The moderating role of adoption of ifrs between tax avoidance and SMEs performance in Nigeria
Abstract
The study examines the moderating role of International Financial Reporting Standards (IFRS) adoption between tax avoidance and the performance of Small and Medium Enterprises (SMEs) in Nigeria. This research explores whether adopting IFRS for SMEs mitigates the negative implications of tax avoidance, which may improve short-term performance but create long-term reputational and operational risks. Using a quantitative research strategy as well as a positivist research philosophy, the respondents were selected using a purposive sampling technique based on the relevance of their SME activities and readiness to participate in the study. A cross-sectional survey design was employed to obtain the data from 502 SME owners and managers in Nigeria. Questionnaires were administered via Google Forms, and descriptive statistics as well as Structural Equation Modeling (SEM) were used to test formulated hypotheses. The results show that tax avoidance has a positive influence on SMEs’ performance, but its benefits are offset by long-term challenges. IFRS adoption moderates this relationship by enhancing financial transparency and operational efficiency. The study reveals how IFRS adoption can improve financial reporting practices, thus promoting sustainable business growth in emerging economies like Nigeria. The study also shows that IFRS adoption is not just a compliance requirement but can also be a strategic tool to enhance SMEs’ operational performance and reduce risks associated with aggressive tax avoidance.
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Abedana, V., Omane-Antwi, K., & Owiredu, A. (2016). The impact of IFRS/IAS adoption on corporate income taxation in Ghana. International Journal of accounting and financial reporting, 6(1).
Adelekan, S. A., Eze, B. U., & Majekodunmi, S. A. (2019). Bank loans and Small Medium Enterprises’ (SMEs) performance in Lagos, Nigeria. Ilorin Journal of Human Resource Management, 3(1), 52–61. http://ejournals.unilorin.edu.ng/journals/index.php/ijhrm
Adeosun, O. T., & Shittu, A. I. (2021). Small–medium enterprise formation and Nigerian economic growth. Review of Economics and Political Science. Advance online publication. https://doi.org/10.1108/REPS-07-2020-0089
Adetula, D. T., & Okafor, G. O. (2014). Adoption of IFRS for SMEs in Nigeria: Benefits, challenges, and prospects. Journal of Financial Reporting and Accounting, 12(2), 170-190.
Adeyemo, K. A., & Olateju, I. A. (2022). Impact of access to finance on the growth of small and medium enterprises in Nigeria. International Journal of Business Systems and Economics, 13(7), 22–36. https://arcnjournals.org/images/2726452731372.pdf
Akpan, J. U., Akinadewo, I. S., & Osatuyi, Y. A. (2023). International Financial Reporting Standards (IFRS) and Small and Medium-sized Enterprises (SMEs): assessing the impact of IFRS adoption on SMEs. World Journal of Finance and Investment Research, 7(4), 34-56.
Alhawamdeh, H., Alafeef, M. A. M. I., Alkhawaldeh, B. Y., Nawasra, M., Al_Rawashdeh, H. A. A., Zraqat, O., Hussien, L. F., & Al-Eitan, G. N. (2024). The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES, Cogent Business & Management, 11:1, 2297458, DOI: 10.1080/23311975.2023.2297458
Awoyemi, B. O., & Makanju, A. A. (2020). The growth prospect and challenges of financing micro, small and medium scale enterprises (MSMEs) in Nigeria. European Journal of Business and Management Research, 5(4), 1–7. http://doi.org/10.24018/ejbmr.2020.5.4.350
Damak-Ayadi, S., Sassi, N., & Bahri, M. (2020). Cross-country determinants of IFRS for SMEs adoption. Journal of Financial Reporting and Accounting, 18(1), 147-168. https://doi.org/10.1108/JFRA-12-2018-0118
Fanani, Z., Puji Rahayu, A., & Erlando, A. (2024). Determining factors to implementing IFRS for SMES: a study in International Accounting Standards Board countries. Cogent Business & Management, 11(1), 2420767.
