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( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

ACCOUNTING STANDARD AND QUALITY OF FINANCIAL REPORTS 
OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA  

 
 Solomon Egbe 

Department of Accounting, Faculty of Management Science, University of Port 
Harcourt, Nigeria 

Abstract 
Banks play important roles in promoting national development. In order to 
provide efficient services and to perform their statutory roles effectively, banks 
are required to comply with established standards. This study empirically 
examined the relationship between accounting standards and quality of financial 
reports in Nigeria. Five (5) banks out of twenty two quoted banks were randomly 
selected for analysis over the period covering 2010 to 2017. Data used in the 
study were sourced from the financial statements of the selected banks for the 
period under study. Panel data analysis in the form of pooled OLS analysis, fixed 
effect analysis and random effect analysis alongside post estimation test such as 
restricted f-test and Hausman test were used. The results revealed that 
accounting standards measured in terms of IFRS13 ans IAS18 exert positively on 
quality of financial reports of quoted banks. The result also revealed that Quality 
of Financial reports such as Timeliness, Relevance, and Faithful Representation 
exert significant influence on financial reporting quality of quoted bank's with 
reported coefficient estimates and probability values of 0.084159(P=0.0000), 
059716(P=0.0009), 0.084159(P=0.0000) for Timeliness, Relevance, Faithful 
Representation respectively. The study concluded that the relationship between 
accounting standards and quality of financial reports of quoted banks in Nigeria 
cannot be undermined, The study recommended that in order to enhance 
performance, Nigerian banks must maintain adequate compliance with 
accounting standards, and take dose cognizance qualities of financial reports of 
as their relative significance on performance of Nigerian Banks cannot be 
undermined. 

Key Words: Timeliness. Relevance. Faithful representation.Quoted 
Deposit Money Banks. 
 
Introduction 
Financial statements apart from stating position of an organization, 
provides other information such as the value added, changes in equity if 
any and cash flows of the enterprise within a defined period of time to 
which it relates (Iyoha&Faboyede, 2011).Financial reports can only be 
regarded as useful if it represents the "economic substance" of an 
organization in terms of relevance, reliability, comparability and aids 
interpretation simplicity (Penman, 1984).Accounting Standard can be 
defined as an information system through which financial and monetized 
information is generated 

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IJO- INTERNATIONAL JOURNAL OF SOCIAL SCIENCE AND HUMANITIES RESEARCH  

( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

for economic, social and political decision (Izedonmi, 2001).Accounting 
standards were introduced to serve as a guide and to provide a framework 
in preparing and presenting financial reports and statements, The 
Accounting standards are aimed at providing creditors and investors with 
quality information in relation to the IASB for the preparation and 
presentation of financial statement. The major objective of Accounting 
Standards is to ensures that important matters regarding preparation and 
presentation of financial statements as well as auditing same are not left to 
whim of the preparers and auditors. However, it is important to state that 
the rate at which existing and potential investors and business 
practitioners are disappointed in their investment decisions/ventures 
following corporate failures especially in the banking sector has raised 
unusual concerns among business practitioners. The general objective of 
this research is to examine the relationship between accounting standards 
and quality of financial reports of quoted banks in Nigeria. 

Literature Review 
Theoretical Framework 
The decision usefulness theory 
This theory places that the best accounting standards are the ones giving 
the most valuable financial reports to clients in order to aid them in decision 
making. It endeavours to build up a logical and target strategy to help 
standard setters and clients in their decision of the best option of the 
estimation and presentation of accounting information. Basically, this 
hypothesis expresses that accounting information should help providers in 
their capital allocation choice. 

Accounting Standards 
Accounting Standards can be defined as an information system through 
which financial and monetary information is generated for economic, social 
and political decision (Izedonmi, 2001).According to the institute of 
chartered accountants of India, Accounting Standards (ASs) are written 
policy documents issued by expert accounting body or by government or 
other regulatory body covering the aspects of recognition, measurement, 
presentation and disclosure of accounting transactions in the financial 
statements. The main purpose of the standard setting bodies is to promote 
the reporting of timely and useful financial information to investors and 
certain other parties having an interest in the company's economic 
performance. 

