Financial Reporting Quality and Shareholders’ Wealth Maximization: Evidence from listed Companies in Nigeria (original) (raw)
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Zenodo (CERN European Organization for Nuclear Research), 2023
This study examined financial reporting quality and shareholders wealth maximization of listed consumer goods manufacturing companies in Nigeria, from 2011 to 2020. Ten consumer goods manufacturing firms quoted on the Nigeria Stock Exchange were used. Financial reporting quality was measured by discretionary accruals, earnings persistence and earnings smoothening), while shareholders' wealth maximization was measured by the return on equity. Ordinary Least Square (OLS) regression estimation technique was used with the aid of E-views 9 statistical software. The study found that earnings persistence has a significant and positive impact on shareholders' wealth maximization in listed consumer good firms in Nigeria while discretionary accruals, earnings smoothing and earnings volatility have negative and significant impact on shareholders' wealth maximization in listed consumer firms in Nigeria. The study concludes that financial reporting quality has a significant impact on shareholders wealth maximization of listed consumer goods manufacturing companies in Nigeria. The study recommends that consumer goods manufacturing firms in Nigeria should maintain competence in managing shareholders' equity in order to ensure robust returns. I. BACKGROUND OF THE STUDY Investors commit funds into investments in order to get good returns at the end of a period. Sanyaolu, Onifade and Ajulo (2017) posit that the reward investors receive for the resources they invest in a company is mainly dividend which is a function of earnings of the company. Sanyaolu and Job-Olatunji (2017) have indicated that the maximization of shareholders' wealth represents the level of profitability, managerial resource utilization competence and value creation of a firm. In the same vein, a company's financial statement is a means of providing information and enlightening the shareholders about the financial position, performance and cash flow of the firm. The financial statements are a paramount enabling instrument for shareholders investment decisions. Appolos and Ademola (2020), Asia and Ratan, (2019), and Arowosegbe and Emeni (2016) believe that shareholders' wealth maximization is a profitability index, a good measure and a valuable widely used matrix for Shareholders' wealth maximization of firms with large earnings. Habib and Jiang (2016) assert that shareholders' wealth maximization is one of the most important variable to measure the performance of a business, as investors make investment decisions based on the expectation that management would create value for the investors predicated on the accuracy of Shareholders' wealth maximization predictions and as market forecast determinant. Appolos and Ademola (2020) also argue that shareholders are always at the losing end due to dishonesty and unethical practices, accounting maneuvers with deceitful intentions and accounting fraud through the exploitation of the managers' privileged positions, which negate shareholder wealth maximization goals. Typical of the cases of corporate scandals are Xerox for improper accounting and deviation from accounting principles; WorldCom for leveraging of shares to raise debt for expansive acquisition; Enron and Arthur Anderson for lack of transparency and premeditated projection of healthy picture of performance; and Tyco for aggressive acquisition strategies and accounting frauds. Sanyaolu and Job-Olatunji (2017) admit that financial statements are subject to independent examination by appointed auditor so as to confirm whether the statement of financial performance and statement of financial position for the period show the true image of the reporting firm. The essence of the auditing process and other institutional settings www.theijbmt.com 339|Page Financial Reporting Quality and Shareholders Wealth Maximization of Listed Manufacturing Companies… such as internal control and corporate governance is to ensure that financial statement maintains high quality measured relevance, reliability, comparability, understandability, accuracy and completeness,
CORPORATE GOVERNANCE AND FINANCIAL REPORTING QUALITY IN NIGERIA
The purpose of this paper is to investigate corporate governance and financial reporting quality in Nigeria. This research has been performed using a sample of 40 companies listed on the Nigeria Stock Exchange (NSE) from 2006 to 2015. The relationship between corporate governance mechanisms (board characteristics, audit committees, board independence, board size and growth) and financial reporting quality was observed. The results of the multiple regression analysis were statistically significant at 0.05 level. The F statistics of 3.641 shows that the results typically explained the model. The findings of the study revealed thatcorporate governance improves the financial reporting quality in Nigeria. Copyright©2017, Joseph Babatunde Akeju and Ahmed Adeshina Babatunde. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution and reproduction in any medium, provided the original work is properly cited.
The Effect of Financial Reporting Quality on Corporate Performancein Nigeria
The purpose of this paper is to investigate the effect of financial reporting quality on corporate performance in Nigeria. This research has been performed using a sample of 30 companies quoted on the Nigeria Stock Exchange (NSE). Three proxies were employed for measuring financial reporting quality, namely, earnings quality, accounting conservatism and accruals quality. Panel data were used for the purpose of the study. The relationship between the explained variables and an explanatory variable was observed. The results of the empirical tests were statistically significant at 0.01 and 0.05 levels. The research evidence revealed a significant negative relationship between corruption and financial reporting quality in Nigeria, which implies that the higher the level of corruption, the lower the financial reporting quality in Nigeria. Moreso, a significant positive relationship was found between IFRS and financial reporting quality. This shows that the adoption of IFRS by all quoted companies in Nigeria improves their financial reporting quality. The evidence of the study also found a significant positive relationship between accounting system and financial reporting quality. This revealed that more conservative companies with sound accounting systems enjoy higher financial reporting quality in Nigeria. The findings of the study revealed that financial reporting quality improves corporate performance in Nigeria.
