Assessing the Impact of IFRS Adoption on Earnings Quality: A Study of Selected Nigerian Consumer Goods Companies

Abstract

This study analyzed the impact of International Financial Reporting Standards (IFRS) adoption on earnings quality for selected consumer goods companies in Nigeria over the period 2008–2024. The model controlled for firm size and board size to avoid omitted variables. Employing panel least squares estimation, earnings quality was measured following the accrual-based approach to show the extent to which reported earnings were supported by cash flows with lesser absolute values reflecting higher quality. A Hausman test was used in selection of the appropriate regression model of either fixed effect of random effects. The Hausman test emerged statistically insignificant, lending credence to the validity of the random effect. The outcome indicated that IFRS adoption largely improved earnings quality by minimising dependency on discretionary accruals. On the other hand, firm size played a considerable mediating role as larger firms exhibited stronger improvements in earnings quality following adoption of IFRS. This reflected significant reporting capacity, greater internal controls, and better accounting expertise. In contrast, board size did not considerably influence earnings quality which suggests that governance effectiveness relied more on-board member’s quality rather than numerical strength. In general, the findings unveiled that while adoption of IFRS enhanced earnings quality its effectiveness was contingent on firm-level capacity and supportive corporate governance structures, with significant implications for firms, regulators and policymakers in emerging market contexts.