms debt level has not yet reached the level of financial
distress.
Also, the regression result reveals that the profitability of banks before the adoption of IFRS has a coefficient of
0.0000378 with a t-value of 1.37 which was found to be insignificant either at 1% level or 5% level of significance,
but the coefficient of the post period of IFRS was 0.0000492 and a t-value of 2.08 which was significant at 5% level.
This two different result shows that profitability has no significant influence on the earnings quality of listed deposit
money banks in Nigeria before the adoption of IFRS, while after the adoption of IFRS, profitability was found to
impact positively on the earnings quality of the banks. The implication is that when there is an increase in the level
of profitability based on the financial statement prepared in line with IFRS, the earnings quality of such statement
will be positively influenced. This may be as a result of the fact that, the financial statement that were prepared
before the adoption of IFRS was based on historical cost, while with the adoption of IFRS, financial statement
preparation is based on fair value accounting. It will be interesting to note that the coefficient value of the post
period is higher than the coefficient of the pre period, which is indicative of the improvement in the level of
influence profitability, has on earnings quality.
In addition, the regression result reveals that liquidity has a coefficient value of 0.0000115 and a t-value of 0.90
which is neither significant at 1% nor 5% in the pre period of IFRS, while post period of IFRS with regards to
liquidity recorded a coefficient value of 0.0000761 and a t-value of 1.73 which is significant at 10% level. This
shows that the pre period result of liquidity has a positive, but insignificant impact on earnings quality of banks,
while the post period of IFRS shows that liquidity have positively, strongly and significantly impacted on the
earnings quality of listed deposit money banks in Nigeria. This implies that, when the liquidity is increased within
the pre period, it has no any significant influence on earnings management, while after the adoption of IFRS, when
there was increase in liquidity; it increases the quality of earnings of the banks. The impact of the adoption of IFRS
can further be explained by the differences in their coefficient value, as the coefficient value of the post period is far
and above the coefficient of the pre period which shows the extent and level of impact it has on explained variable.
Furthermore, Bank size was found to have a coefficient value of -0.0000139 and a t-value of -1.64, while the
bank size for post period recorded a coefficient value of 0.0000174 and a t-value of 4.14. Looking at the relation
between bank size and earnings quality, a negative relation emerged for pre period and this has not been supported
statistically at any level of significance. The post period as regards to bank size recorded a positive and significant
impact on earnings quality. This insignificant relation for the pre period of IFRS shows that, the size of the bank has
no strong influence on earnings quality and thus implying that if there an increase in the bank size before the
98 Shehu Usman Hassan / Procedia Economics and Finance 28 (2015) 92 101

adoption of IFRS, the earnings quality of banks may not necessarily improve. But for the post period of IFRS, the
result signifies that increase in size of banks has positive and significant impact on earnings quality of Banks
implying that, when there is an increase in the bank size after the adoption of IFRS, the earnings quality of the banks
will increase tremendously. This can further be substantiated by the coefficient value of the post period which was
higher than the pre period.
Our regression result reveals that firm growth measured by changes in total deposit was found to be positively
but insignificant in influencing earnings quality of listed deposit money banks in Nigeria as it recorded a coefficient
value of 3.7100006 and t-value of 1.28. Meanwhile, a positive and significant relationship was found between bank
growth and earnings quality as it also recorded a coefficient value of 4.9900006 and a t-value of 2.50. This shows
that the post period of IFRS has impacted positively on earnings quality while the pre period was found not to have
impact on earnings quality. This implies that when there is an increase in total deposit of banks before the adoption
of IFRS by banks, it has no significant influence on the earnings quality, while increase in total deposit of banks
after adoption of IFRS by Banks, increases the earnings quality of listed deposit money Banks in Nigeria.
The cumulative correlation between dependent variable and all the independent variables is for pre period of
IFRS was 0.1699 (see table 1) indicating that the relationship between earnings quality and firm attributes used in
this study is 17% which is positively, weak. This implies that for any changes in firm attributes of listed deposit
money banks in Nigeria, their earnings quality may not be much directly affected. Hence, it signifies 17% of total
variation in earnings quality of listed deposit money banks in Nigeria is caused by their, level of leverage,
profitability, liquidity and total assets, and changes in total deposits. While the cumulative correlation between
dependent variable and all the independent variables is for post period of IFRS recorded 0.3944 indicating that the
relationship between earnings quality and firm attributes used in this study is 39% which is positively, strong and
significant. This implies that for any changes in firm attributes of listed deposit money banks in Nigeria after the
adoption of IFRS, their earnings qualitywill be directly affected.
Hence, it signifies 39% of total variation in earnings quality of listed deposit money banks in Nigeria is caused
by their, level of leverage, profitability, liquidity and total assets, and changes in total deposits. This indicates that
the model is fit and the explanatory variable are properly selected, combined and used. The increase in the level of
explanation of the independent variables to the dependent variable from the pre period to the post period was about
129%. This difference in the cumulative correlation result for pre and post IFRS is an indication that the firm
attributes of banks explained better the attitude of earning quality after the adoption of IFRS.
The results of robustness tests conducted in order to improve the validity of all statistical inferences all revealed
favourable to the data collected and used for the study. These tests include; multicollinearity test, heteroscedasticity
test, cross-sectional dependence test, test of serial correlation, Hausman specification test and histogram of residuals
test.
The findings have several theoretical, practical and regulatory implications. These implications represent the
contributions of the study which are expected to benefit the existing body of knowledge within the accounting
research, regulators and providers of accounting services. Our findings have important policy implications since
they suggest the need to encourage applying IFRS principles by banks and other institutions to provide effective
monitoring of earnings management in listed deposit money banks in Nigeria. This research will assist the regulators
in appreciating the benefits of IFRS and therefore making it mandatory for other sectors of the economy other than
banks to adopt IFRS. Furthermore, the effect of firm attributes on earnings quality of firms as showed by empirical
evidence may find here a plausible explanation. This has significant policy implications for the composition of the
structure of firm attributes.
Finally, our findings shed more light on firm attributes and earnings quality studies in the sense that earnings
management practices are not attributed to few firms; rather it is a widespread phenomenon in Nigeria. As the
central question for standard setters is to enhance the credibility of financial reporting through the adoption of IFRS
by ensuring that abusive earnings management is not encouraged, standard setter may consider adjust policy for
disclosure or request additional disclosures from banks in associating discretionary activities.

5. Conclusion and Recommendation

Conclusively, the study has provided both empirical as well as statistical evidence on the utility of five firms
attributes; leverage, profitability, liquidity, bank size and bank growth in explaining and predicting earnings quality
of listed deposit money banks in Nigeria after the adoption of IFRS better than before the adoption. This paper
 Shehu Usman Hassan / Procedia Economics and Finance 28 (2015) 92 101 99

concluded that adoption of IFRS has contributed tremendously in the Nigerian Banking Sector. What is left to be
done therefore is for the regulatory agencies of the sector, especially Central Bank of Nigeria to intensify the effort
of monitoring the adoption compliance by all the banks and other financial institutions in the country as this will go
a long way in improving the earnings reported by the listed deposit money banks in Nigeria.

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