IFRS 9 Adoption and Loan Loss Provisioning in Listed Nigerian Banks: The Moderating Role of Bank Capitalization

This study investigates the effect of IFRS 9 adoption on loan loss provisioning among listed Deposit Money Banks (DMBs) in Nigeria, while examining the moderating role of bank capitalization. Following the introduction of IFRS 9 in 2018, the Nigerian banking sector experienced heightened regulatory scrutiny due to persistent credit risk exposures, fluctuating macroeconomic conditions, and inconsistencies in financial reporting. Despite expectations that IFRS 9 would enhance the forward-looking nature of expected credit loss (ECL) recognition, concerns persisted regarding disclosure quality, audit report transparency, and the influence of capitalization pressures on provisioning behaviour. This study employs a panel dataset of ten listed banks covering 2015–2024, capturing both pre-IFRS 9 and post-implementation periods. IFRS 9 adoption is measured through Financial Statement Disclosure, Audit Report Disclosure, and External Auditor Opinion, while loan loss provisioning constitutes the dependent variable. Using panel regression models with robust clustered standard errors, findings reveal that IFRS 9-related financial statement disclosure and audit report disclosure significantly increase loan loss provisioning. The IFRS 9 composite index also shows a positive direct influence on provisioning. Bank capitalization demonstrates a significant moderating effect: higher capitalization weakens the positive relationship between IFRS 9 adoption and provisioning, suggesting that well-capitalized banks face less pressure to increase provisions aggressively under IFRS 9. The study concludes that while IFRS 9 enhances provisioning quality, disclosure effectiveness depends on capitalization strength. The findings offer critical implications for regulators, auditors, and bank management regarding transparency, compliance, and financial stability under IFRS 9.