International Financial Reporting Standards and Earnings Management Behaviour of Listed Deposit Money Banks in Nigeria

This paper investigates the effect of International Financial Reporting Standards adoption on earnings management behavior of listed deposit money banks in Nigeria. The study examines how the change in the recognition and measurement of banks’ loan loss provision, affects earnings management behaviour. A sample of 15 deposit money banks listed on the floor of the Nigerian Stock Exchange (NSE) was used. Financial data in respect of the periods before and after adoption of the IFRSs (i.e., 2004 to 2008 and 2009 to 2013) were used. The banks under investigation experience a significant growth of their loan portfolio, on average, 16.65 % (median 14.77 %) during IFRS period as compared to 10.12 % (8.79 %) before IFRS adoption. Non-performing loans (NPLit-1) remain relatively stable over the whole time period, and represent, on average, 3.44 % (median 2.21 %) of loans before and 3.19 % (median 1.99 %) after IFRS adoption. Regulatory capital ratios (RegCapit) remain basically similar in both time periods. Earnings before taxes and loan loss provisions (EBTLLPit) increase slightly; however, this increase is statistically not significant. Besides the impressive loan growth the most significant change between the two time periods relates to our dependent variable the level of loan loss provisions (LLPit). LLPit decreases significantly from a mean of 0.72 % (median 0.54 %) to 0.49 % (median 0.32 %) after IFRS adoption. Taken the descriptive statistics together, the study concludes that the restriction to incurred losses under IFRS significantly reduces the ability of banks to engage in earnings management. Keywords: IFRS, IAS, financial reports, loan loss provisions, earnings management, non-performing loans, loss recognition, bank regulation, earnings before taxes and loan loss provisions.

The Correlation between Risk Management and Organizational Performance: An Empirical Investigation using Panel Data

The study analyzes risk management and organizational performance in deposit money banks in Nigeria. Two measures of organizational performance concentration are used. The first is the return on assets, while the second is return on equity. Determination of the relationship between risk management and organizational performance is done using panel data regression models. Explanatory variables, such as standard deviation of return on assets, standard deviation of return on revenue, current ratio, quick ratio, equity over total assets, equity over loan ratio, debt over equity and debt over total assets are used. Five hypotheses are tested and overall, organizational performance is positively affected by the risk management mechanisms of the bank and its liquidity policies. However, the relationship between financial leverage, size and age of the bank and financial performance is negative. The study concludes that risk and liquidity management policies are important to high financial performance. However, banks should put in place sound risk management mechanisms and policies to guide their operations. Also, banks should adhere strictly to sound liquidity management practices to guide against lack of liquidity. They should utilize earnings rather than seeking for external financing. Finally, banks should reduce their level of noncurrent assets and invest more in current assets in order to earn more profits from operations. Keywords: Risk management, organizational performance, deposit money banks, liquidity, financial leverage, size, age, Nigeri