Issam, P. B., & Ibtissam, P. Z. (2023). Determinants of IFRS for SMEs adoption worldwide. International Journal of Accounting and Finance Studies, 6(2), 12-39. 10.22158/ijafs.v6n2p12. hal-04209334
Izedonmi, F. I., & Uadiale, O. M. (2017). IFRS adoption and SMEs' performance in Nigeria. African Journal of Economic and Management Studies, 8(2), 203-219.
Kaya, D., & Koch, M. (2015). Countries’ adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical evidence. Accounting and Business Research, 45(1), 93-120.
Khan, M. A. & Tjaraka, H. (2024). Tax justice and understanding: MSME compliance with Tax Regulation No. 55/2022 in Surabaya, Indonesia, Cogent Business & Management, 11:1, 2396042, DOI: 10.1080/23311975.2024.2396042
Khan, S. A. R., Sheikh, A. A. & Ahmad, Z. (2023) Developing the interconnection between green employee behavior, tax avoidance, green capability, and sustainable performance of SMEs through corporate social responsibility. Journal of Cleaner Production, Vol. 419 123236
Kiliç, M., & Uyar, A. (2017). Adoption process of IFRS for SMEs in Turkey: Insights from academics and accountants. Accounting and Management Information Systems, 16(2), 313-339.
Litjens, R., Bissessur, S., Langendijk, H., & Vergoossen, R. (2012). How Do Preparers Perceive Costs and Benefits of IFRS for SMEs? Empirical Evidence from the Netherlands. Accounting in Europe, 9(2), 227-250. https://doi.org/10.1080/17449480.2012.720875
Malik, M. S., Irfan, M. & Munir, S. (2025). Corporate tax avoidance and firm performance: the moderating role of ownership concentration and board independence, Cogent Business & Management, 12:1, 2448277, DOI: 10.1080/23311975.2024.2448277
Marina, A. G. (2022). IFRS for SMEs: Evolution and Discussions. Journal of Economic Financial Theory and Practices. Revista Economică, 74(4). DOI: 10.56043/reveco-2022-0036
Msechu, S. Z., Kasoga, P. S. & Kipesha, E. F. (2024) Firm characteristics and compliance with IFRSs for small and medium-sized entities in developing countries: evidence from Tanzania, Cogent Business & Management, 11:1, 2399313, DOI: 10.1080/23311975.2024.2399313
Muda, P., Tornyeva K. & MacCarthy J. (2024). The moderating role of environmental factors between institutional isomorphic pressures and the adoption of IFRS for SMEs: application of SEM, Cogent Business & Management, 11:1, 2330012, DOI: 10.1080/23311975.2024.2330012
Mvunabandi, J. D. (2023). The difference between non-profit organization financial reporting practices and financial performance in relation to IFRS for SMEs and government requirements. Management & Accounting Review (MAR), 22(2), 149-182.
Mvunabandi, J. D. & Mbonigaba, J. (2023). Perceptions of Non-Government Organisations Managers About International Financial Reporting Standards in the NGOs Sector: A Case Study of a Large NGO in Durban, South Africa. International Journal of Environmental, Sustainability, and Social Science, 4(3), 915-926.
Nguyen, C., Pham, S. & Nguyen, L. (2025) The mediating effect of brand image on the relationship between E-WOM and purchase intention: the case study of FOREO skin-care devices, Cogent Business & Management, 12:1, 2471532, DOI: 10.1080/23311975.2025.2471532
Okafor, O. N., Akindayomi, A., & Warsame, H. (2019). Did the adoption of IFRS affect corporate tax avoidance. Can. Tax J., 67, 947.
Okoye, E. I., & Ajam, M. (2019). The adoption of IFRS for SMEs in Nigeria: A survey of SMEs' experiences and challenges. Journal of Financial Reporting and Accounting, 17(1), 28-52.
