Determinants of Earnings Response Coefficient in the Nigerian Post-IFRS Implementation Era

Abstract

Aims: The study assessed the determinants of earnings response coefficient in the Nigerian Post-IFRS implementation era. It critically looked at the impact of investors' protection, earnings persistency, and systematic risks on earnings response coefficients.
 Study design: The study adopted an ex-post facto research design.
 Methodology: A sample of 35 companies was drawn from the population of the listed companies in the Nigerian Stock Exchange between 2013 to 2020. Secondary data was used. The Generalized Least Square was used to test the hypotheses
 Results: The study shows that the earnings response coefficient improves with the influence of investors’ protection, systematic risk, and earning persistency. Although the influence from systematic risk brings about an inverse effect on ERC, it is a fundamental determinant nonetheless. It was recommended that firms should improve on their investors' protection and that their financial reports should be designed to improve the information contents of accounting earnings to include inherent socio-economic risk, past and prospective earnings.

Determinant of earnings response coefficient on the Indonesian and Singaporean stock exchanges during the COVID-19 pandemic

“…Susanto (2012) proves that systematic risk has a positive effect on ERC. Beredugo (2021) states that systematic risk has a negative effect on ERC, while Beredugo (2021) shows that systematic risk has no effect on ERC.…”

“…According to Beredugo (2021), manufacturing companies are defensive with uncertainty always appearing. Even though the company's operations are going well and the stock price has no reason to down, according to efficient market theory, the market will still react negatively because of systematic risk (Basuki et al, 2017) Dividend payout ratio fails to moderate the positive effect of firm growth on ERC.…”

Moderating Effect of Earnings Persistence on the Relationship Between International Financial Reporting Standards Implementation and Earnings Response Coefficient of Listed Companies in Nigeria

“…The IFRS implementation has not resonated in the expected increase in investors' patronage as speculated. Indeed, the persistent apathy and waning investors' confidence that has beset the country's securities exchange in the previous few years kept on reflecting on market indices and continues to spark a steady fall in share prices of listed firms (Beredugo, 2021). Scott (2009) suggested that a number of reasons could be responsible for differential market response to reported earnings, which could be attributable to the information need on earnings persistence among others.…”

Role of Investors' Protection On The Relationship Between International Financial Reporting Standards Implementation And Earnings Response Coefficient Of Listed Companies In Nigeria

“…However, the resultant effect of IFRS on the decision usefulness of financial statements information, still remain a mirage among investors in Nigeria. Beredugo (2021) also added that IFRS implementation has not resonated in the expected increase in investors' patronage as speculated. Indeed, the persistent apathy and waning investors' confidence that has beset the country's securities exchange in the previous few years kept on reflecting on market indices and continues to spark a steady fall in share prices of listed firms (Beredugo, 2021).…”

“…Beredugo (2021) also added that IFRS implementation has not resonated in the expected increase in investors' patronage as speculated. Indeed, the persistent apathy and waning investors' confidence that has beset the country's securities exchange in the previous few years kept on reflecting on market indices and continues to spark a steady fall in share prices of listed firms (Beredugo, 2021). Affirmatively, investor responses to return sensitivity of published financial statement are very low.…”