IFRS 16 adoption and financial performance of listed manufacturing companies in Nigeria
Abstract
Purpose: The objective of this study is to examine IFRS 16 adoption and its impact on financial performance of listed manufacturing companies in Nigeria.
Methodology: This paper empirically examines the relationship between IFRS 16 adoption and its impact on liquidity, leverage and profitability of Nigeria listed manufacturing companies between 2015 and 2022. The empirical methodology selected was panel data ordinary least square regression analysis.
Results The results indicate that the adoption of IFRS 16 has significant impact on the profitability, leverage, and liquidity of the sampled manufacturing companies.
Research limitations: The study relied on the annual reports of listed manufacturing companies in Nigeria between the period 2015-2022. During the Pre and post adoption of IFRS 16. Other sectors which have implemented IFRS 16 could not be covered neither could a survey be conducted to asess the inherent challenges of implementing IFRS 16 in Nigeria.
Practical implications: Studies in developed countries have proven that the changeover from IAS 17 to IFRS 16 promises to promote business valuation and financial statements comparability and transparency. This study will provide research evidence to support this assertion from a develoing country’s persective. This study will enhance comliance with the standard by corporate management of organisations and promote its imlementation across other industry sectors not covered in this study.
Originality: This research work contributes to the development of literature on the decision usefulness of financial statements with the adoption of IFRS 16 from an emerging economy perspective.
Keywords: IFRS 16, Financial Performance, Leases, Manufacturing companies, leverage, liquidity
DOI: https://doi.org/10.58869/EJABM10(2)/02
Full Text:
PDFReferences
Akerlof, G. A. (1970). The market for ―lemons: Quality uncertainty and the market mechanism. Quarterly Journal of Economics, 84(3), 488-500.
Aremo, A. A., & Ayorinde, Y. O. (2022). Lease Financing and Financial Performance of Listed Manufacturing Companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 10(6), 1-8.
Bello, U., Ahmad, B., & Al-Mustapha, B. (2016). Impact of lease financing on liquidity of Nigerian oil & gas companies. International Journal of Social Studies, 78(9), 45-67.
Boronos, V. M., Zakharkin, O. O., Zakharkina, L. S., & Bilous, Y. (2020). The Impact Of The COVID-19 Pandemic On Business Activities In Ukraine. Health Economics and Management Review, 1(1), 76–83. https://doi.org/10.21272/hem.2020.1-07
Diaz, I. M., Hernandez, M. A., &Voicila, F. I. (2019). Lease accounting: an inquiry into the origins of the capitalization model. De Computis, Revista Española de Historia de la Contabilidad, 16(2), 160-187.
Eleonora, S.T., & Nadya, V.S. (2019). IFRS 16 Leases and Its Impact on Company’s Financial Reporting, Financial Ratios and Performance Metrics. Economic Alternatives, 1, 44 – 62.
Equipment Leasing Association of Nigeria (2023). 2023 outlook- Continued recovered amidst heightened turbulence. Retrived August 17, 2023 https://elannigeria.org/2022-outlook/
Finger, M., Gavious, I., & Manos, R. (2018). Environmental risk management and financial performance in the banking industry: A cross-country comparison. Journal of International Financial Markets, Institutions and Money, 52, 240–261. https://doi.org/10.1016/j.intfin.2017.09.019
Hameed, A.R., & Bello, G.B. (2023). An Empirical Investigation of Lease Financing and Performance of Conglomerates Firms Listed in Nigeria Stock Exchange. Journal of Arid Zone Economy, 1(1), 142-152.
IFRS Foundation (2019). IFRS 16: Lease https://efrag-website.azurewebsites.net/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FMeeting%20Documents%2F1605130941352768%2FIFRS%2016%20Presentation.pdf&AspxAutoDetectCookieSupport=1
Magli, F., Nobolo, A. & Ogliari, M. (2018). The Effects on Financial Leverage and Performance: The IFRS 16. International Business Research, Canadian Center of Science and Education, 11(8), 76-89
Mary, W.M, & Charles, N.N. (2017). Factors affecting lease financing in the manufacturing industry in Kenya. International Journal of Business Management & Finance, 1(1),1-18.
Marenkov, N.L & Veselova, T.N. (2019) International standards of accounting, financial
reporting and auditing in Russian firms, (Moscow, URSS, 328.
Morales-Díaz, J., & Zamora-Ramírez, C. (2018). The Impact of IFRS 16 on Key Financial Ratios: A New Methodological Approach. Accounting in Europe, 15(1), 105 133.
Musa-Mubi, G. (2017). The effect of firm-specific attributes on finance lease use in listed non-financial firms in Nigeria. European Journal of Reasearch and Reflection in Management Sciences, 3 (3), 32-48.
Runesson, E. (2015). Disclosures and judgment in financial reporting essays on accounting quality under International Financial Reporting Standards. Göteborg: BAS, School of Business, Economics and Law, University of Gothenburg.
Sabreen, K.B. (2022). The Impact of the Application of the IFRS16 Lease Contract Standard on the Quality of the Financial Reports of the Leased Units. Social Science learning Education Journal, 7(5), 75-92. doi: 10.15520
Săcărin, M. (2017), IFRS 16 “Leases” – consequences on the financial statements and financial indicators, Audit Financiar, XV, nr. 1(145), 114-122, DOI: 10.20869/AUDITF/2017/145/114
Segal, M., & Naik, G. (2019). The Expected Impact of the Implementation of International Financial Reporting Standard (IFRS) 16 – Leases. Journal of Economic and Financial Sciences, 12(1), 1- 12. doi: 10.4102
Shiyanbola, T.T., Desi, A., Oyedele, P.O., &Oyewumi, S. (2022). Leases Financing, Liquidity, and Return on Equity of Selected Manufacturing Companies in Nigeria: Implication of IFRS 16 Leases. International Journal of Accounting, Finance and Risk Management, 7(2), 77-85. doi: 10.11648
Silvana, S., Valerico, B., Daniel, I., & Federico, C. (2020). Relevance in the application of IFRS 16 for financial statements: Empirical evidence of the impact of the finance methods in SMEs. Chinese Business Review, 19 (1), 1-15.
Susanti, M., Sufiyati, A. C., & Dewi, S. P. (2020). The impact of IFRS 16 (PSAK 73) implementation on key financial ratios: An evidence from Indonesia. Advances in Economic, Business and Management Research, 17 (5), 432-448.
Tănase, A.E., Traian C.O. Florin, R. O. (2018). The impact of IFRS 16 on the companies' key performance indicators: limits, advantages and drawbacks. Academic journal of economic studies, 4 (1), S. 54 - 59.
Copyright (c) 2024 European Journal of Applied Business and Management
European Journal of Applied Business and Management
ISSN: 2183-5594
DOI: https://doi.org/10.58869/EJABM
Indexing:
EBSCO | CROSSREF | GOOGLE SCHOLAR | LATINDEX | DRJI | ICI JOURNALS MASTER | REDIB | MIAR