Oladejo, M. O. & Shittu S. A. (2018). Perception of electronic cooperative financing by SMEs Members in Oyo State, Nigeria. Fountain University Osogbo Journal of Management (FUOJM). 3(3): 72-83 Available online at www.osogbojournalofmanagement.
Olaleye, J. O., Ayodele, A. O. & Adigun, M. O. (2021). Factors Affecting the Growth of Small and Medium Size Enterprises in Oyo State, Nigeria. International Journal of Advances in Engineering and Management (IJAEM), 3(8), 1801-1812, doi: 10.35629/5252-030818011812
Onyali, C. I., & Odia, J. O. (2015). An empirical study of IFRS adoption in Nigerian SMEs. International Journal of Business, Accounting, and Finance, 9(1), 1-12.
Oyedeji, R. O. Ogunleye, J. K., Aribaba, F. O., Ahmodu, A. O. & Shittu, S. A. (2023). Strategic Financial Management Practices and Sustainability of Small and Medium Enterprise in Osogbo Metropolis, Nigeria. Kampala International University Journal of Social Sciences. 9(1), 17-22, ISSN: 2413-9580
Pais, C. A. F., & Bonito, A. L. M. (2018). The macroeconomic determinants of the adoption of IFRS for SMEs: Los Determinantes macroeconómicos en la adopción de las IFRS para las pymes. Revista de Contabilidad-Spanish Accounting Review, 21(2), 116-127.
Ramanna, K. & Sletten, E., (2009). Why do countries adopt International Financial Reporting Standards? Working Paper, Harvard University and Boston College
Roman, T., Marcu, N., Rusu, V. D., Doacă, E. M., & Siriteanu, A. A. (2023). Tax payment and the performance of SMEs: a longitudinal analysis on EU countries. Sustainability, 15(2), 927.
Samour, A., Musah, M., Mati, S., & Amri, F. (2024). Testing the impact of environmental taxation and IFRS adoption on consumption‐based carbon in European countries. Environmental Science and Pollution Research, 1-14.
Sánchez‐Ballesta, J. P., & Yagüe, J. (2024). Tax avoidance and debt maturity in SMEs. Journal of International Financial Management & Accounting, 35(2), 429-464.
Segotso, T., Mvunabandi, J. D., & Phesa, M. (2024). A Systematic Literature Review of the Challenges of Adopting and Implementing IFRS for SMEs in South Africa. International Journal of Economics and Financial Issues, 14(5), 131-147.
Septriani, Y., Wardhani, R., Adhariani, D. & Samingun (2025) Tax avoidance in Southeast Asia: unraveling the effects of environmental uncertainty and governance, Cogent Business & Management, 12:1, 2473031, DOI: 10.1080/23311975.2025.2473031
Shittu, S. A., Taleat, B. A., Owojori, O. C. & Aminu, S. O. (2023). Small and Medium Scale Businesses Performance in the New Normal (Post-COVID); Environment: Evidence from Oyo State. Fuoye Journal of Public Administration and Management, 1(1), 58-68, ISSN: 2992-4863
Tenzer, A. (2024). Impact of IFRS 15 adoption on performance measurement in healthcare – the case of National Health Service Foundation Trusts, Cogent Business & Management, 11:1, 2331982, DOI: 10.1080/23311975.2024.2331982
Umadia, K. Sr., & Kasztelnik, K. (2020). The financial innovative business strategies of small to medium scale enterprises in developing country and influence for the global economy performance. SocioEconomic Challenges, 4(3), 20–32. https://doi.org/10.21272/sec.4(3).20-32.2020
Uyar, A., & Güngörmüş, A. H. (2013). Perceptions and knowledge of accounting professionals on IFRS for SMEs: Evidence from Turkey. Research in Accounting Regulation, 25(1), 77-87. https://doi.org/10.1016/j.racreg.2012.11.001
Wyk, M. V. & Enslin, Y. (2025). The impact of IFRS 16 adoption on financial statements of listed South African mining companies, Cogent Business & Management, 12:1, 2450096, DOI: 10.1080/23311975.2025.2450096
Yoo, S., & Managi, S. (2022). Disclosure or action: Evaluating ESG behavior towards financial performance. Finance Research Letters, 44, 102108. https://doi.org/10.1016/j.frl.2021.102108
Zahid, R. A., & Simga-Mugan, C. (2019). An analysis of IFRS and SME-IFRS adoption determinants: a worldwide study. Emerging Markets Finance and Trade, 55(2), 391-408.