Quality of financial reports 
Ofurum et al, (2014) in accordance with the IASB stated that the 
qualitative characteristics of financial statements are understandability, 
relevance, reliability, and comparability. These qualitative characteristics 
are the attributes that makes the information provided in the financial 
statements useful to users. The usefulness of financial reports is confirmed 
when they can embody the economic realities of the organization in terms 
of relevance, reliability, comparability, and presented in a form that can be 
easily understood. (IASB, 2015). Glautier&Underdown (2001) posited 

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IJO- INTERNATIONAL JOURNAL OF SOCIAL SCIENCE AND HUMANITIES RESEARCH  

( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

that the primary objective of financial reporting is to communicate 
information about the resources held by entity and performances of the 
reporting entity, useful to those having right to such information. Nzotta 
(2008) opined that financial reports assist the users in evaluating the past 
and present performance of the organization and its ability to maximize the 
wealth of the shareholders. The primary objective of financial reporting is 
to provide high quality financial reporting information concerning economic 
entities, primarily financial in nature, useful for economic decision making 
(FASB, 1999; IASB, 2008). Providing high quality financial reporting 
information is important because it will positively influence capital 
providers and other stakeholders in making investment, credit, and similar 
resource allocation decisions enhancing overall market efficiency (IASB, 
2006; IASB, 2008).The importance of financial reports is affirmed when 
they can incorporate the economic realities in terms of relevance, 
reliability, timeliness and comparability and displayed in a form that can be 
readily understood. (IASB, 2015). 

Empirical Reviews 
Biddle et al. (2009) evaluated the connection between financial reporting 
quality and investment productivity and found that organizations with 
higher communication quality had to bring down levels of mutilation from 
the anticipated business and were less touchy to changes in 
macroeconomic conditions (Biddle et al. 2009). Bushman & Smith (2001) 
and Lambert et al. (2007) looked at the connection between financial 
related reporting quality and investment and found that expansion in the 
financial reporting quality prompted increment in business proficiency 
(Bushman & Smith, 2001). Jensen (1986) explored the financial related 
reporting quality and found that financial communication quality affected 
the attributes of firms, including financial use, business, evaluating quality 
and financial structures (Jensen, 1986). Li Fengchen (2010) opined that 
the effect of financial communication quality on business costs, information 
vulnerability and organisation and found that brilliant financial related 
reporting lessened investment and office costs (Fengchen et al. 2010). 
Sajjadi et al. (2009) directed a review titled exploring the effect of 
non-financial related attributes on the financial reporting nature of 
recorded firms in Tehran Stock Exchange and presumed that firm size, firm 
life and kind of industry had huge and positive organisation with the 
financial reporting quality and financial communication quality was 
adversely identified with the possession structure (Sajjadi et al. 2009). 
 
Methodology 
Research 
design 
A total of twenty two commercial banks operate presently in Nigeria, out of 
which five banks were selected for this study. The selected banks include 
First of Nigeria Bank Pic. (FBN), United Bank for Africa Pic. (UBA), Fidelity 
Bank Pic. (FB), Zenith International Bank Pic. (ZIB), and Access Bank Pic 
(ABP). The basis for the selection rests on the facts provided by Kolapo, 
Ayeni and Oke (2012) that these banks have 

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IJO- INTERNATIONAL JOURNAL OF SOCIAL SCIENCE AND HUMANITIES RESEARCH  

( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

been rated as the topmost five Nigerian banks by Fitch rating and Bankers' 
Magazine of July 2012, they account for over fifty per cent of deposit 
liabilities in the Nigerian banking sector, they have made the list of the first 
25 and 500 banks in Africa and the world respectively, their credit rating by 
Fitch, Standard and Poors, and Agusto and Co have moved from stability to 
positive as at January 2012, they all have a large customer base and 
participate actively on the Nigerian Stock Exchange (NSE). The study made 
use of data obtained from the audited financial reports of the banks for a 
period of eight years (2010- 2017). 

Population for the Study 
The population of this study covered 5 selected quoted banks listed on the 
Nigerian Stock Exchange (NSE) for the period of 8years (2010-2017).Secondary 
data was extracted from the published financial statements/reports of the 
organisations as well as the banks' websites. 

Nature/ Sources of Data 
Secondary data was collected for the purpose of analysis from the 
published financial statements of the 5 selected quoted Banks, UBA, First 
Bank, Access Bank, Fidelity Bank, Zenith Bank, listed on the Nigerian Stock 
Exchange as well as the banks websites. 

