Tag Archives: Income Smoothing

The Influence of Forced Financial Reporting Disclosures On Behaviour Of Reporting Firms: Evidence From Nigeria (Published)

This paper examines the influence of forced financial reporting disclosures on the behavior of reporting firms in the Nigerian banking industry. Market size, asset base and profitability were used as the selection criterion. The sample size represents seventy percent of the population. Forced disclosure metrics used were capital adequacy and liquidity ratios while reporting behavior was measured using income smoothing and loan loss provisioning. A regressed forced disclosure metric was performed on variables of the behavior of the reporting firm. Results suggest correlation between forced disclosure and the behavior of reporting firms. No significant relationship existed between capital adequacy and liquidity ratio with income smoothing. Correlation between capital adequacy ratio and loan loss provisioning behavior was significant suggesting heavy reliance on loan loss provisioning to smooth income in order to meet regulatory requirements.

Keywords: Banking Industry, Capital Adequacy Ratio and Loan Loss Provisioning, Forced Disclosure, Income Smoothing, Liquidity Ratios


Our paper aims to study the impact of the regulatory disclosure requirements enacted in 2004 on the income smoothing behaviour (a proxy for quality of financial reporting) and on firm valuation (measured by Topins’ q ratio) of Jordanian listed firms on Amman Stock Exchange (ASE). Our perception is that the new disclosure requirements of 2004 hold higher quality as a reporting system for the ASE market than did the one of 1998. A higher reporting quality is expected as the new disclosure requirements of 2004 had removed the conditions over adopting IASB-based standards that existed under the previous regulatory disclosure requirements along with bringing new structural and procedural changes. Previous literature suggested that IASB standards have been long perceived as a set of high quality reporting standards. Under such perceptions, we expect the reporting quality to increase, which in return, would impact the market valuation for listed firms. To perform our study, we selected a sample of 94 out of 133 publicly listed service and industrial Jordanian firms at the ASE. The sample consists of 58 industrial and 36 service listed firms. Our findings indicate a positive impact on both of the quality of reporting and market valuation of service firms with the new regulation of 2004 compared to a negative impact on the quality of reporting and a positive impact on market valuation of industrial firms.



Keywords: : IASB Standards, ASE Jordan, Emerging Markets, Income Smoothing, Reporting Quality, Tobin’s q Ratio