Abedana, V., Omane-Antwi, K., & Owiredu, A. (2016). The impact of IFRS/IAS adoption on corporate income taxation in Ghana. International Journal of accounting and financial reporting, 6(1).
Adelekan, S. A., Eze, B. U., & Majekodunmi, S. A. (2019). Bank loans and Small Medium Enterprises’ (SMEs) performance in Lagos, Nigeria. Ilorin Journal of Human Resource Management, 3(1), 52–61. http://ejournals.unilorin.edu.ng/journals/index.php/ijhrm
Adeosun, O. T., & Shittu, A. I. (2021). Small–medium enterprise formation and Nigerian economic growth. Review of Economics and Political Science. Advance online publication. https://doi.org/10.1108/REPS-07-2020-0089
Adetula, D. T., & Okafor, G. O. (2014). Adoption of IFRS for SMEs in Nigeria: Benefits, challenges, and prospects. Journal of Financial Reporting and Accounting, 12(2), 170-190.
Adeyemo, K. A., & Olateju, I. A. (2022). Impact of access to finance on the growth of small and medium enterprises in Nigeria. International Journal of Business Systems and Economics, 13(7), 22–36. https://arcnjournals.org/images/2726452731372.pdf
Akpan, J. U., Akinadewo, I. S., & Osatuyi, Y. A. (2023). International Financial Reporting Standards (IFRS) and Small and Medium-sized Enterprises (SMEs): assessing the impact of IFRS adoption on SMEs. World Journal of Finance and Investment Research, 7(4), 34-56.
Alhawamdeh, H., Alafeef, M. A. M. I., Alkhawaldeh, B. Y., Nawasra, M., Al_Rawashdeh, H. A. A., Zraqat, O., Hussien, L. F., & Al-Eitan, G. N. (2024). The relationship between marketing capabilities and financial performance: the moderating role of customer relationship management in Jordanian SMES, Cogent Business & Management, 11:1, 2297458, DOI: 10.1080/23311975.2023.2297458
Awoyemi, B. O., & Makanju, A. A. (2020). The growth prospect and challenges of financing micro, small and medium scale enterprises (MSMEs) in Nigeria. European Journal of Business and Management Research, 5(4), 1–7. http://doi.org/10.24018/ejbmr.2020.5.4.350
Damak-Ayadi, S., Sassi, N., & Bahri, M. (2020). Cross-country determinants of IFRS for SMEs adoption. Journal of Financial Reporting and Accounting, 18(1), 147-168. https://doi.org/10.1108/JFRA-12-2018-0118
Fanani, Z., Puji Rahayu, A., & Erlando, A. (2024). Determining factors to implementing IFRS for SMES: a study in International Accounting Standards Board countries. Cogent Business & Management, 11(1), 2420767.
Issam, P. B., & Ibtissam, P. Z. (2023). Determinants of IFRS for SMEs adoption worldwide. International Journal of Accounting and Finance Studies, 6(2), 12-39. 10.22158/ijafs.v6n2p12. hal-04209334
Izedonmi, F. I., & Uadiale, O. M. (2017). IFRS adoption and SMEs' performance in Nigeria. African Journal of Economic and Management Studies, 8(2), 203-219.
Kaya, D., & Koch, M. (2015). Countries’ adoption of the International Financial Reporting Standard for Small and Medium-sized Entities (IFRS for SMEs)–early empirical evidence. Accounting and Business Research, 45(1), 93-120.
