EFFECT OF REAL EARNINGS MANAGEMENT ON FINANCIAL PERFORMANCE OF LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

The objective of the study is to examine the effect of real earnings management on the financial performance of listed manufacturing companies in Nigeria. The financial performance proxied by Return on Assets (ROA) is the dependent variable of the study while real earnings management which is the independent variable was proxied by Sales Manipulation (SMP), Discretionary Expenses (DE), Abnormal Production Cost (APC) and Accrual-Based Earnings (ABE). The research design used in the study is ex-post facto research design which relies in using mainly secondary data. The targeted population of the study are all the 65 listed manufacturing firms in Nigerian Group Exchange. The study adopted random sampling technique and as such 21 listed manufacturing firms were selected for the data collection spanning from 2016 to 2023. Multiple regression technique was used in the study. The result shows statistically significant impact between Sales Manipulation, Discretionary Expenses, Abnormal Production Cost on Return on Asset.
However, Accrual-Based Earnings was insignificant on Return on Asset. The study concluded that of real earnings management has on the financial performance of listed manufacturing companies in Nigeria. Based on this result, the study recommends that firms should focus on optimizing these costs. Implement cost control measures and enhance production efficiency to ensure that abnormal production costs contribute positively to financial performance.