Bank Earnings Smoothing During Mandatory IFRS Adoption in Nigeria

African Journal of Economic and Management Studies 10(1): 32-47

22 Pages Posted: 11 Sep 2018 Last revised: 4 Mar 2019

See all articles by Peterson K Ozili

Peterson K Ozili

University of Essex - Essex Business School; Central Bank of Nigeria

Erick Rading Outa


Date Written: 2019


We examine the extent of bank earnings smoothing during mandatory IFRS adoption in Nigeria, to determine whether mandatory IFRS adoption increased or decreased income smoothing among Nigerian banks. We find that the mandatory adoption of International Financial Reporting Standards (IFRS) is associated with lower earnings smoothing among Nigerian banks, which implies that Nigerian banks do not use loan loss provisions to smooth reported earnings during the mandatory IFRS adoption period. We find evidence for earnings smoothing via LLP during voluntary IFRS adoption. Earnings smoothing is not significantly associated with listed and non-listed Nigerian banks during voluntary and mandatory IFRS adoption. Overall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of loan loss provisions estimate by discouraging Nigerian banks from influencing loan loss provisions for earnings smoothing purposes during the mandatory IFRS adoption. The findings of this paper are relevant to the debate on whether IFRS reporting improves the quality of financial reporting among firms in Nigeria. The implication of the study is that IFRS has higher accounting quality than local GAAP in Nigeria as it improves the quality and informativeness of accounting numbers (LLPs and earnings) reported by Nigerian banks during the period examined.

Keywords: Loan Loss Provisions, Discretionary Accruals, Income Smoothing, Earnings Management, Nigeria, Banks, IFRS

JEL Classification: G21, G28

Suggested Citation

Ozili, Peterson Kitakogelu and Outa, Erick Rading, Bank Earnings Smoothing During Mandatory IFRS Adoption in Nigeria (2019). African Journal of Economic and Management Studies 10(1): 32-47. Available at SSRN: or

Peterson Kitakogelu Ozili (Contact Author)

University of Essex - Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Central Bank of Nigeria ( email )

Plot 33, Abubakar Tafawa Balewa Way
Central Business District, Cadastral Zone

Erick Rading Outa

Independent ( email )

No Address Available

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