Ogechi Eberechi Alpheaus, M.Sc., ACA
Department of Accounting,
College of Management Sciences,
Michael Okpara University of Agriculture, Umudike
Alpheausogechieberechi@gmail.com
The purpose of this paper is to ascertain the effect of IFRS adoption on accounting quality of
firms listed on the Nigerian Stock Exchange. The study adopted a value relevance perspective
to accounting quality by assessing the accounting quality of earnings and equity measured
under NGAAP and IFRS reporting regimes. Data for Market Value per share (MVPS), Net
Income per share (NIPS) and Book Value of equity per share (BVPS) were extracted from
financial statements of 21 listed entities for the last year of NGAAP and first years of IFRS
adoption and the Price Level regression model used in comparing the relative value relevance
quality under the two alternative accounting rules. Also, data were computed for Annual Stock
Returns (ASR), BVPS, NIPS, Changes in Book Value of equities per share (BVCH) and
Changes in Net Income per share (NICH) for a period of seven years (2012 to 2018) and ASR
regression model was used as a robustness test to assess the sustainability of accounting
quality under the period IFRS was adopted by the entities. Results of the Price level model
indicate that NIPS and BVPS have significant positive effects on MVPS, jointly explaining
89.5% of the changes in Market value of equities under IFRS as against 80% reported under
NGAAP with only NIPS having significant effect. The coefficients and t-values of BVCH and
NICH under the second model indicate that changes in both earnings per share and book value
of equity per share had significant positive effects on annual stock returns over the period of
IFRS adoption. Based on the results, the paper concludes that IFRS adoption has sustainable
significant positive effect on accounting quality of listed companies in Nigeria, and therefore
recommends that managers of listed entities should comply with IFRSs in other to increase the
quality and value of their earnings and equities with associated positive tradeoffs for local and
foreign capital inflows.
Keywords: IFRS adoption, value relevance, accounting quality, annual stock returns, book
value of equity, earnings quality