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