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Aguguom Theophillus Rufus Akintoye and Rafiu Oyesola Salawu
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Aguguom Theophillus Rufus Akintoye: Babcock University, Postal: Department of Accounting, Babcock University, Illishan-Remo, Ogun State.
Rafiu Oyesola Salawu: Obafemi Awolowo University, Postal: Department of Management and Accounting, Obafemi Awolowo University,, Ile-Ife, Osun State.

International Journal of Accounting and Finance (IJAF), 2018, vol. 07, issue 2, 32-54

Abstract: This paper examined the trend and impact of earnings quality on the financial performance of firms from the perspective of accounting information usefulness, aimed at resolving a missing link between current and expected firm performance, due to existing gap between managers and investors on information asymmetry and opportunistic earnings tendencies, in improving managerial and investment decisions and forecast abilities of the analysts towards increasing the level of earning quality and firm performance. The study proposed accounting-based earnings quality measures of accruals quality (AQ), earnings persistence (EPERS), earnings predictability (EPRED) and earnings smoothness (ESMOTH) as proxies to measure earnings quality and Tobin's Q to measure firm financial performance. A sampled of 51 firms listed on the Nigerian Stock Exchange over the period of 2000-2016 were purposively selected. Panel data were extracted from the audited published financial statements. Descriptive and inferential statistics were used for the specified models. The findings revealed that earnings quality proxies jointly had a positive significant effect on the financial performance of the firms. Individual coefficient estimate of each of the variables revealed that AQ, EPRED and ESMOTH each had negative effect on Tobin's Q, while EPERS had a positive significant effect on Tobin's Q. The study recommended that analysts, investors, policy makers and other stakeholders should pay attention to the earnings consistency of time-series behavioral pattern of earnings as measured by predictability and persistence as a guide in managerial and investment decisions andforecasting offuture earnings.

Keywords: Earnings quality; financial performance; Accruals quality; Earnings persistence; Earnings smoothness (search for similar items in EconPapers)
Date: 2018
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