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Bank Earnings Smoothing During Mandatory IFRS adoption in Nigeria

Author

Listed:
  • Ozili, Peterson K
  • Outa, Erick R
Abstract
We examine the extent of bank earnings smoothing during mandatory IFRS adoption in Nigeria, to determine whether mandatory IFRS adoption increased or decreased income smoothing among Nigerian banks. We find that the mandatory adoption of International Financial Reporting Standards (IFRS) is associated with lower earnings smoothing among Nigerian banks, which implies that Nigerian banks do not use loan loss provisions to smooth reported earnings during the mandatory IFRS adoption period. We find evidence for earnings smoothing via LLP during voluntary IFRS adoption. Earnings smoothing is not significantly associated with listed and non-listed Nigerian banks during voluntary and mandatory IFRS adoption. Overall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of loan loss provisions estimate by discouraging Nigerian banks from influencing loan loss provisions for earnings smoothing purposes during the mandatory IFRS adoption. The findings of this paper are relevant to the debate on whether IFRS reporting improves the quality of financial reporting among firms in Nigeria. The implication of the study is that IFRS has higher accounting quality than local GAAP in Nigeria as it improves the quality and informativeness of accounting numbers (LLPs and earnings) reported by Nigerian banks during the period examined

Suggested Citation

  • Ozili, Peterson K & Outa, Erick R, 2018. "Bank Earnings Smoothing During Mandatory IFRS adoption in Nigeria," MPRA Paper 89690, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:89690
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    File URL: https://mpra.ub.uni-muenchen.de/92507/1/MPRA_paper_92507.pdf
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    References listed on IDEAS

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    Cited by:

    1. Ozili, Peterson K, 2019. "Impact of IAS 39 reclassification on income smoothing by European banks," MPRA Paper 97035, University Library of Munich, Germany.
    2. Ozili, Peterson K, 2019. "Impact of IAS 39 reclassification on Income Smoothing by European Banks," MPRA Paper 92098, University Library of Munich, Germany.
    3. Małgorzata Olszak & Sylwia Roszkowska & Iwona Kowalska, 2018. "The Joint Effect Of Borrower Targeted Macroprudential Instruments And Capital Regulations On Procyclicality Of Loan-Loss Provisions," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 7(3), pages 29-53.
    4. Ozili, Peterson K, 2019. "Bank Income Smoothing, Institutions and Corruption," MPRA Paper 92339, University Library of Munich, Germany.
    5. Ozili, Peterson K, 2019. "Bank Earnings Management using Commission and Fee Income: the Role of Investor Protection and Economic Fluctuation," MPRA Paper 101824, University Library of Munich, Germany.
    6. Ozili, Peterson K., 2019. "Bank income smoothing, institutions and corruption," Research in International Business and Finance, Elsevier, vol. 49(C), pages 82-99.

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    More about this item

    Keywords

    Loan Loss Provisions; Discretionary Accruals; Income Smoothing; Earnings Management; Nigeria; Banks; IFRS.;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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