Association between Corporate Attributes and Extent of Compliance with Accounting Standards Disclosures by commercialized federal Government enterprises in Nigeria.
ABSTRACT
Prior studies’ on accounting disclosures showed relationships between accounting disclosures and firm .
Similarly, the Report of the Auditor-General for the Federation on Audited Financial Statements of commercialised enterprises indicated that these enterprises complied partially with the disclosure of relevant accounting standards in preparing financial in Nigeria.
The objective of this research therefore, wasto confirm or refute the findings of these prior studies and the reports of the Auditor-General.
To achieve this, the study examined the relationship between extent of compliance with accounting standards disclosures and firm size, leverage, liquidity, audit firm size, professional qualification, and firm effects using the audited accounts of commercialised Federal Government enterprises in Nigeria.
The theoretical framework linking disclosure practices to corporate attributes and firm effects of commercialised enterprises was based on four theories- agency, stewardship, stakeholders, and resource dependence theories.
Contents analysis method was used for data gathering and descriptive statistics and regression analysis were employed for secondary data analysis.
Based on the analyses conducted, the results showed significant p-values of the regression tests for some of the firm attributes such as firm size 0.035, audit firm size 0.000 and professional qualification 0.000; while some of the regression p-values were insignificant, such as leverage 0.128 and liquidity 0.429 at 0.05 levels of significance.
Therefore, these results showed that firm size, audit firm size and professional qualification are significantly related to the levels of compliance with accounting standards disclosure requirements and leverage and liquidity are notsignificantly related to the levels of compliance with accounting standards disclosures.
In addition, the difference of the overall values of the Coefficient of Determination was 33.98%. This means that 33.98% variations in the levels of accounting disclosures are due to the firm effects factors.
The results also showed that disclosure indices of commercialised enterprises in Nigeria are low, compared with the cross-country disclosure index benchmark of 91% for emerging economies like Nigeria. The study suggested four possible ways of increasing investment in assets to improve accounting disclosures.
These include: full commercialisation, privatization, government and private partnership, reforms in the share guarantee status of the commercialized enterprises to allow private investors to come in and government’s fulfilment of the performance agreement promised to the Governing Boards of these enterprises.
These recommendations if implemented would improve the disclosure levels (quality of financial statements)because the amount of assets, quality of accountants and audit firms hired for accounting and audit works would improve.
TABLE OF CONTENTS
CONTENT PAGE
TITLE PAGE i
DECLARATION ii
CERTIFICATION iii
ACKNOWLEDGEMENTS iv
DEDICATION vi
TABLE OF CONTENTS viii
LIST OF TABLES xiii
LIST OF FIGURES xiv
LIST OF APPENDICES xv
ABSTRACT xvi
CHAPTER ONE INTRODUCTION
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 8
1.3 RESEARCH QUESTIONS 9
1.4 AIM AND OBJECTIVES OF THE STUDY 10
1.5 HYPOTHESES OF THE STUDY 11
1.6 SCOPE OF THE STUDY 12
1.7 SIGNIFICANCE OF THE STUDY 12
1.8 OPERATIONAL DEFINITION OF TERMS 14
CHAPTER TWO REVIEW OF RELATED LITERATURE
2.1 CONCEPTUAL FRAMEWORK 16
2.1.1 Disclosure 16
2.1.2 Corporate Information Disclosure Medium 17
2.1.3 Categories of Corporate Disclosure 18
2.1.4 Disclosure Practices among Firms 19
2.1.5 Purpose of Accounting Disclosure 20
2.1.6 Nature of Corporate Disclosure 22
2.1.7 Disclosure Position 23
2.1.8 Costs of Corporate Disclosure 24
2.1.9 Stakeholder Approach to Disclosure 25
2.1.10 Drivers of Corporate Disclosure 26
2.2 THE CONCEPT OF CORPORATE GOVERNANCE 29
2.2.1 Importance of Corporate Governance 32
2.2.2 Approaches to Corporate Governance 35 2.2.3Disclosure and Corporate Governance 35
2.2.4Determinants of Disclosure 38
2.2.5Relationship between Corporate Attributes and Extent of Disclosure 50
2.3 CORPORATE ACCOUNTABILITY AND DISCLOSURE 53
2.4 CORPORATE RESPONSIBILITY AND DISCLOSURE 56
2.5 ACCOUNTABILITY AND RESPONSIBILITY FOR DISCLOSURE 58
2.5.1. Delegation and Disclosure 62
2.5.2. Legitimacy and Corporate Disclosure 64
2.6 CORPORATE TRANSPARENCY AND DISCLOSURE 65
2.7 ACCOUNTING STANDARDS AND DISCLOSURE OF ACCOUNTING INFORMATION 67
2.7.1 Accounting Standards and Financial Reporting 68