Khan, M. A. & Tjaraka, H. (2024). Tax justice and understanding: MSME compliance with Tax Regulation No. 55/2022 in Surabaya, Indonesia, Cogent Business & Management, 11:1, 2396042, DOI: 10.1080/23311975.2024.2396042
Khan, S. A. R., Sheikh, A. A. & Ahmad, Z. (2023) Developing the interconnection between green employee behavior, tax avoidance, green capability, and sustainable performance of SMEs through corporate social responsibility. Journal of Cleaner Production, Vol. 419 123236
Kiliç, M., & Uyar, A. (2017). Adoption process of IFRS for SMEs in Turkey: Insights from academics and accountants. Accounting and Management Information Systems, 16(2), 313-339.
Litjens, R., Bissessur, S., Langendijk, H., & Vergoossen, R. (2012). How Do Preparers Perceive Costs and Benefits of IFRS for SMEs? Empirical Evidence from the Netherlands. Accounting in Europe, 9(2), 227-250. https://doi.org/10.1080/17449480.2012.720875
Malik, M. S., Irfan, M. & Munir, S. (2025). Corporate tax avoidance and firm performance: the moderating role of ownership concentration and board independence, Cogent Business & Management, 12:1, 2448277, DOI: 10.1080/23311975.2024.2448277
Marina, A. G. (2022). IFRS for SMEs: Evolution and Discussions. Journal of Economic Financial Theory and Practices. Revista Economică, 74(4). DOI: 10.56043/reveco-2022-0036
Msechu, S. Z., Kasoga, P. S. & Kipesha, E. F. (2024) Firm characteristics and compliance with IFRSs for small and medium-sized entities in developing countries: evidence from Tanzania, Cogent Business & Management, 11:1, 2399313, DOI: 10.1080/23311975.2024.2399313
Muda, P., Tornyeva K. & MacCarthy J. (2024). The moderating role of environmental factors between institutional isomorphic pressures and the adoption of IFRS for SMEs: application of SEM, Cogent Business & Management, 11:1, 2330012, DOI: 10.1080/23311975.2024.2330012
Mvunabandi, J. D. (2023). The difference between non-profit organization financial reporting practices and financial performance in relation to IFRS for SMEs and government requirements. Management & Accounting Review (MAR), 22(2), 149-182.
Mvunabandi, J. D. & Mbonigaba, J. (2023). Perceptions of Non-Government Organisations Managers About International Financial Reporting Standards in the NGOs Sector: A Case Study of a Large NGO in Durban, South Africa. International Journal of Environmental, Sustainability, and Social Science, 4(3), 915-926.
Nguyen, C., Pham, S. & Nguyen, L. (2025) The mediating effect of brand image on the relationship between E-WOM and purchase intention: the case study of FOREO skin-care devices, Cogent Business & Management, 12:1, 2471532, DOI: 10.1080/23311975.2025.2471532
Okafor, O. N., Akindayomi, A., & Warsame, H. (2019). Did the adoption of IFRS affect corporate tax avoidance. Can. Tax J., 67, 947.
Okoye, E. I., & Ajam, M. (2019). The adoption of IFRS for SMEs in Nigeria: A survey of SMEs' experiences and challenges. Journal of Financial Reporting and Accounting, 17(1), 28-52.
Oladejo, M. O. & Shittu S. A. (2018). Perception of electronic cooperative financing by SMEs Members in Oyo State, Nigeria. Fountain University Osogbo Journal of Management (FUOJM). 3(3): 72-83 Available online at www.osogbojournalofmanagement.
Olaleye, J. O., Ayodele, A. O. & Adigun, M. O. (2021). Factors Affecting the Growth of Small and Medium Size Enterprises in Oyo State, Nigeria. International Journal of Advances in Engineering and Management (IJAEM), 3(8), 1801-1812, doi: 10.35629/5252-030818011812
Onyali, C. I., & Odia, J. O. (2015). An empirical study of IFRS adoption in Nigerian SMEs. International Journal of Business, Accounting, and Finance, 9(1), 1-12.
