Accounting regulation in Nigeria : institutionalisation, accounting quality effects and capital market effects

This study examines three different aspects of accounting regulation in Nigeria. The first empirical chapter (chapter 2) examines the process of the institutionalisation of IFRS in Nigeria and its outcome. Using data from documents, interviews and survey, the chapter finds that IFRS is substantively adopted by Nigerian listed firms, as they use it for internal reporting. Furthermore, the institutionalisation process involves three levels of social order (i.e., Social, political and economic level; organisational field; and organisational level) at which different agents reinforce one another to ensure that institutionalisation of IFRS in Nigeria is substantive. The second empirical chapter examines whether accounting regulation in the form of IFRS adoption and/or enforcement of accounting standards lead(s) to higher accounting quality. The effects of these two regulatory mechanisms were assessed on three dimensions of accounting quality using fixed-effect regressions for earnings management, binary logistic regression for timely loss recognition, and a system dynamic panel model for earnings persistence on a sample of non-financial companies listed on the Nigerian Stock Exchange. The chapter finds that IFRS adoption significantly increases earnings management and reduces earnings persistence, while institutional reform, through the setting up of the Financial Reporting Council of Nigeria (FRCN) to enforce and monitor compliance with accounting standards, reduces earnings management. The third empirical chapter examines the effect of accounting regulation in the form of IFRS adoption and enforcement on market liquidity in Nigeria. The chapter adopts a longitudinal research design and analyses hand-collected panel data sets from semi-structured archives. Three proxies of market liquidity (i.e., bid-ask spread, zero returns, and volume) were adopted for the study. Firm-quarter observations of 1,416, 1,417 and 1,418 were analysed using a random-effect model for bid-ask-spread and a fixed-effect regression for both zero returns and volume, respectively. The chapter finds that both IFRS adoption and enforcement significantly improve the Nigerian stock market liquidity.School of Social Sciences PhD scholarshi

The value-relevanceof Accounting Information in Nigeria: Analysts’ perception in the IFRS regime

This study investigates the effect of IFRS adoption on the value-relevance of accounting information in Nigeria. The study builds on the explanation of extant finance theories on the value and timing of information. IFRS was measured with more disclosure of economic events as well as the fair valuation of economic events under IFRS. The opinions of a number of financial analysts with the aid of e-mail questionnaire were sourced. A log-linear test was run to test the interaction of the variables and the significance of such interaction. A significant relationship was found between the each of the independent variables and the dependent variable at 5% level of significance. The study therefore offers explanations regarding the IFRS adoption as a bridge of the gap between accounting and finance measurement of information. Hence, concludes that IFRS adoption has enhanced the value relevance of accounting information in Nigeria. However, recommendation was made that more measures should be put in place to ensure full compliance of IFRS by all affected Nigerian entities

Resisting institutionalized corruption: The case of public audit in Nigeria

In a highly corrupt environment such as Nigeria, accounting practices have been permeated by corruption in the wider society. As such, several studies on the relationship between accounting and corruption have unveiled a symbiotic association between accountants and corruption. Contrary to this popular viewpoint, this study shows that there are instances of resistance to corruption by accountants in such environments. This study adopts a multiple case study approach. We used two case studies to demonstrate the consistency of the Auditors-General for the Federation (AuGFs) in resisting institutionalized corruption and one case study to show that AuGFs’ resistance is not commonplace in Nigeria. Data were gathered from interviews, videos, and documents. We found that AuGFs resist corruption through the disclosure of accounting irregularities in their audit reports despite the severe consequences associated with exposing corrupt practices in Nigeria. However, they hide this resistance through a number of strategies to sustain the resistance and avert possible repercussions of corruption disclosure. Prior studies of accounting and corruption in developing countries often find accountants enabling corrupt practices through their silence or through active participation in such practices. However, this study shows how accountants also resist corruption in a highly corrupt developing country, which is rare in the literature

Auditor practices and auditee responses to corporate governance audit regulation in Nigeria