Method of data analysis 
This study adopted the Pooled Ordinary Least Square (panel least squares) 
regression technique to determine the relationship between the 
independent variables and the dependent variables. The choice of the 
pooled ordinary least squares is mainly because it minimizes the error sum 
of squares and also it has a number of advantages such as unbiased, 
consistency, minimum variance and efficiency. This analysis was done by 
the use of E-views 8 software. 

Model Specification 
Model specification is the expression of a relationship into precise 
mathematical form and then into an econometric form, capturing the 
effects of stochastic factors. The dependent variable .is Financial Reporting 
with its proxies as Faithful Representation, Relevance and Timelines while 
the Independent variable also known as predictor variable is Accounting 
Standards, with its proxies as IFRS13 and IAS18. In order to examine the 
functional relationship between the variables the model is expressed as 
follows: 
Functional Form 
DTM = F(REV, FVL) ................ (i). 
DRV = f(REV, FVL) ........................... (ii) 
DFR = F(REV, FVL) ................. (iii) 
These are then transformed into mathematical models: 

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IJO- INTERNATIONAL JOURNAL OF SOCIAL SCIENCE AND HUMANITIES RESEARCH  

( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

DTM = A0+ AiREV + A2FVL ............... (iv) 
DRV = B0+ Bi REV + A2FVL .............. (v) 
DFR = d0 + ciiREV + a2FVL .............. (vi) 
Further transformed into econometrics model: 
DTM ^ = Aoit+ AiREVit + A2FVLjt +//t (vii) 
DRVit = B0it+ BiREVit + B2FVLit +£it ... (viii) 
DFR|t—Ooit + Qi REVit+a2FVLjt+fiit   .  ..  (ix) 
Where: 
DTMit=Dummy Variable for Timeliness at time and across banks 
DRVit= Dummy Variable for Relevance at time and across banks 
DFRit=Dummy Variable for Faithful Representation at time and across 
banks 
REVit= Revenue Standard (IAS 18) at time and across banks 
FVLit= Fair Value Standard (IFRS 13) at time and across banks 
u,£,h= Error Terms 
A0, Bi, a0 = Constant 
 
Results and Discussion 
Table IPanel Least Squares Result of Accounting (Revenue) 
Standards and Quality of Financial Reports (Timeliness). 

Dependent Variable:' DTM 
  

Method: Panel Least Squares 
  

Date: 09/12/18 Time: 17:15 
  

Sample: 2010 2017 
  

Periods included: 8 
  

Cross-sections included: 5 
  

Totaljjanel (balan ced) obser •vations: 
40 

  

Variable 
Coeffici 

ent 

Std. 

Error 

t- 

Statistic 
Prob. 

C 

0.13948 

0 

0.026055 

5.353263 0.0000 

REV 0.08415 

9' 

0.001983 42.44040 
0.0000 

FVL 

0.00508 

6 

0.001083 

4.696937 

0.0000 

. .   - - - - - - - - - - - - - - - - - -   - - - - - - - - - - - - -   

Effects 

Specificati
on 

 
 

  

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IJO- INTERNATIONAL JOURNAL OF SOCIAL SCIENCE AND HUMANITIES RESEARCH  

( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

 

Cross-section fixed (dummy variables) 
 

—     

R-squared 0v98592 

6 

Mean 

var 

dependent 

0
.9

5
0
0
 

    

Adjusted R- 

squared 
0.98336 

8 

S.D. 

var 

dependent 0.2207 

21 

S.E. of regression 0.02846 

6 

Akaike 

criterion 

info 

4.1225 

99 

Sum squared 

resid 

0.02674 

0 

Schwarz criterion 

3.8270 

46 
Log likelihood 89.4519 

9 

Hannan-Quinn 

criter. 
4.0157 

37 
F-statistic 385.301 

2 

Durbin-Watson 

stat 

1.3729 

40 
Prob(F-statistic) 

°
 P

 b
 o o o o    

Source: Eviews 8 computation 

 

Table 5 above is the panel least squares result for the first model of the 
implication of accounting standards and quality of financial reports of 
quoted banks in Nigeria. From the table above, it is could be observed that 
revenue (IAS 18) has a positive and significant relationship with timeliness 
as its coefficient is 0.084159 and its P-value is less than 5% level of 
significance (0.0000). However, the R-squared and Adjusted R- squared 
are 0.985926 and 0.983368 respectively implying that about 98.33% of 
changes in timeliness (DTM) is explained by IFRS, While the other 
percentage is explained by other variables not captured in the model. A 
further investigation reveals the F-statistics of 385.3012 at a probability 
level of 0.000 which is lower than 0.05 level of significance shows that the 
goodness-of-fit of the model is acceptable. Although, the Durbin-was ton 
statistic is below the benchmark of 2 but could still be acceptable as it is 
clpse to 2 (1.372940). 
 

