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International Financial Reporting Standards (IFRS) Adoption and Short-Term Liquidity of Firms in Nigeria

Author

Listed:
  • Lucky Izobo ENAKIRERHI

    (Department of Accounting, Faculty of Management Sciences, University of Port Harcourt, Choba, Rivers State, Nigeria)

  • Emmanuel A. L. IBANICHUKA

    (Department of Accounting, Faculty of Management Sciences, University of Port Harcourt, Choba, Rivers State, Nigeria)

  • Clifford O. OFURUM

    (Department of Accounting, Faculty of Management Sciences, University of Port Harcourt, Choba, Rivers State, Nigeria)

Abstract

The study has the primary aim of examining the impact of IFRS adoption on the liquidity position of firms quoted on the floor of the Nigerian Stock Exchange. Short-term liquidity is measured by current ratio and the paired sample t-test measures the statistical difference between the mean of liquidity in pre-IFRS and mean of liquidity in post-IFRS periods. Using descriptive statistics to measure the mean of both periods, the results show that the mean of liquidity is lower in post-IFRS adoption period indicating a negative impact of International Financial Reporting Standards adoption in Nigeria. Furthermore, the paired sample t-test shows that there is difference between the mean of both periods and the difference is significant at 1% level. Thus, the study concludes that the adoption of IFRS has had a significant but negative impact on the short-term liquidity position measured by current ratio of firms. The study, therefore, recommends that managers should find a way to improve the liquidity position of firms and as adoption should have led to more transparency, openness and greater flexibility, there should be a new study to examine whether the reduction in liquidity is solely caused by adoption of IFRS or the economic recession which hampered the Nigerian economy in the year 2015.

Suggested Citation

  • Lucky Izobo ENAKIRERHI & Emmanuel A. L. IBANICHUKA & Clifford O. OFURUM, 2020. "International Financial Reporting Standards (IFRS) Adoption and Short-Term Liquidity of Firms in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(1), pages 154-157, January.
    • Handle: RePEc:bjc:journl:v:7:y:2020:i:1:p:154-157
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    References listed on IDEAS

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    1. Khaled Aljifri & Abdulkareem Alzarouni & Chew Ng & Mohammad Iqbal Tahir, 2014. "The Association between Firm Characteristics and Corporate Financial Disclosures: Evidence from UAE Companies," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 8(2), pages 101-123.
    2. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
    3. Katsiaryna Salavei Bardos, 2011. "Quality of financial information and liquidity," Review of Financial Economics, John Wiley & Sons, vol. 20(2), pages 49-62, May.
    4. Wallace, R. S. Olusegun & Naser, Kamal, 1995. "Firm-specific determinants of the comprehensiveness of mandatory disclosure in the corporate annual reports of firms listed on the stock exchange of Hong Kong," Journal of Accounting and Public Policy, Elsevier, vol. 14(4), pages 311-368.
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