Purpose The purpose of this study is to examine both the responses of auditees to corporate governance audit (CGA) regulation and the practices of CGA auditors. Design/methodology/approach The study used a mixed method. Content analysis of 200 annual and CGA reports was carried out for 13 years, from 2008 to 2021, split into voluntary disclosure and mandatory disclosure periods. Quantitative analysis was also conducted using Kruskal–Wallis and Dunn\u27s tests. Data gathered were interpreted through the lens of isomorphism and Oliver\u27s (1991) strategic responses to institutional processes. Findings The study revealed that in the voluntary disclosure period, auditees responded mainly with acquiescence, motivated by mimetic isomorphic pressure. In the mandatory disclosure period, auditee responses ranged from acquiescence to dismissal of corporate governance regulation (i.e. coercive isomorphic pressure). Auditor reporting of CGA findings was found to be heterogeneous, suggesting that normative and mimetic isomorphism did not homogenize auditor practices. Practical implications The absence of uniform auditee responses to CGA regulation during the mandatory disclosure period suggests that the purpose of mandating the regulation has not yet been achieved and may signal inadequate coercive isomorphic pressure from the Financial Reporting Council of Nigeria (FRCN). Similarly, heterogeneous reporting of CGA findings by corporate governance auditors inhibits the comparability of audit findings, limiting their value for information users. Originality/value This study examines corporate governance auditor practices and auditee responses to corporate governance audit regulation

Strategic responses of the clients of multinational audit firms to corporate governance audit regulation

PurposeWe investigate how existing investment in strong external corporate governance mechanism—use of Big 4 audit firms—affect compliance with corporate governance audit (CGA) regulation in Nigeria and Kenya. While both countries are characterized by weak enforcement, they differ in their corporate governance audit regulatory strategies. Design/methodology/approachThe study adopts neo-institutional theory as a theoretical framework and uses logit and probit models and generalized estimating equations as empirical models to test the hypotheses developed.FindingsThe study finds that persuasive coercive isomorphism provides reputational benefits to clients of multinational audit firms in Kenya and encourages them to conduct and report their CGA. In Nigeria, clients of multinational audit firms are less likely to conduct CGA as there is no persuasive coercive isomorphism in place. We also find many internal corporate governance variables to positively influence CGA.Practical implicationsThe success of any regulation is dependent on the level of compliance by regulated entities. As clients of multinational audit firms usually have the motivation and resources to employ such high quality audit firms, it is expected that if they are well motivated, they will commit similar level of resources to conducting CGA. In Nigeria, the Financial Reporting Council should develop some persuasive measures to encourage clients of multinational audit firms to conduct CGA. In both Nigeria and Kenya, enforcement of internal corporate governance frameworks should be strengthened.Originality/valueThis is the first study to explore how regulatory strategies affect strategic responses of regulated entities to CGA regulation, introducing a new dimension to the ESG literature

Does corporate governance matter in the cleanup of reported oil spills? Evidence from Nigeria

Purpose: This study aims to examine whether corporate governance mechanisms – board size, board independence and CEO duality – influence the actions of oil companies operating in Nigeria to clean up oil spills from their facilities. Design/methodology/approach: Both binary logistic regression (linear) and random-effects logistic regression models were used to test three hypotheses using a unique data set of 1,262 oil spill events involving 24 oil companies from 2017 to 2019. Findings: The study found that board size and board independence are positively related to oil spill cleanup. Practical implications: Private oil companies in Nigeria should encourage larger and more independent boards in their corporate governance (CG) structures, as these boards may be more effective in serving the interests of stakeholders by bringing diverse knowledge and experience to the boards. Similarly, regulators should extend the enforcement of CG codes to private firms. Originality/value: To the best of the authors’ knowledge, this is the first study that investigates the influence of CG attributes on oil spill cleanup

Market structure, institutional quality and bank capital ratios: Evidence from developing countries

Purpose - This paper investigates the role of market structure and institutional quality in determining bank capital ratios in developing economies. Design/methodology/approach - The generalised methods of moment technique is used to control for auto-correlation and endogeneity in a sample of 79 publicly listed commercial banks. The study period is between 2000 and 2016. Findings - Results show that market structure (proxied with bank competition) as well as institutional quality (regulatory quality) lowers bank capital in the sampled banks. This suggests that banks operating in less competitive markets with good regulatory quality do not need to engage in excessive risk-taking activities that would necessitate holding increased level of capital. Furthermore, the interaction of competition and regulatory quality reinforces the main findings, suggesting the importance of the two variables in determining bank capital ratio. Research limitations/implications - Research has limitation in that the study investigated publicly listed commercial banks, the findings may not be applicable to non-listed banks. Practical implications - Taking into cognisance the developing nature of the banking system in Africa, the findings from this study imply that the maintenance of an improved regulatory quality in an environment where healthy competition exists would encourage banks to hold capital ratios appropriate for their level of banking activities, that is, the banks would not engage in excessive risk-taking activities. Originality/value - This is one of the first papers that examine the effect of market structure and institutional quality on bank capital ratios in developing countries that have bank-based financial systems