Unmasking Earnings Management In Nigerian Banks: The International Financial Reporting Standards (IFRS) Approach

Abstract

This study investigates the impact of International Financial Reporting Standards (IFRS) adoption on the financial performance and reporting practices of Deposit Money Banks (DMBs) in Nigeria. It focuses on critical areas such as earnings management, loan loss provisions, and overall financial transparency. It explores whether IFRS adoption has significantly influenced key financial metrics, including Operating Cash Flow (OCF), leverage (LEV), non-performing loans (NPL), and Return on Assets (ROA). Using a pre-and-post-IFRS adoption analysis, the findings reveal that IFRS has enhanced operational transparency, with notable improvements in OCF and ROA, suggesting an increase in reporting quality and financial accuracy. However, IFRS adoption alone has not significantly impacted leverage ratios or non-performing loans, indicating limited influence on risk management practices within Nigerian banks. The study underscores that while IFRS has improved the comparability and transparency of financial reports, additional regulatory measures are necessary to address persistent challenges in credit risk and leverage management. Based on these insights, the study recommends stricter credit risk assessment guidelines, enhanced capital adequacy measures, and comprehensive training for financial teams to ensure full IFRS compliance. Furthermore, the adoption of additional systemic risk management frameworks is suggested to complement IFRS and foster a more resilient Nigerian banking sector. These findings offer valuable insights for stakeholders, policymakers, and regulatory authorities seeking to improve financial reporting and risk management standards in emerging economies.