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Effect of Financial Statement Comparability on Firm Value of Listed Companies in Nigeria

Abstract

Financial statement comparability has become an essential characteristic of high-quality financial reporting due to its ability to enhance transparency, improve investment decisions, and facilitate efficient allocation of capital. Financial statement comparability refers to the extent to which financial information prepared by different companies, or by the same company over different reporting periods, can be consistently compared to identify similarities and differences in financial performance, financial position, and cash flows. High levels of comparability enable investors, creditors, analysts, regulators, and other stakeholders to evaluate corporate performance more accurately, reduce information asymmetry, strengthen market confidence, and improve the efficiency of capital markets. The adoption of International Financial Reporting Standards (IFRS) has further promoted comparability of financial statements by providing a uniform framework for financial reporting across jurisdictions. In Nigeria, listed companies are required to prepare financial statements in accordance with IFRS under the supervision of the Financial Reporting Council of Nigeria (FRCN), the Securities and Exchange Commission (SEC), and the Nigerian Exchange Group (NGX). Despite the adoption of IFRS, differences in accounting policy choices, disclosure practices, managerial judgments, industry-specific reporting practices, and variations in corporate governance continue to affect the comparability of financial statements among listed companies. These inconsistencies may reduce the usefulness of accounting information and influence investors' valuation of firms. Although previous studies have examined financial reporting quality and firm value, empirical evidence regarding the effect of financial statement comparability on the firm value of listed companies in Nigeria remains limited and inconclusive. Against this background, this study investigates the effect of financial statement comparability on the firm value of listed companies in Nigeria. The study is anchored on Information Asymmetry Theory, Signaling Theory, and Efficient Market Hypothesis (EMH). Information Asymmetry Theory posits that greater comparability of financial statements reduces information gaps between corporate managers and investors, thereby improving investment decisions and firm valuation. Signaling Theory argues that companies providing highly comparable and transparent financial reports signal strong financial reporting quality, effective corporate governance, and sound managerial practices, thereby enhancing investor confidence and increasing firm value. The Efficient Market Hypothesis explains that financial information, including the comparability of financial statements, is rapidly incorporated into market prices, thereby influencing corporate valuation in efficient capital markets. Collectively, these theoretical perspectives provide a comprehensive framework for explaining the relationship between financial statement comparability and firm value of listed companies in Nigeria. The study adopts a quantitative research design using a structured questionnaire administered to chief financial officers, finance managers, accountants, financial controllers, internal auditors, external auditors, company secretaries, investment analysts, stockbrokers, portfolio managers, institutional investors, and other professionals involved in financial reporting and investment analysis within selected listed companies and capital market institutions in Nigeria. A stratified random sampling technique will be employed to ensure adequate representation of companies operating in the financial services, manufacturing, consumer goods, industrial goods, oil and gas, telecommunications, agriculture, healthcare, and other sectors listed on the Nigerian Exchange Group (NGX). Financial statement comparability will be measured using consistency of accounting policies, uniformity of financial reporting practices, disclosure comparability, compliance with International Financial Reporting Standards (IFRS), consistency in financial statement presentation, transparency of accounting information, and comparability across reporting periods, while firm value will be measured using market value, market capitalization, investors' perception, share price performance, Tobin's Q, shareholder value, and overall corporate valuation. Primary data collected from respondents will be analyzed using descriptive statistics to summarize respondents' demographic characteristics and perceptions regarding financial statement comparability and firm value. Structural Equation Modeling (SEM) will be employed to examine the effect of financial statement comparability on firm value. The measurement model will be evaluated using Cronbach's Alpha, Composite Reliability (CR), Average Variance Extracted (AVE), and Confirmatory Factor Analysis (CFA) to establish the reliability and validity of the research instrument. Additional diagnostic tests, including multicollinearity assessment, common method bias analysis, and model fit indices such as the Comparative Fit Index (CFI), Tucker-Lewis Index (TLI), Root Mean Square Error of Approximation (RMSEA), and Standardized Root Mean Square Residual (SRMR), will be conducted to ensure the adequacy, consistency, reliability, and robustness of the structural model. The study anticipates that financial statement comparability will have a significant positive effect on the firm value of listed companies in Nigeria. High levels of financial statement comparability are expected to improve the usefulness of accounting information, strengthen investor confidence, facilitate informed investment decisions, reduce information asymmetry, and enhance market valuation. Companies with highly comparable financial statements are also anticipated to improve transparency, strengthen corporate governance, reduce the cost of capital, attract greater investment, and enhance shareholder wealth. Furthermore, consistent application of IFRS and improved disclosure practices are expected to strengthen market efficiency, improve analysts' forecasts, facilitate corporate benchmarking, and support sustainable value creation. Conversely, low comparability arising from inconsistent accounting policies, inadequate disclosures, poor financial reporting practices, and weak regulatory compliance may reduce investor confidence, increase uncertainty, weaken market valuation, and adversely affect firm value. Consequently, improved financial statement comparability is expected to contribute significantly to enhancing firm value, capital market efficiency, financial reporting credibility, and long-term corporate sustainability among listed companies in Nigeria. This study is expected to make significant theoretical and empirical contributions to the literature on financial accounting, corporate finance, financial reporting, and capital markets by providing comprehensive evidence on the relationship between financial statement comparability and firm value of listed companies in Nigeria. Unlike previous studies that broadly examined financial reporting quality or accounting disclosure, this research specifically evaluates financial statement comparability as a strategic determinant of firm value using primary data and Structural Equation Modeling (SEM). The findings will provide valuable insights for the Financial Reporting Council of Nigeria (FRCN), the Securities and Exchange Commission (SEC), the Nigerian Exchange Group (NGX), listed companies, investors, financial analysts, professional accounting bodies, policymakers, regulators, and academic researchers regarding the strategic importance of financial statement comparability in enhancing corporate valuation and strengthening investor confidence. The study will also provide evidence-based recommendations for improving financial reporting consistency, strengthening compliance with International Financial Reporting Standards (IFRS), enhancing disclosure quality, promoting transparency in corporate reporting, reinforcing regulatory oversight, and fostering a more efficient and credible Nigerian capital market.

Keywords: Financial statement comparability, firm value, listed companies, International Financial Reporting Standards (IFRS), financial reporting quality, corporate valuation, capital market, Structural Equation Modeling (SEM), accounting disclosure, Nigeria.