Financial Reporting Quality And The Performance Of Firms In Nigeria

Financial Reporting Quality And The Performance Of Firms In Nigeria

Abstract

The research work “financial reporting quality and the performance of firms in nigeria”, basically aims at ascertaining how financial reporting quality has helped in advancing the objectives of corporate organizations. In the process, it investigated the effected that financial accounting bear on the performance of a business. Furthermore, if sought to ascertain the compliance of relevant statues by corporate organizations and the overall satisfaction of stakeholders in a corporate organizations. The study obtained its data basically from primary and secondary sources. The primary sources of data collection employed were questionnaire, oral interview and observations, while the secondary sources of data included textbooks, journals. in the analysis of the data collected, the chi-square was used to analyze the responses gathered. The study revealed that a loot of problems were inherent in financial reporting quality ranging from non-disclosure of vital information, subjective judgments of prepares of the financial information and most times non-compliance to relevant statues. There were recommendations given such as strict compliance to the relevant statute were made to the companies, the government needs to strengthen its regulatory agencies in order to ensure that the financial statements show a “true and fair view and comply with the relevant statues at all times.

Table of Content

• Title Page
• Certification
• Dedication
• Acknowledgement
• Table of Content
• List of Tables
• Abstract

Chapter One:

Introduction

• 1.1 Background of the Study
• 1.2 Statement of the Problem
• 1.3 Objective of the Study
• 1.4 Research Questions
• 1.5 Research Hypothesis
• 1.6 Significance of the Study
• 1.7 Scope of the Study
• 1.8 Limitation of the Study
• 1.9 Definition of Terms
• 1.10 Organisations of the Study

Chapter Two:

Review of Literature

• 2.1 Conceptual Framework
• 2.2 Theoretical Framework
• 2.3 Empirical Review

Chapter Three:

Research Methodology

• 3.1 Research Design
• 3.2 Population of the Study
• 3.3 Sample Size Determination
• 3.4 Sample Size Selection Technique and Procedure
• 3.5 Research Instrument and Administration
• 3.6 Method of Data Collection
• 3.7 Method of Data Analysis
• 3.8 Validity of the Study
• 3.9 Reliability of the Study
• 3.10 Ethical Consideration

Chapter Four:

Data Presentation and Analysis

• 4.1 Data Presentation
• 4.2 Analysis of Data
• 4.3 Answering Research Questions
• 4.4 Test of Hypotheses

Chapter Five:

Summary, Conclusion and Recommendation

• 5.1 Summary
• 5.2 Conclusion
• 5.3 Recommendation
• References
• APPENDIX
• QUESTIONNAIRE

Chapter One

Introduction

1.1 Background of the Study

The quality of financial report is very crucial to every management since the only means by which outside shareholders and investors keep themselves informed about the performance of the firm is through the disclosure of these reports (Olumide, Tanko & Nyor 2016). In the present economic situation, the need for financial reporting quality becomes more sensitive as rising market economies and mono economies like Nigeria face uncertainties as they battle the challenges of unparalleled fall in oil prices. Accounting information system plays a vital role in firm’s active flow and also in complex economic decision because many economic decisions are based on the information obtained from accounting information system so it is important to assess, maintain and improve the financial reporting quality (Owolabi, Okere & Adeleke, 2020). Today, the drive for preparing quality corporate financial reports has established pronounced consideration globally. Publishing high quality information is significant because it may positively impact key capital providers as well as other stakeholders in investment decision process, credit options as well as decisions promoting total market efficiency (Nwaobia, Kwarbai, Ajibade, 2016). The key indicators of corporate information quality with respect to accounting standards are relevance and reliability, which presents information relevant for decision makers as well as enhancing qualities such as comparability, verifiability, timeliness and understandability (Owolabi, Okere & Adeleke, 2020). Thus, one of the key debates that emerge concerning the quality of financial reporting quality is its impact on future performance of an entity, that is, how the stock market responds to this increased perceived quality.

The impact of financial reporting quality on the performance of a business organization is becoming more apparent to user groups of a financial statement.