This study examined the effect of corporate reporting quality on financial performance of listed manufacturing firms in Nigeria. The study employed ex-post facto research design and secondary data was collected from forty (40) manufacturing firms listed on the floor of the Nigerian Stock Exchange for the period 2014 to 2018. The data were analyzed using simple regression analysis techniques. The findings of the study align with Stewardship Theory. Specifically, the study found out that earnings quality has no significant effect on Return on Asset, but has a significant effect on Profit after Tax. The study concludes that earnings quality is greatly an essential tool to financial information users, because the earnings of companies are generally supposed to be important information components presented in financial statements. The study also recommends adequate evaluation and examination of manufacturing firms' financial statements and that adequate procedures should be put in place for early detection of earnings management practices by listed manufacturing firms in Nigeria.
Financial Reports and Shareholdersâ Decision Making in Nigeria: Any Connectedness?
The Journal of Internet Banking and Commerce, 2017
The preeminent objective of this paper is to ascertain the impact of financial statements on shareholders' investment decision making in Nigeria. We employed the use of wellstructured questionnaire to elicit the perception of shareholders regarding the importance of financial statements for investment decision making and also their discernment of the adequacy of the content of financial statements. The two hypotheses formulated in the course of the study, were tested by the use of ANOVA test and the Likelihood Ratio Test, and otherwise referred to as G-test or maximum likelihood statistical significance test. The results of the empirical tests show that Stockholders do possess the requisite technical and professional skills to analyze IFRs financial Statement. And that Stakeholders in financial reporting in Nigeria do rely on the Financial Information disclosed in financial statements for investment decision making. We recommended inter alia that stakeholders should in addition to the accounting figures in the financial statement, compute ratio, trend and common size analysis in order to secure deeper information. Secondly, investors should not be unaware of the possibility of the use of creative accounting techniques by directors, in painting a distorted picture of the state of health of the reporting entities. Additionally, investors should be mindful of the fact that financial statements are historical in nature. Since the past do not always paint a perfect picture of the present or future, investors should in addition to financial statements analysis, investigate the internal and external environment of the reporting entities before arriving at a final investment decision.
DETERMINANTS OF FINANCIAL REPORTING QUALITY: EVIDENCE FROM LISTED INDUSTRIAL GOODS FIRMS IN NIGERIA
Academy of Accounting and Financial Studies Journal, 2022
This study investigated the determinants of financial reporting quality among listed industrial goods firms in Nigeria. All the 14 industrial goods firms listed on the Nigerian stock exchange from 2010 to 2019 were included in the study. This study used the descriptive and inferential statistical methods to analysed the data collected through content analysis of the annual report and accounts of the sampled firms. The result of the panel least square regression revealed that firm size and asset tangibility have positive significant effect on financial reporting quality. Profitability and financial distress have negative influence on the quality of financial reporting while firm growth has no statistically significant effect on financial reporting quality. The result of the influence of financial distress suggests that the quality of financial reporting decreases with distress. The study recommended, amongst others, that special attention be paid to the quality of financial information provided by companies that are experiencing financial distress.
Corporate Governance and Accounting Quality : Empirical Investigations from Nigeria
Journal of Policy and Development Studies, 2015
Quality decision making is based on the quality of information available to investors and other stakeholders. Financial reports published by companies serve as the major means of financial information. The quality of these reports determines the types of decisions investors make. Various and alternate corporate governance variables have been evaluated in the literature. In this study, we incorporated the variables of enterprise risk management(ERMD) and corporate governance disclosure(CGDC) reports to enhance the robustness of the corporate governance model. By using secondary data from 150 companies in Nigeria, we sought to know the relationship between corporate governance variables and accounting quality, proxied by timeliness. The data were analyzed using the Ordinary Least Square (OLS) of multiple regressions along with the descriptive statistics to obtain the mean, standard deviation, minimum and maximum values. In our findings in 2006 through 2009,results were mixed, Nevertheless, it was suggested that an average of 9 members as the Board Size be encouraged, though the code of corporate governance code is silent on this. This is in addition to having reports on ERMD and CGDC in the annual reports for stakeholders' information, investment decision and review.
