CHAPTER ONE INTRODUCTION

1.1          Background to the Study

Accounting literatures on value relevance research dates back to early 1960s with the

remarkable seminal work of Ball and Brown (1968) being the center stage. The work provided

an extensive analysis on the value relevance of accounting information and equity valuation and

found that accounting information contained in financial statement have an effect on share

price. This perhaps laid the foundation for numerous empirical studies seeking to measure

association between accounting numbers and equity values in both the developing and

developed world. Recent studies however, have taken a different dimension by measuring the

association between value relevance of accounting information under different regimes of

accounting standards that is local standards (GAAP) and the International Financial Reporting

Standard (IFRS). IFRS is in the fore front of accounting standards used in the world today with

over 120 countries fully adopting it.

Nigeria is a signatory to the International Financial Reporting Standard (IFRS) which

compels its public and special entities to adopt the new accounting standard. This is following

the approval of the Federal Executive Council in December 2010, the then Nigerian Accounting

Standards Board (NASB), now designated as Financial Reporting Council of Nigeria (FRCN))

issued an implementation roadmap for Nigerian‟s adoption of IFRS which set a January 2012

date for compliance of publicly quoted companies, banks and insurance firms in Nigeria. The

Central Bank of Nigeria (CBN) and the Securities and Exchange Commission also adopted this

date for compliance and issued guidance compliance circulars to ensure full implementation of

IFRS in Nigeria.

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Several studies such as: Laurenco and Curlo (2008), Hung and Subramanyam (2007),

Bartov, Goldberg & Kim (2005), Barth, Landsman & Lang (2008), have compared the value

relevance of accounting information under IFRS and domestic standard in various countries.

IFRS was adopted in Nigeria to overcome the weaknesses of Statement of Accounting Standard

(SAS) and improve the quality of financial reporting (Bagudo, Abdul Manaf and Ishak,2015).

The country‟s vision 20:20:20 envisioned the country‟s insurance sector to be among the highly

placed emerging markets famous for high market capacity and transparency to achiev