Hausman test is done to select the appropriate model between the fixed 
effects and the random effects model. The value of chi-square statistics 
was 15.427378, Chi-Square d.f provided a value of 2,with a probability 
value of 0.0004. The null hypothesis is that the random effects model is 
appropriate and the alternate hypothesis is that the fixed effects model is 
appropriate. 

 
 
 
 
 
 
 

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IJO- INTERNATIONAL JOURNAL OF SOCIAL SCIENCE AND HUMANITIES RESEARCH  

( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

Decision Rule:If the chi-square probability value is less than 0.05 reject 
null hypothesis and accept alternate. From the table above it is observed 
that the chi-square statistics is 15.427378 and its probability value is 
0.0004 which is less than 0.05 we reject the null hypothesis and accept the 
alternate hypothesis of fixed effects mode being appropriate. 

Discussion Of Findings 
The hypothesis seeks to examine the relationship between accounting 
standards and qualities of financial reports using E-Views 8to test the null 
hypothesis. Statistical evidence proves that the relationship between 
independent and dependent variables are significant and positive 
therefore, leading to the rejection of the null hypothesis and acceptance of 
the alternate hypothesis. 

Conclusion 
In accordance with the research findings of the study, we can therefore 
conclude that Accounting Standards has the potential of increasing the 
Quality of Financial Reports in Nigeria. The overall empirical evidence 
generated from the findings showed that quoted banks do comply with the 
requirements of the accounting standards at different levels. There is a 
positive relationship between Accounting Standards and quality of financial 
reports of quoted banks in Nigeria. 

Recommendations. 
0. In the long and short run, there should be enhancement of new 

standards and review of old standards with would bring about a 
positive effect on the qualities of financial reports. 

1. In order’ to .enhance performance, Nigerian Banks must maintain 
adequate compliance with the statements of accounting standard 
especially those that enhance effective bank performance. 

2. The Nigerian Stock Exchange should ensure compliance with the 
accounting standards by suspending erring banks from trading on the 
Stock Exchange market for two consecutive years. 

3. There should be regular training and re-training programs organized 
for staff on efficient and effective preparation of statements of 
accounts in line with national and international standards. 

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IJO- INTERNATIONAL JOURNAL OF SOCIAL SCIENCE AND HUMANITIES RESEARCH  

( ISSN 2811-2466 )                                                                   Solomon Egbe * 

https://ijojournals.com/                                      Volume 06 || Issue 12 || December, 2023 || 

 

 

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Bello, M. S. (2006).Emerging Paradigm in Financial Reporting and the 
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Beest, F., Braanri, G., &Boelens, S. (2009). Quality of Financial Reporting: 
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Blanchette, M. &Desfleurs, A. (2011). Critical Perspectives on the 
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in Canada. Journal of Global Business Administration, 3(1), 1-35. 

Blanchette, M., Racicot, F.E. & Girard, J.Y. (2011). The Effects of IFRS on 
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Early Evidence in Canada. CGA-Canada, 55. 

Canadian Institute of Chartered Accountants (CICA). (2009). The CICA's 
Guide to IFRS in 

Canada. CICA, 462-473. 

 

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	ACCOUNTING STANDARD AND QUALITY OF FINANCIAL REPORTS OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA 
	Solomon Egbe
	Abstract
	Key Words: Timeliness. Relevance. Faithful representation.Quoted Deposit Money Banks.
	Introduction
	Literature Review
	Accounting Standards
	Quality of financial reports
	Empirical Reviews
	Population for the Study
	Nature/ Sources of Data
	Method of data analysis
	Model Specification
	Functional Form
	Results and Discussion
	Discussion Of Findings
	Conclusion
	Recommendations.
	Reference