Journal of Risk and Financial Studies, 2021
Enterprise risk management and associated value relevance and quality of the financial information are said to be curial for sound corporate governance and organisational success. The value of enterprise risk management in checkmating managerial opportunistic tendencies and improving the quality of financial reporting has been debated by various scholars; the quarrelsome view in terms of the direction of their association has remained unclear, which entreats the exploration of the possible effect of enterprise risk management practices on the quality of firms' accounting numbers. The population of the study consists of all the 74 listed nonfinancial firms that are active on the Nigerian Stock Exchange as at 31st December, 2019 and whose data were for the period of the study 20102019. Secondary source of data was used and the data in respect of all the variables of the study was extracted from the Annual Report and Accounts of the firms. Longitudinal balanced panel multiple regression (two stage least square) was used as a technique of data analysis for the study. The study reveals that enterprise risk management has significant impact on quality of financial reports of the firms under investigation. Specifically, both Board Risk Management Committee and Value at Risk are positively, strongly and significantly constraining earnings management to improve quality of financial reporting. On the other hand, Cash Flow Volatility is inversely related with earnings management and therefore significantly diminishes the quality of accounting numbers in the financial statement of the firms. The implications of these findings show that when ERM is appropriately managed, a quite number of abnormal earnings would be exterminated, which improves the quality of financial reporting of listed nonfinancial firms in Nigeria. What is left to be done therefore, is for the regulatory bodies like FRCN, SEC, and NSE to ensure that listed firms in Nigeria strictly adhere with code of best practice of corporate governance, COSO frameworks and all other enactments in terms of integrated risk management, so that the quality of financial reports is protected and enhanced so that the contents do not mislead both existing and prospective investors which influence investment decision as well as the cost of raising funds especially among the listed Nigerian nonfinancial firm.
Corporate governance attributes and financial reporting quality in Nigeria
Zenodo (CERN European Organization for Nuclear Research), 2023
This study evaluated the effect of corporate governance attributes on financial reporting quality of listed manufacturing firms in Nigeria. The research design adopted for this study was the ex-post facto research design. Secondary data were taken from audited annual reports and accounts of sampled listed manufacturing firms on the Nigerian Exchange Group (NEG) 2021. The study adopted non-probability sampling filtering technique, using a sample of forty-two (42) manufacturing firms listed on the NEG. These listed manufacturing firms included selections from: four-agriculture; sixteen-consumer goods; seven-industrial goods; sixhealthcare; four-natural resources and five-conglomerates. Data extracted from the annual reports and accounts of these companies and were analyzed with the aid of Panel Regression using Stata version 14. From the Hierarchical Regression results, the variables of board size (Coef. = 6.2313; t = 2.88 and P-value = 0.004) and ownership concentration (Coef. = 70.2144; t = 2.22 and P-value = 0.027) have significant positive effects on timeliness of financial reporting of listed manufacturing firms in Nigeria from 2012 to 2021. These results are in line with prior expectations but are inconsistent with the stated null hypotheses, hence the null hypotheses which states that board size and ownership concentration have no significant effects on timeliness of financial reporting of listed manufacturing firms in Nigeria during the period under study are rejected. It implies that an increase in the number of board size and ownership concentration will improve the financial reporting timeliness of listed manufacturing firms in Nigeria during the period under study. The variables of board gender diversity (Coef. = .04463; t = 0.11 and P-value = 0.912) and board diligence (Coef. =-2.0632; t =-0.47 and P-value = 0.638) have no significant effects on timeliness of financial reporting of listed manufacturing firms in Nigeria from 2012 to 2021. These results are not in line with prior expectations but are consistent with the stated null hypotheses, hence the null hypotheses which states that board gender diversity and board diligence have no significant effects on timeliness of financial reporting of listed manufacturing firms in Nigeria during the period under study are retained. It also implies that an increase in the number of female members on the board and an increase in the number of board meetings will have no effect on the financial reporting timeliness of listed manufacturing firms in Nigeria during the period under study. The manufacturing sector is extremely crucial for a developing country such as Nigeria since they promote the enlargement and expansion of Nigeria's economic growth. It is therefore recommended that the number of directors on the board should be between seven (7) or eight (8) board members in order to foster faster communication, coordination and ultimately timeliness of financial reporting among listed manufacturing firms in Nigerian.
The increasing pervasive failure of companies made it imperative to advocate for increased financial reporting quality and to make stronger management control through creation of reliable firm characteristics. Therefore, the paper examines the effect of characteristics of firm from viewpoint of structure of firm, structure of board, structure of performance and structure of ownership variables on quality of financial reporting in quoted Industrial goods companies in Nigeria proxied by Roychowdhury (2006) model. Correlational design was employed by the study using a panel balanced data of 11 companies which is the sample of the study for the period of 2011-2018.Multiple regression technique was used as analysis tool. Firm size, leverage, firm age and women directors were established to have significant and negative effect on real earnings manipulation of quoted Industrial goods companies in Nigeria. These does imply that the variables improve the financial reporting worth of companie...