Abstract
This study is on the compliance with regulatory framework by Small and Medium Enterprises (SMEs) in Nigeria evincing financial reporting quality impact on firm performance. The design is an exploratory survey employing structural equation modelling in model specification. The empirical analysis of this study went through exploratory factor analysis (EFA) and then confirmed by confirmatory factor analysis (CFA). This study examined the impact of compliance with companies and allied Matters Act through financial reporting quality on performance of SMEs in Nigeria. The outcome revealed that the Financial Reporting Quality (exogenous variables) accounted for 39% while the Firm Performance (endogenous variables) accounted for 61% of the total variance. Thus, the Squared Multiple Correlations (SMC) fraction result confirmed that financial reporting quality has direct relationship with SMEs performance. Thus, Financial Reporting Quality (FRQ) impact on firm performance at (β=0.875) is significant. The study recommends that since FRQ is having a direct and significant relationship with SMEs performance the need for enforcing compliance to statutory and regulatory framework on SMEs by SMEDAN, CBN and all other stakeholders is necessary. Keywords: compliance, reporting quality, performance, SMEs, Nigeria. DOI : 10.7176/RJFA/10-6-08 Publication date :March 31 st 2019
Highlights
Regulatory laws are guidelines that oversee the operations of Small and Medium Enterprises (SMEs)
The observed exogenous variables in the revised model accounted for 39% in the explanation of the total variance of the observed endogenous variable Financial Reporting Quality
The Squared Multiple Correlations (SMC) fraction between the two endogenous variables (0.39 and 0.61 refer to table 7) were investigated to determine the proportion of variance that was described by the exogenous variables in the theoretical model
Summary
Regulatory laws are guidelines that oversee the operations of Small and Medium Enterprises (SMEs). These guidelines are usually promulgated by government regulators or international groups to protect stakeholders, maintain orderly markets and encourage financial stability. Regulatory laws incorporate a set of rules evolved by regulatory bodies; government or private, to guide the operations of corporations These rules might have the legislative support or may perhaps be a pronouncement by the relevant body to be strictly adhered to by SMEs. Contained by the framework of financial reporting, regulatory laws entail of outlines issued in form of enactments, guidelines, and standards to be followed by enterprises when preparing financial statements. Cutting-edge SMEs taking advantage of this, the organizations eventually overwhelmed the regulatory agency such that the focus of the objective of regulation (promoting public’s interest) is shifted to protecting the interest of the entities
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