Accounting is a not an exact science neither are business operations without some subjective and judgmental errors when it comes to reporting them. A financial reporting quality therefore is a document statement which informs the various interest groups to a business on the operations and performance of their business in a period under review its present state of affairs as well as its anticipated future, in accordance with the statutes. If a financial report is to service its purpose it ought to be characterized by the following.

1. Relevance
2. Understandability
3. Reliability
4. Completeness
5. Objectivity
6. Timeliness

In the accounting process of an organization is to provide the information required to prepare a financial report which shall have the above characteristics then the transaction doing the period must be recorded prompt by and accurately and interpreted in conformity with the Generally Accepted Accounting Principles (GAAP), Statements of Accounting Standard Board (NASB), International Accounting Standard committee and the companies and Allied Matters Act cop LFN (CAMA) financial reporting quality become necessary with the obvious need for accountability of stewardship from the managers to whom investors entrusted their financial resources. The Railway age in the UK. Occurred between 1830 to 1870 and for the first time the world same the emergence of multimillion corporations with large numbers of shareholders. It was a period of disorder but it brought the basis for the present day system of corporate financial report. financial reporting quality is a duty of stewardship assigned to the directors of a company by section 334 of the company and Allied Matters Act Cap L20 LFN, equally the mandatory responsibility of companies to keep accounting records derives its strength from section 331 and 382 of the same act. These sections explicitly defined the necessary content and manner in which financial records should be kept.

1.2 Statement of the Problem

The study “financial reporting quality and the performance of firms in nigeria” aims at investigating the financial reports of selected companies in Enugu State with a view to determine the following ;

1. The extent to which a standard financial report contributes to or detracts from the growth of a business organization.
2. The extent to which the financial reports of corporate business organization comply with statutory provisions.
3. The uniformity and conflict which exist in the financial reporting quality regulations given the multiplicity of regulators.

Therefore, bused on the above statements, the researcher shall investigate the financial reporting quality standards and every regulation their bear on the financial statement and to the extent the selected company (s) has either complied with or disobeyed the relevant statutes.

1.3 Objectives of the Study

The objectives of this study are to critically examine the financial reporting quality of the selected company and to probe into the fundamental for their preparation as well as its presentation with a view to determining:

1. The adequacy of the basis and the fundamental that guides its preparation.
2. The degree to which the financial report meets the needs of its various users.
3. The extent to which the financial report conform to the established standard.
4. The influence that financial report has on business performance.
5. Finally, to present suggestions and recommendations based on my findings.

1.4 Research Questions

In order to determine the impact of financial reporting quality on the corporate performance of business organizations, it is pertinent to test the following question;

1. Does the information disclosed in the financial statements adequate to support good decision making?
2. Does the disclosure requirement of the statutes affect corporate performance positively or negatively?
3. Do companies comply strictly with the regulation?
4. Does the financial report meet the needs of the various users?

1.5 Research Hypotheses

The following null and alternative hypothesis shall be tested in this research works:

• Ho: there is no positive and significant relationship between financial accounting reporting and management of a business organization.
• Hi: there is a positive and significant relationship between financial accounting reporting and management of a business organization.

1.6 Significance of the Study

This study is a very important one and most significant at this period of economic situation which has witnessed the collapse of giant corporate with impressive profit and loss accounts and balance sheet statement, because the financial report serves is a “prima facie” evidence on the state of attains of such companies as well as its performance and could be relied upon as a certificate because it had the auditors certification, financial reporting quality could be done with every ser business, utmost good faith and diligence.

1.7 Scope of the Study

This study could have covered the financial reporting quality and the performance of firms in Nigeria all the sectors of the Nigerian economy but due to the challenges of such a task especially the financial resources with which to execute it, it is limited to brewing industry. The study used the Nigerian Breweries plc, Enugu.

1.8 Limitations of the Study

The limitations encountered by the researcher of this work are given as follows:

1. The confidential nature of financial accounting information in the business organization posed as a problem to this business organization posed as a problem to this study.
2. The researcher was unable to reach all the members of the sample as a result of their frequent travels and busy schedule.
3. The sample used in the research though representative but it is relatively small compared to the population, as a result of lack of financial with which to carry out the research on a greater sample.

