EFFECT OF IFRS ADOPTION ON FINANCIAL PERFORMANCE OF CONSTRUCTION FIRMS IN NIGERIA: A STUDY OF RETURN ON ASSETS (ROA) AND NET PROFIT MARGIN (NPM)

This study investigated the impact of International Financial Reporting Standards (IFRS) adoption on the financial performance of construction firms listed on the Nigerian Exchange Group (NGX), with a focus on Return on Assets (ROA) and Net Profit Margin (NPM). The specific objectives were to examine the average ROA and NPM of construction companies in Nigeria before and after the adoption of IFRS. An ex post facto research design was employed, using secondary data sourced from the published financial reports of eight (8) listed construction companies. The study covered an 18-year period (2003–2020), divided into the pre-IFRS era (2003–2011) and the post-IFRS era (2012–2020). Both descriptive and inferential statistical methods were applied. Hypotheses were tested using Analysis of Variance (ANOVA). The results revealed statistically significant improvements in financial performance after IFRS adoption. ROA increased from 6.19% to 8.24%, with an F-value of 14.12 and a p-value of 0.001. Similarly, NPM rose from 9.64% to 12.15%, with an F-value of 10.98 and a p-value of 0.004. These findings suggest that IFRS adoption contributed to better asset utilization and enhanced profitability relative to revenue in the construction sector. The study provides empirical evidence that transitioning to IFRS has a positive effect on key financial performance indicators in Nigeria’s construction industry. It concludes that full compliance with IFRS enhances transparency, profitability, and financial reporting quality, and recommends that construction firms continue to align with international standards to sustain these benefits.