VALUE RELEVANCE OF FINANCIAL DERIVATIVE INSTRUMENTS UNDER IFRS 7: A PANEL STUDY OF NIGERIAN INTERNATIONALLY LICENSED BANKS (20152024)

Abstract

This study examines the value relevance of financial derivative instruments among listed internationally licensed banks in Nigeria. The study appraised Ohlson’s Residual Income Valuation framework and the disclosure architecture established by IFRS 7. Focusing on financial derivative assets, derivative liabilities, derivative trading income, and derivative risk sensitivity disclosure, the investigation evaluates how derivative-related accounting variables shape market valuation as captured by share price. The study employed ex-post facto research to collate data and examine the nexus between the variables. The secondary data required were sourced from the Nigerian Exchange Group (NGX) fact books and other related companies’ annual financial records. The study collected panel data covering 2015–2024 for the analysis. The sample consists of all eight (8) internationally licensed banks listed on the NGX. The sample was arrived at using a census sampling technique. The study employs a panel data regression technique to estimate the panel data. The findings reveal that while derivative assets exhibit a significant negative link with market value, other derivative dimensions, including liabilities, trading income, and disclosure, 
do not exert statistically significant valuation effects, indicating a clear asymmetry in how investors interpret different aspects of derivative activities. In conclusion, the results highlight the dynamic and non-linear nature of market reactions to derivative information, suggesting that 
Conventional assumptions about the uniformly positive or transparent signaling role of derivative reports and disclosures may not hold in real-time situations.