VALUE RELEVANCE OF INTERNATIONAL FINANCIAL REPORTING STANDARD 7 (IFRS 7) FINANCIAL INSTRUMENTS DISCLOSURES FOR LISTED INSURANCE FIRMS IN NIGERIA
Abstract
This study examines the value relevance of International Financial Reporting Standard (IFRS) 7 financial instruments disclosures for listed insurance firms in Nigeria from 2012 to 2018. The weak disclosure requirements of Nigeria General Accepted Accounting Principles (GAAP) and the need for improved financial information quality and value relevance prompted the study. The research adopted quasi-experimental research using census sampling technique to select fifteen (15) out of 27 listed insurance firms for the period 2012 to 2018. The study uses agency theory and signalling theory to underpin the research and Ohlson Model (1995) to determine the influence of firm accounting information on share price valuation. Pooled robust OLS was used to analyze the data extracted from published annual financial reports of studied listed insurance firms in Nigeria. The findings suggest that book value is positively and statistically more value relevant than earnings per share in the second and third models. Therefore, the study recommends that regulators in the Financial Reporting Council of Nigeria (FRCN) enforce adequate measures on behavioural reporting of insurance firms to enhance financial information quality and increase value relevance. The insurance sector, due to its unique characteristics, deserves investigation on its extent and effectiveness in practising IFRS 7. Risk management plays a critical role in the insurance industry, and risk disclosure is particularly important to policyholders, regulators and other external stakeholders interested in managing risk. The study highlights the requirements of IFRS 7 for financial institutions and their relevance to the insurance sector in Nigeria. The study contributes to the literature on value relevance of IFRS 7 financial instruments disclosures in Nigeria, and its findings provide useful information for regulators, investors, and insurance companies on the importance of compliance with IFRS standards and the need for behavioural reporting of insurance firms to improve financial information
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