FAIR VALUE ACCOUNTING AND FINANCIAL PERFORMANCE OF INSURANCE COMPANIES IN NIGERIA
DOI:
https://doi.org/10.65336/WJEBM.2026.3804Keywords:
Fair Value Accounting, Fair Value Disclosure, Fair Value Measurement, Financial Performance, Insurance CompaniesAbstract
This study examined the effect of fair value accounting on the financial performance of insurance companies in Nigeria. The study specifically examined the effects of fair value measurement, fair value disclosure, fair value hierarchy, valuation techniques, and fair value gains and losses on financial performance. A quantitative approach and ex-post facto study design were adopted, while secondary data obtained from published annual reports and financial statements were used for the analysis. The study covered 100 firm-year observations, and data were analysed using descriptive statistics, correlation analysis and multiple regression analysis. The descriptive results showed that financial performance had a mean value of 0.0999, fair value measurement had a mean of 0.4321, fair value disclosure had a mean of 0.6989, fair value hierarchy had a mean of 0.3588, valuation techniques had a mean of 0.6456, while fair value gains and losses had a mean of 0.0115. The regression result produced an R-squared value of 0.289, indicating that the explanatory variables jointly explained 28.9% of the variation in financial performance. The ANOVA result was statistically significant at F = 7.645 and p = 0.000. Fair value measurement had a positive and significant effect on financial performance (β = 0.0444, p = 0.005), while fair value disclosure also had a positive and significant effect (β = 0.0432, p = 0.022). Fair value hierarchy had a negative and insignificant effect (β = -0.0312, p = 0.104), while valuation techniques had a positive but insignificant effect (β = 0.0232, p = 0.231). Fair value gains and losses had a positive and significant effect and recorded the strongest coefficient (β = 0.3194, p = 0.000). The study concluded that fair value measurement, fair value disclosure, and fair value gains and losses significantly influence the financial performance of insurance companies in Nigeria. The study recommended improved fair value measurement, transparent disclosure, effective valuation procedures and closer monitoring of fair value gains and losses by insurance companies and regulatory authorities.
References
1. AbdulRahman, S. B., Yunusa, M. S., & Idris, S. (2022). Corporate liquidity and performance of listed insurance companies in Nigeria. UMYU Journal of Accounting and Finance Research, 3(1).
2. Abiahu, M. F. C., Udeh, F. N., Okegbe, T. O., & Eneh, O. M. R. (2020). Fair value accounting and reporting, and firm value: Evidence from quoted deposit money banks in Nigeria. Asian Journal of Economics, Business and Accounting, 17(1), 46–53.
3. Adegboyegun, A. E., Ben-Caleb, E., Ademola, A. O., Madugba, J. U., & Eluyela, D. F. (2020). Fair value accounting and corporate reporting in Nigeria: A logistics regression approach. International Journal of Financial Research, 11(2), 301–310.
4. Agboola, M. O., Popoola, A., & Onipe, A. Y. (2020). Firm specific attributes and financial performance of listed insurance companies in Nigeria. Gusau Journal of Accounting and Finance, 1(2), 1–16.
5. Aigienohuwa, O., & Ohonba, N. (2023). Effect of fair value accounting on financial performance of deposit money banks in Nigeria. Journal of Global Accounting, 9(4), 258–274.
6. Alaryan, L. A., & Al-Salti, Z. (2021). Fair value accounting and its impact on financial reporting quality: Evidence from emerging markets. International Journal of Financial Studies, 9(4), 1–18.
7. Al-Htaybat, K., von Alberti-Alhtaybat, L., & Al-Htaybat, K. (2019). IFRS 13 fair value measurement: Challenges and implications for financial reporting. Journal of Accounting and Organizational Change, 15(3), 401–422.
8. Ali, M. M., & Ahmed, K. (2020). Fair value accounting and financial reporting quality: Evidence from listed firms. Asian Journal of Accounting Research, 5(2), 245–260.
9. Ayeni-Agbaje, R. A., Adesina, O. D., & Adebayo, A. I. (2024). Assessment of fair value measurement for financial reporting in industrial manufacturing firms in Nigeria. The Journal of Accounting and Management, 14(3), 26–41.
10. Banjo, K. A., & Oyetade, J. A. (2022). Improving the financial performance of life insurance industry in Nigeria through effective asset–liability management. Nigerian Journal of Risk and Insurance, 12(1).
11. Barth, M. E. (2006). Including estimates of the future in today’s financial statements. Accounting Horizons, 20(3), 271–285.
12. Barth, M. E., Landsman, W. R., & Lang, M. H. (2008). International accounting standards and accounting quality. Journal of Accounting Research, 46(3), 467–498.
13. Beest, F. V., Braam, G., & Boelens, S. (2009). Quality of financial reporting: Measuring qualitative characteristics. Nijmegen Center for Economics Working Paper, 09(108), 1–41.
14. Christensen, H. B., & Nikolaev, V. V. (2013). Does fair value accounting for non-financial assets pass the market test? Review of Accounting Studies, 18(3), 734–775.
15. Danjuma, U. B., & Dauda, I. (2024). Capital structure and financial performance of listed insurance firms in Nigeria: Moderating role of sustainability reporting. KASU Journal of Accounting Research and Practice, 9(1), 119–134.
16. Deloitte. (2024). IFRS 17 implementation: The Nigeria insurance industry experience. Deloitte Nigeria.
17. Dumbor, N., Nwite, S. C., & Edike, J. B. (2025). Firm-level characteristics and financial performance: A study of listed insurance firms in Nigeria. Advance Journal of Management, Accounting and Finance, 10(5).
18. Duniya, M., Murtala, A., & Nurudeen, U. M. (2023). Impact of risk on the financial performance of listed insurance firms in Nigeria. Nigerian Journal of Cooperative Economics and Management, 14(1), 161–170.
