The International Financial Reporting Standards (IFRS) is a high quality and principle based reporting standards that remove many accounting alternatives. It is therefore, consequently expected to limit the management’s discretion and lessen practices on earnings management. Quite the opposite, some researchers argue that the flexibility in IFRS and its fair value pre-eminence might afford greater opportunities for firms to manage earnings. It is this inaptness which incited and aggravated the conduct of this study.
This study applies a desktop review to investigate the worldwide existing empirical research evidence on the effect of IFRS on earnings management post- IFRS adoption and in relation to other reporting standards and reports whether the results are indistinguishable between developed and developing economies. Accounting research in developed economies has long identified earnings management as a means by which managers manipulate financial reports to mislead other stakeholders on the underlying economic performance of the firm. However, earnings management research did not receive much attention in developing countries such as Nigeria until recently.
The findings reveal that the existing empirical crams and conclusions there on are mixed, inconsistent and difficult to generalise. This indicates the pressing need for country, especially Nigeria to engage on studies of this nature. The study further, stumbles on the fact that IFRS can indistinctly benefit both developing and developed markets when coupled with appropriate effective enforcement machinery. Substantially, the results entail that IFRS is a critical determinant for quality reporting but not a ‘prima facie’ guarantor for quality reporting.
Inhaltsverzeichnis (Table of Contents)
- INTRODUCTION
- Background to the Study
- Statement of the problem
- REVIEW OF RELATED LITERATURE
- Theoretical Framework
- Pecking order Theory
- Trade off Theory
- Agency Theory
- Irrelevancy Theory
- Free Cash flow Theory
- Conceptual Framework
- Concept of Financial leverage
- Concept of firm Performance
- Empirical Review
- CONCLUSION
- RECOMMENDATIONS
- REFERENCES
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
The primary goal of this study is to review existing empirical research on the impact of financial leverage on firm performance and analyze whether the findings are consistent across developed and developing economies.
- The relationship between financial leverage and firm performance
- The impact of financial leverage on profitability and shareholder wealth
- The influence of leverage on firm behavior and decision-making
- The differences in empirical findings between developed and developing economies
- The need for further research on financial leverage in developing countries
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction provides background information on the debate surrounding financial leverage and firm performance, highlighting the key theories and contributions in the field. It also outlines the research problem and the study's objectives. The chapter emphasizes the significance of financial decisions for firm profitability and the challenge of determining the optimal capital structure to maximize shareholder wealth.
The review of related literature explores the theoretical framework underpinning the study, delving into various theories such as the pecking order theory, trade-off theory, agency theory, irrelevancy theory, and free cash flow theory. It also provides conceptual definitions of financial leverage and firm performance, outlining their importance and relationship within the context of firm financing decisions.
Schlüsselwörter (Keywords)
The primary focus of this study lies on the impact of financial leverage on firm performance, emphasizing the need for further research on this topic, particularly in developing countries. The key terms and concepts investigated include financial leverage, firm performance, capital structure, profitability, shareholder wealth, debt financing, equity financing, and the various theoretical frameworks employed to understand these relationships.
- Quote paper
- John Joseph (Author), 2018, The Leverage Effect on Financial Performance. A Review of Empirical Evidence, Munich, GRIN Verlag, https://www.grin.com/document/429684
