REAL ACTIVITIES EARNINGS MANAGEMENT AND FIRM VALUE OF QUOTED CONSUMER GOODS FIRMS IN NIGERIA

Abstract

This study investigated the impact of real activities earnings management (RAEM) on the firm value of consumer goods companies quoted on the Nigerian Exchange Group (NGX). A correlational research design was employed, with a criterion-based sampling adopted to choose fifteen (15) companies from a population of twenty as of 31 December 2025. RAEM was measured using the Absolute value of abnormal cash flow from operating activities, abnormal production costs and abnormal discretionary expenses based on Rowchowdhury Model, while firm value was proxied by Tobin’s Q ratio. Firm size, profitability and leverage were included as control variables. Data covering the period from 2013 - 2025 were extracted from the audited annual financial statements of the sampled firms. The result estimates are obtained with panel corrected standard errors and panel specific AR(1) correction. The findings-revealed that RAEM exerts a positive and statistically significant influence on the Tobin’s Q (coefficient = 0.156; p = 0.020). Profitability and leverage are also positive and significant, whereas firm size is not statistically significant in the final specification. These results underscore the role of RAEM as a strategic tool that can shape investors’ perceptions and market valuations. However, the empirical findings also highlight concerns for transparency and ethical financial reporting. Accordingly, the study recommends that policymakers and regulatory authorities should enhance monitoring and enforcement mechanisms to detect and curtail misleading earnings management practices that may distort market outcomes and mislead investors. Establishing and enforcing effective regulatory frameworks will help to ensure that earnings management, where practiced, aligns with ethical standards and promotes integrity in financial reporting.