1. Real Earnings Management and Future Financial Performance of Quoted Consumer Goods Companies in Nigeria.
- Author
-
OLANIYI, Taiwo Azeez and ABUBAKAR, Fatima Larai
- Subjects
FINANCIAL performance ,EARNINGS management ,FINANCIAL management ,CONSUMER goods ,AUDITED financial statements - Abstract
Reporting earnings to managers and shareholders differently aggravates information asymmetry and distorts stakeholders’ estimates of a firm's value. This study examines the effect of real earnings management (REM) on future financial performance in quoted consumer goods companies in Nigeria from 2001 to 2016. Ex-post Facto research design was adopted with an extensive reliance on secondary data obtained from the audited financial statements of the 22 quoted companies. Sales manipulation (earnings management), ROE and EPS (financial performance) and control variables (firm size, growth and financial strength) were analysed using panel Generalized Method of Moments. The study found that quoted consumer goods companies in Nigeria manipulate their earnings through sales. Though insignificant, (P-value=0.810 and 0.459, the subsequent effect of this manipulation on financial performance proxies is positive. Growth had a positive significant effect (Coeff =0.583 and 0.155, P-value=0.000 and 0.000) while firm size and financial strength are insignificant (p-value =0.140 and 0.134 respectively). The study concludes that subsequent increase in future financial performance as a result of increase in investment (present earnings manipulation will continuously hide the true picture of financial statement published by such companies. It was therefore recommended that Setters of Accounting Standards should limit opportunistic management discretion in treating financial statement transactions, minimise flexibility of standards, while stiffer penalty should be given to companies caught engaging in such act [ABSTRACT FROM AUTHOR]
- Published
- 2018