Moderating Effect of Blockholder Ownership Structure and Corporate Attributes on IFRS 7-Financial Instruments Compliance of Financial Services Firms in Nigeria

Abstract

This study examines the extent of compliance with International Financial Reporting Standards 7 (IFRS 7) financial instruments disclosure requirements, examine the relationship between corporate governance characteristics and IFRS 7, and examine the moderating role of block holder ownership on the relationship between corporate governance characteristics and IFRS 7 by listed financial sector firms in Nigeria. Panel data from the annual reports of 50 sampled financial institutions for a period of 3 years (2012-2014) were used in the study. Findings of the study indicate that the compliance with IFRS 7 is at 51% and showed steady improvement. In terms of risk type, the compliance was found to be lower in market and liquidity risk. Audit committee size, expertise, independence and meeting frequency positively and significantly affected IFRS 7 compliance. Similarly, risk management committee independence showed a positive relationship with IFRS 7 compliance. The interaction between block holder ownership and audit committee independence and risk management committee independence with IFRS 7 compliance showed a significant and positive relationship. In this regard, policy makers in Nigeria should formulate forward-looking policies aimed at enhancing the independence of the audit committee to bring about strong internal control activities. They should also strengthen dealings on financial relationship between block holding investors and minority shareholders to restore the confidence hitherto enjoyed by the Nigerian financial institutions. The findings of the study provide the needed input for policy formulation and decision making in Nigerian financial institutions.