EFFECT OF ACCRUAL QUALITY AND INCOME SMOOTHING ON THE VALUE OF QUOTED CONSUMER GOODS COMPANIES IN NIGERIA

Abstract

Recently, the quality of financial reporting and earnings management practices has become
an important topic due to its influence on investor confidence and firm valuation. Within
the Nigerian consumer goods sector, concerns about earnings quality and transparency
have intensified as stakeholders demand more credible information for decision-making.
Against this backdrop, this study examined the effect of accrual quality and income
smoothing on the value of quoted consumer goods companies in Nigeria. A descriptive
longitudinal research design was adopted, utilising panel data from multiple firms over a
10-year period from 2015 to 2024. The study population comprised all 21 quoted consumer
goods companies listed on the Nigerian Exchange's (NXG) Group as at December 31,
2024, with a final sample of 17 firms selected based on a purposive sampling technique.
Guided by positive accounting theory, firm value was measured using Tobin’s Q, and
multiple regression analysis was employed to evaluate the relationships among variables
with aid of STATA 16. The findings revealed that both accrual quality and income
smoothing had significant positive effects on firm value, indicating that higher earnings
quality and consistent reporting patterns enhance investor confidence and market
valuation. The study concluded that accrual quality and income smoothing are vital
determinants of firm value in the Nigerian consumer goods sector. It is recommended that
financial analysts pay closer attention to earnings quality indicators, while managers adopt
practices that improve reporting credibility and reduce information asymmetry.