2.7.2 Other Regulatory Frameworks 75 2.7.3 Consequences of Non-disclosure of Accounting Items in Financial Reports 78
2.8 CONCEPTS AND CONVENTIONS OF ACCOUNTING 81
2.8.1 Accrual Concept 81
2.8.2 Going Concern Concept 82
2.8.3 Historical Cost Concept 83
2.9 FINANCIAL INFORMATION, CORPORATE FINANCIAL REPORTS AND CORPORATE DISCLOSURE 84
2.9.1 Objective of Financial Statements 86
2.9.2 Recognition of Elements of Financial Statements 86
2.9.3 Elements of Financial Statements 86
2.9.4 Measurement of Elements of Financial Statements 87
2.9.5 Approaches to Disclosure Measurement 90
2.10 DISCLOSURE RESPONSIBILITY OF MANAGEMENT TO SHAREHOLDERS AND STAKEHOLDERS 92
2.11 COMMERCIALISED GOVERNMENT ENTERPRISES 93
2.11.1 The Concept of Public Enterprises 93
2.11.2 Reasons for Establishing Public Enterprises 95
2.11.3 Problems of Public Enterprises in Nigeria 96
2.11.4 Privatization 97
2.11.5 Commercialisation 97
2.11.6 Privatization and Commercialization 98
2.11.7 Reasons for Commercializing Public Enterprises 99
2.11.8 Full Commercialization 100
2.11.9 Partial Commercialization 100
2.11.10 Objectives of Commercialized Government Companies 100
2.11.11 Government Financial Policy on Commercialized Enterprises in Nigeria 101
2.12 THEORETICAL FRAMEWORK 103
2.12.1 Accounting Theories, Disclosures and Corporate Attributes 103
2.12.2 Agency Theory 105
2.12.3 Stewardship Theory 106
2.12.4 Stakeholder Theory 107
2.12.5 Resource Dependence Theory 108
2.13 REVIEW OF EMPIRICAL STUDIES 109
2.14 SUMMARY OF LITERATURE REVIEWED 119
CHAPTER THREE RESEARCH METHODS
3.1 TYPE OF DATA REQUIRED FOR THE STUDY 123
3.2 SOURCE OF DATA COLLECTION 123
3.3 STUDY POPULATION 123
3.3.1 Population of Commercialised Enterprises 124
3.3.2 Population of Audited Financial Statements 126
3.4 SAMPLE SIZE AND SAMPLING TECHNIQUES 128
3.4.1 Sample Size 128
3.4.2 Sampling Techniques 128
3.5 METHODS OF DATA COLLECTION 128
3.5.1 Contents Analysis Method 128
3.5.2 The Scoring of the Disclosure Index Checklist 134
3.6 VALIDITY AND RELIABILITY TEST 134
3.6.1 Validity and Reliability of Disclosure Index Checklist 134
3.7 METHODS OF DATA PRESENTATION AND ANALYSIS 136
3.7.1 Methods of Data Presentation 136
3.7.2 Methods of Data Analysis 136
3.7.3 Definition of Variables of the Study 136
3.7.4 Model Specification 140
CHAPTER FOUR DATA PRESENTATION AND ANALYSIS
4.1 DATA PRESENTATION 154
4.2 DATA ANALYSIS 157
4.2.1 Descriptive Statistics of Disclosure Index 158
4.2.2 Interpretation of Regression Results Based on each Hypothesis 169
4.3 DISCUSSION OF FINDINGS 173
4.3.1 Findings Based on Descriptive Statistics 173
4.3.2 Findings Based on Multiple Regression Statistics 175
CHAPTER FIVE SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.1 SUMMARY OF FINDINGS 187
5.2 CONCLUSION 188
5.2.1 Conclusion based on results of Descriptive Statistics of Disclosure Index 189
5.2.2 Conclusion based on results of Regression Result 189
5.3 RECOMMENDATIONS 191
5.3.1 Recommendation based on findings from question 1 191
5.3.2 Recommendation based on findings from Hypotheses 192
5.3.3 Strategies for the Future 198
5.3.4 Problem-Solving Approaches 199
5.4 SUGGESTIONS FOR FURTHER STUDIES 199
5.5LIMITATIONS TO THE STUDY 201
5.6CONTRIBUTION TO KNOWLEDGE 201
REFERENCES 203
INTRODUCTION
1.1 Background of the Study
The increase in the collapse of businesses has been attributed to the failure of accounting standards to disclose misrepresentations in accounts which results from complex accounting methods used for earnings determination and assets valuations (Mack, 2002).
For instance, at the international level, the collapse of Enron in 2001 was blamed on Enron’s complex business model and unethical practices of management which led to the company‟s use of accounting limitations to misrepresent earnings and modify the balance sheet to indicate favourable performance (Mack, 2002; Zakaree, 2013).
These misrepresentations were intended to conceal insider dealings and related party transactions in financial reports. This later resulted in the bankruptcy of the company (Healy & Palepu, 2001).
In Nigeria, Cadbury (1992) reported that the dwindling fortunes of government companies in the 1980s and the collapse of banks and other listed companies in the 1990s were caused by insider dealings and lack of disclosure of related party transactions in financial reports.
Alabi, Onimisi & Enete (2010) observed that this situation led to the reforms of the public sector which included privatisation and commercialisation of public enterprises and the introduction of new accounting standards in the accounting and auditing systems of these enterprises.
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