Implications of Earnings Management on the Firm Value of Listed Non-Financial Firms in Nigeria

Abstract

This study examined the implications of earnings management on the value of sampled Nigerian non-financial firms. While earnings management was measured through accrual earnings management (ACEM) and real earnings management (REM) from production, the firm value was measured with Tobin Q. Data used were generated from a sample of sixty-nine (69) non-financial firms in Nigeria. In line with the outcomes of specification tests, fixed effect panel regression was employed in testing the hypotheses. The results of the panel regression technique indicate that while accrual earnings management recorded insignificant negative influence on Tobin Q (t=-0.75; p>0.05), real earnings management was found to exerts significant negative influence on Tobin Q (t=-2.56; p<0.05). The study thus concludes that earnings management through real activities is detrimental to the market value of Nigerian listed non-financial firms. Hence, the recommendation that emanates from this study is that EM practice among Nigeria non-financial firms should be discouraged as it discourages investors and thus hinders the firm value and long run growth of the firm by extension.