Oyedeji, R. O. Ogunleye, J. K., Aribaba, F. O., Ahmodu, A. O. & Shittu, S. A. (2023). Strategic Financial Management Practices and Sustainability of Small and Medium Enterprise in Osogbo Metropolis, Nigeria. Kampala International University Journal of Social Sciences. 9(1), 17-22, ISSN: 2413-9580
Pais, C. A. F., & Bonito, A. L. M. (2018). The macroeconomic determinants of the adoption of IFRS for SMEs: Los Determinantes macroeconómicos en la adopción de las IFRS para las pymes. Revista de Contabilidad-Spanish Accounting Review, 21(2), 116-127.
Ramanna, K. & Sletten, E., (2009). Why do countries adopt International Financial Reporting Standards? Working Paper, Harvard University and Boston College
Roman, T., Marcu, N., Rusu, V. D., Doacă, E. M., & Siriteanu, A. A. (2023). Tax payment and the performance of SMEs: a longitudinal analysis on EU countries. Sustainability, 15(2), 927.
Samour, A., Musah, M., Mati, S., & Amri, F. (2024). Testing the impact of environmental taxation and IFRS adoption on consumption‐based carbon in European countries. Environmental Science and Pollution Research, 1-14.
Sánchez‐Ballesta, J. P., & Yagüe, J. (2024). Tax avoidance and debt maturity in SMEs. Journal of International Financial Management & Accounting, 35(2), 429-464.
Segotso, T., Mvunabandi, J. D., & Phesa, M. (2024). A Systematic Literature Review of the Challenges of Adopting and Implementing IFRS for SMEs in South Africa. International Journal of Economics and Financial Issues, 14(5), 131-147.
Septriani, Y., Wardhani, R., Adhariani, D. & Samingun (2025) Tax avoidance in Southeast Asia: unraveling the effects of environmental uncertainty and governance, Cogent Business & Management, 12:1, 2473031, DOI: 10.1080/23311975.2025.2473031
Shittu, S. A., Taleat, B. A., Owojori, O. C. & Aminu, S. O. (2023). Small and Medium Scale Businesses Performance in the New Normal (Post-COVID); Environment: Evidence from Oyo State. Fuoye Journal of Public Administration and Management, 1(1), 58-68, ISSN: 2992-4863
Tenzer, A. (2024). Impact of IFRS 15 adoption on performance measurement in healthcare – the case of National Health Service Foundation Trusts, Cogent Business & Management, 11:1, 2331982, DOI: 10.1080/23311975.2024.2331982
Umadia, K. Sr., & Kasztelnik, K. (2020). The financial innovative business strategies of small to medium scale enterprises in developing country and influence for the global economy performance. SocioEconomic Challenges, 4(3), 20–32. https://doi.org/10.21272/sec.4(3).20-32.2020
Uyar, A., & Güngörmüş, A. H. (2013). Perceptions and knowledge of accounting professionals on IFRS for SMEs: Evidence from Turkey. Research in Accounting Regulation, 25(1), 77-87. https://doi.org/10.1016/j.racreg.2012.11.001
Wyk, M. V. & Enslin, Y. (2025). The impact of IFRS 16 adoption on financial statements of listed South African mining companies, Cogent Business & Management, 12:1, 2450096, DOI: 10.1080/23311975.2025.2450096
Yoo, S., & Managi, S. (2022). Disclosure or action: Evaluating ESG behavior towards financial performance. Finance Research Letters, 44, 102108. https://doi.org/10.1016/j.frl.2021.102108
Zahid, R. A., & Simga-Mugan, C. (2019). An analysis of IFRS and SME-IFRS adoption determinants: a worldwide study. Emerging Markets Finance and Trade, 55(2), 391-408.
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