IFRS Implementation and Earnings Quality in listed conglomerate Companies in Nigeria: Earnings Management Insights

Abstract

This study investigated the effect of International Financial Reporting Standards (IFRS) implementation on earnings quality in listed conglomerate companies in Nigeria, using discretionary accruals estimated through the Modified Jones Model as a proxy for earnings management. The study also examined whether the interaction between IFRS compliance and reported earnings improves earnings quality. Pooled data were collected from the annual reports of selected conglomerate firms listed on the Nigerian Exchange Group over a period 2012 – 2022. Descriptive statistics, correlation analysis, robustness diagnostics, and pooled regression techniques were employed for data analysis. The findings reveal a statistically significant positive association between IFRS compliance and discretionary accruals, suggesting that IFRS implementation alone may not effectively reduce earnings management in the Nigerian context. However, the interaction between IFRS adoption and earnings performance shows a negative and significant effect on discretionary accruals, indicating that higher earnings, when aligned with IFRS, enhance earnings quality. The study concludes that while IFRS adoption has brought reporting uniformity, it does not automatically ensure improved earnings quality unless supported by robust enforcement and firm-level governance structures. The paper recommends enhanced regulatory oversight by the Financial Reporting Council of Nigeria (FRCN) and stronger compliance mechanisms to maximize the intended benefits of IFRS implementation in Nigeria’s capital market.