Earnings quality and market value of selected listed manufacturing companies in Nigeria

Earnings quality and market value of selected listed manufacturing companies in Nigeria

Author by Adewojo, Adeyemi Ademola

Journal/Publisher: Unihez Journal Of Contemporary Research

Volume/Edition: 10

Language: English

Pages: 60 - 75

Abstract

The expectation of every accounting information user is value creation derivable
from credible and quality earnings capable of adding value to investment decisions.
Evidences from prior studies have shown that the magnitude of influence of
earnings quality on market values remains quite uncertain and controversial
requiring more empirical investigation. Consequently, extending empirical debates
in this regards, this study investigated the effect of earning quality on market value
of selected manufacturing companies in Nigeria. Expo-facto research design was
adopted and the population consisted of 66 manufacturing companies, while 15 of
the companies were conveniently selected. Descriptive and inferential analyses
were employed in the study. The study found earnings quality having a positive
significant effect on market values of selected manufacturing companies in Nigeria
(AdjR2 = 0.009; F-Stat. (4, 160) = 8.540; P-v = 0.007), when the controlling variables of
firm value and rate of inflation were augmented to the main model, the result
further revealed that earnings quality had a positive significant effect on market
value, (AdjR2 = 0.047; F (4, 160) = 9.460; P-value = 0.002). The study recommended that
managers should adopt appropriate capital structure policies that are suitable in
balancing the debt and equity financing considered adequate to ensure yearly
dividend payout, and ensure efficient performance that will enhance market values


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