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Mandatory International Financial Reporting Standards Adoption and Cost of Equity Capital in Nigeria

Author

Listed:
  • Uwuigbe Uwalomwa

    (Covenant University)

  • Francis Kehinde Emeni

    (University of Benin)

  • Olubukunola Ranti Uwuigbe

    (Covenant University)

  • Oyenike I Oyeleke

    (Covenant University)

Abstract

This study examined the effect of mandatory International Financial Reporting Standards (IFRS) adoption on the cost of equity capital on Nigerian firms and whether the cost of equity capital effect after adoption of IFRS can be moderated by Return on Equity. The study covered a sample of 11 listed companies in the industrial goods sector for the period 2011 and 2013. The data for the study was secondary data generated from the annual reports and stock market report websites. The cost of equity capital was shown as the expected return on the basic value of a share and computed based on pre and post-adoption data. Findings from the study revealed that there is a significant positive relationship between the cost of equity capital and IFRS adoption indicating that the cost of equity capital increased. The market-based performance measure failed to have significant effect on the cost of equity capital after mandatory adoption. The study recommends that policies that improve domestic savings, as a principal source of equity capital, be enacted as an increase should lead to a reduction in the cost of equity capital, interest rates and increase the appeal of equity and foreign investments.

Suggested Citation

  • Uwuigbe Uwalomwa & Francis Kehinde Emeni & Olubukunola Ranti Uwuigbe & Oyenike I Oyeleke, 2016. "Mandatory International Financial Reporting Standards Adoption and Cost of Equity Capital in Nigeria," EuroEconomica, Danubius University of Galati, issue 1(35), pages 92-102, may.
    • Handle: RePEc:dug:journl:y:2016:i:1:p:92-102
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    File URL: http://journals.univ-danubius.ro/index.php/euroeconomica/article/view/3254/3254
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    References listed on IDEAS

    as
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