19. Eccher, E. A., Ramesh, K., & Thiagarajan, S. R. (1996). Fair value disclosures by bank holding companies. Journal of Accounting and Economics, 22(1–3), 79–117.
20. Fali, I. M., Nyor, T., & Mustapha, L. O. (2020). Financial risk and financial performance of listed insurance companies in Nigeria. European Journal of Business and Management, 12(12).
21. Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2004). Costs of equity and earnings attributes. The Accounting Review, 79(4), 967–1010.
22. Goh, B. W., Li, D., Ng, J., & Yong, K. O. (2015). Market pricing of banks’ fair value disclosures. Journal of Accounting and Public Policy, 34(5), 481–500.
23. Hameed, R. A., & Tsoho, G. (2020). Effects of financial performance and firm size on firms’ value: Empirical study of insurance companies in Nigeria. Gusau International Journal of Management and Social Sciences, 3(1), 17–30.
24. Hassan, I., & Hassan Alhaji, T. (2023). Ownership structure and financial performance of listed insurance firms in Nigeria: Moderating role of independent director. International Journal of Research and Innovation in Social Science, 7(6), 1833–1840.
25. Hitz, J. M. (2007). The decision usefulness of fair value accounting—A theoretical perspective. European Accounting Review, 16(2), 323–362.
26. Inaya, A. D. (2025). Determinants of insurance firms’ performance in Nigeria. Management Sciences Review, 16(1), 35–54.
27. Kiarie, J. (2025). Effect of fair value measurement model on financial performance of insurance firms. Journal of Finance and Accounting, 5(7), 20–30.
28. Landsman, W. R. (2007). Is fair value accounting information relevant and reliable? Evidence from capital market research. Accounting and Business Research, 37(sup1), 19–30.
29. Laux, C., & Leuz, C. (2010). Did fair-value accounting contribute to the financial crisis? Journal of Economic Perspectives, 24(1), 93–118.
30. Lev, B., & Sougiannis, T. (1996). The capitalization, amortization, and value-relevance of R&D. Journal of Accounting and Economics, 21(1), 107–138.
31. Mala, R., & Chand, P. (2012). Effect of the global financial crisis on accounting convergence and reporting quality in the Asia-Pacific region. Accounting and Finance, 52(2), 1–34.
32. Mensah, E. (2021). The effect of IFRS adoption on financial reporting quality: Evidence from listed firms in developing economies. International Journal of Accounting and Financial Reporting, 11(2), 1–19.
33. Nnah, L. (2024). Fair value accounting practices and financial performance of listed manufacturing firms in Nigeria. International Journal of Accounting and Management Innovations, 9(1).
34. Oko-Osi, A. H., & Aroyehun, D. D. (2024). Underwriting practices and financial performance of insurance companies in Nigeria. Lagos Journal of Banking, Finance and Economic Issues.
35. Olabode, P., & Ajao, S. O. (2023). Accounting measurement and profitability: Comparative analysis between fair value regime and historical cost regime. Asian Journal of Economics, Business and Accounting, 23(24), 225–236.
36. Okere, W., Offiaeli, A. G., Oluwatobi, R., & Adebayo, M. A. (2022). Fair value accounting and investment decisions in Nigerian listed companies. Journal of Economics, Management and Trade, 28(6), 56–66.
37. Opuene, O. O., & Amadiwo, C. N. (2025). Fair value accounting and financial reporting practices in Nigerian companies. International Journal of Accounting and Finance Research, 8(1), 45–58.
38. Osanyinbi, T. G., Siyannbola, T., Omoniyi, B., & Iregha, M. (2023). Fair value measurement and financial reporting quality of insurance business in Lagos State. European Journal of Accounting, Auditing and Finance Research, 11(9), 101–115.
39. Oyetade, J. A., & Banjo, K. A. (2021). Financial performance determinants of insurance companies in Nigeria. Nigerian Journal of Risk and Insurance, 11(2), 74–89.
40. Oyewo, B. (2020). Post-implementation challenges of fair value measurement (IFRS 13): Some empirical evidence. African Journal of Economic and Management Studies, 11(4), 587–607.
41. Oyewo, B. (2021). Diffusion of fair value measurement (IFRS 13): Perception of auditors. Contaduría y Administración, 66(2), 1–35.
42. Penman, S. H. (2007). Financial reporting quality: Is fair value a plus or a minus? Accounting and Business Research, 37(sup1), 33–44.
43. Poon, W. W. (2004). Using fair value accounting for financial reporting. The CPA Journal, 74(6), 1–6.
44. Power, M. (2010). Fair value accounting, financial economics and the transformation of reliability. Accounting and Business Research, 40(3), 197–210.
45. Ryan, S. G. (2008). Accounting in and for the subprime crisis. The Accounting Review, 83(6), 1605–1638.
46. Song, C. J., Thomas, W. B., & Yi, H. (2010). Value relevance of FAS No. 157 fair value hierarchy information and the impact of corporate governance mechanisms. The Accounting Review, 85(4), 1375–1410.
47. Yahaya, H. Y., Duniya, M., & Abdulmalik, M. (2025). Evaluating the impact of risk on financial performance of listed insurance firms in Nigeria. UMYU Journal of Accounting and Finance Research, 8(1).
48. Zeff, S. A. (2007). Some obstacles to global financial reporting comparability and convergence at a high level of quality. The British Accounting Review, 39(4), 290–302.
49. Zhang, X. J. (2019). Fair value, financial reporting quality and firm performance. Journal of Accounting and Finance, 19(6), 45–58.
50. Zhou, H. (2020). Fair value measurement and the usefulness of financial reporting information. International Journal of Financial Studies, 8(4), 1–17.
