Appraisal of the Impact of Earnings Management on Financial Performance of Consumer Goods Firms in Nigeria
Journal of Finance and Accounting
Volume 8, Issue 1, January 2020, Pages: 34-47
Received: Jan. 7, 2020; Accepted: Jan. 18, 2020; Published: Feb. 14, 2020
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Authors
Ubesie Madubuko Cyril, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology, Enugu, Nigeria
Nwankwo Bobby Godwin Ogbogu, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology, Enugu, Nigeria
Nwankwo Peter Emeka, Department of Accountancy, Faculty of Management Sciences, Enugu State University of Science and Technology, Enugu, Nigeria
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Abstract
There are two different tools of earnings management; real activities and accruals. Prior research shows that the discussion on earnings management was primarily focused on accrual manipulation strategies while recently many articles have focused on real activity manipulation as a proxy for earnings management. In accrual manipulation, managers introduce their judgment and subjectivity by accounting choices in the financial reports, and hence it could distort a company’s underlying operating performance. The main objective of this study was to determine the impact of Earnings Management on financial performance of consumer goods firms in Nigeria. The study adopted the ex-post facto research design and used simple regression analysis for analysing the pooled secondary data obtained from three selected consumer goods firms in Nigeria. The dependent variable in this study is financial performance proxy by Total Assets, Equity and Total liability of the firms while Earnings Management is the independent variable (proxy by Net profit or Profit for the Year). The findings show that Earnings Management does not have significant impact on financial performance of consumer goods firms in Nigeria. The study recommended that there should be conscious effort by management of consumer goods firms to improve the earnings management situation in order to impact on financial performance of the sector; Management of consumer goods firms should emphasize the equity of firms as a means of widening ownership fund position and internal source of capital; There must be re-assessment of the liabilities of such firms for proper positioning of financial performance of consumer goods firms in Nigeria.
Keywords
Earnings Management, Financial Performance, Consumer Goods Firms
To cite this article
Ubesie Madubuko Cyril, Nwankwo Bobby Godwin Ogbogu, Nwankwo Peter Emeka, Appraisal of the Impact of Earnings Management on Financial Performance of Consumer Goods Firms in Nigeria, Journal of Finance and Accounting. Vol. 8, No. 1, 2020, pp. 34-47. doi: 10.11648/j.jfa.20200801.15
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Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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