1.9 Definition of Terms

Auditor:

A person who is qualified to examine the accounts of an organization to see that they are in order.

Balance Sheet:

A business as at a specified date.

Bank:

A financial institution whose responsibilities among others is to keep deposits for their client and customers.

Government:

An institution of the state whose responsibility is to maintain law and order in the society.

Prima Facie:

Sufficient to establish something legally until disprove later.

Researcher:

An enquiring basically concerned with search knowledge.

1.10 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows.

1. Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
2. Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
3. Chapter three deals on the research design and methodology adopted in the study.
4. Chapter four concentrate on the data collection and analysis and presentation of finding.
5. Chapter five gives summary, conclusion, and recommendations made of the study.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Introduction

The chapter gives a summary with major findings aligned to the objectives. A conclusion on the relationship between the study variables was deduced in line with the objectives. Suggestions for recommendations and area for further studies.

5.2 Summary

The study general objective was to study the influence of financial reporting quality on the performance of a business organization.

The first objective was to study is to determine whether the various ways of presenting financial reporting quality have any effect on managerial decision making in Champion Breweries. Results indicated that reliability was important in determining decision making in Champion Breweries. This was supported by majority of the respondents who strongly agreed that that information generated from accounting systems displayed an element of completeness, Accounting information are verifiable and this is key in the decision making process and agreed that financial information was faithfully represented.

According to correlation results, there was a strong, positive and statistically significant association between reliability and decision making. There is also a positive relationship between reliability and decision making in Champion Breweries according to the regression results.

The second objective was to examine the attitude of management in the allocation of resources which often leads to achievement of profit maximization objective in Champion Breweries. Results indicated that comparability was important in determining decision making in public benefit organizations in Champion Breweries. This was supported by majority of the respondents who strongly agreed that Accounting periods are comparable, Accounting information make it easy for users to choose between alternatives, Users are able to compare financial reports and help users to derive meaningful conclusions, financial information made it easier for users to choose between alternatives, and that users of financial information were able to compare financial reports generated in different periods.

According to correlation results, there was a strong and positive association between the comparability and decision making and this was statistically significant. There is also existence of a positive relationship between comparability and decision making according to regression results.

5.3 Conclusions

From the study findings, it can be concluded that accounting information reliability as a characteristic on accounting information used by management in decision making in Champion Breweries was verifiable, financial information was faithfully represented and had an element of completeness. It can further be concluded that accounting information in Champion Breweries Enugu state was characterized by reliability and this reliability was a key predictor of decision making in Champion Breweries.

It can also be concluded that accounting information comparability as a characteristic depended on whether financial statements of one accounting period are comparable to another, whether financial information made it easier for users to choose between alternatives and whether the Users of accounting information are able to compare financial reports generated in different periods. Further, accounting information in Champion Breweries Enugu state had adequate comparability characteristics and this comparability was a key determinant of decision making in Champion Breweries.

5.4 Recommendations

Through this study the researcher recommended the following specific task as a way of insuring that accounting information is important in management to make decisions.

1. From the study findings, the researcher recommends that the management puts in measures to improve both quantitative and qualitative characteristics of financial statements so that they are easily comparable to other industries.
2. All systems have to be computerized and modern speed system network should be established so that the information could reach the accounting department on time. The management should also train its workers on the accounting package for quick and efficient accounting records
3. The management should ensure that all staff in the administrative and finance department is well trained. Sufficient funds should be set aside to provide for staff training in order to Increase their skills in comparing financial reports. The staff in accounting department must be a holder of any professional degree such as Advanced Diploma, Degree, Masters and Certified Public Accountant (CPA).
4. Qualified and capable personnel should be employed for accounting information preparation and presentation.
5. Monitoring and control actions should be enhanced in the decision making process on specific decisions according to the stipulated processes associated so that desired goals are achieved in improving the functionality and performance of the organization.
6. The researcher recommends that there should be a clear methodology designed on how decisions should be undertaken in an attempt to address any concern in the organization.

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