Mandatory International Financial Reporting Standards Adoption and Cost of Equity Capital in Nigeria
Mandatory International Financial Reporting Standards Adoption and Cost of Equity Capital in Nigeria

Summary/Abstract: This study examined the effect of mandatory International Financial Reporting Standards (IFRS)adoption on the cost of equity capital on Nigerian firms and whether the cost of equity capital effect afteradoption of IFRS can be moderated by Return on Equity. The study covered a sample of 11 listed companiesin the industrial goods sector for the period 2011 and 2013. The data for the study was secondary datagenerated from the annual reports and stock market report websites. The cost of equity capital was shown asthe expected return on the basic value of a share and computed based on pre and post-adoption data. Findingsfrom the study revealed that there is a significant positive relationship between the cost of equity capital andIFRS adoption indicating that the cost of equity capital increased. The market-based performance measurefailed to have significant effect on the cost of equity capital after mandatory adoption. The study recommendsthat policies that improve domestic savings, as a principal source of equity capital, be enacted as an increaseshould lead to a reduction in the cost of equity capital, interest rates and increase the appeal of equity andforeign investments.

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