Accrual and Real Earnings Management: Firm Value Analysis

Saheed Akande Shittu (), Hakeem Olayinka Onifade (), Khairat Taiwo Ajibola () and Sherifdeen Olatunji Aminu ()
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Saheed Akande Shittu: Federal Polytechnic Ayede, Oyo State, Nigeria
Hakeem Olayinka Onifade: Crescent University, Ogun State, Nigeria
Khairat Taiwo Ajibola: Federal Polytechnic Ayede, Oyo State, Nigeria
Sherifdeen Olatunji Aminu: Federal Polytechnic Ayede, Oyo State, Nigeria

Acta Universitatis Bohemiae Meridionales, 2023, vol. 26, issue 2, 68-79

Abstract: The study examines the effect of Earnings Management (EM) on the performance of Non-Financial Listed Firms (NFLF) in Nigeria. EM was proxies by Discretionary Accrual (DA) and Real Earnings Management (REM) using Raman and Shahrur's (2008) and Roychodhury's (2006) models, respectively, against firm performance measured by Return on Capital Employed (ROCE). Using purposive sampling technique, 76 NFLF with the required secondary data needed for the study from 2010 to 2020 was selected for the study out of 113 NFLF in Nigeria as at 31 December 2020. Data gathered were analysed using Generalized Method of Moment (GMM) estimator and Dumistrescu and Hurlin panel causality tests technique. The results shows positive and significant influence of DA on ROCE while REM shows negative and significant effect on ROCE. Also, ROCE granger caused both DA and REM. The study concludes that EM had significant influence on the performance of NFLF in Nigeria. Firm size and firm age are found to have positively influenced performance of NFLF. Hence, the study recommends that, managers to be well informed in order to stop overusing activities that result in negative effects on the firm performance in the future and to increase financial transparency.

Keywords: Accrual; real earnings management; manufacturing firms; firm value; Nigeria (search for similar items in EconPapers)
JEL-codes: R30 R39 (search for similar items in EconPapers)
Date: 2023
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