Firm Characteristics and Earning Quality of Quoted Manufacturing Firms in Nigeria

Abstract

Firm characteristics have been adjudged motivating factors responsible for increase in the earnings of firms globally. However, issues on firm characteristics in Nigeria focused mostly on financial institutions with less attention given to manufacturing sector that seems to play a pivotal role in enhancing economic growth. This study tends to examine the relationship between firm characteristics and earnings quality of quoted manufacturing firms in Nigeria. The study used annual data from 2011 to 2018 of six manufacturing firms (Livestock PLC, May and Baker PLC, AG Leventis PLC, Nestle Nigeria PLC, Nigeria Bottling Company and Champions Brewery). Panel data analysis was adopted and Hausman Test was used to determine which of the appropriate method to adopt for the analysis. The study found a positive and significant relationship between firm characteristics (measured by return on asset and current ratio) and earnings quality (measured by persistence). The study recommended that Manufacturing firms may choose to go for more debt especially where the interest rate is considerably low and also increase their liquidity asset and turnover as it has been found empirically so as to enhance the quality of firms reported earnings.