Firm Attributes and Earnings Predictability of Listed Manufacturing Companies in Nigeria

Abstract

Earnings predictability is a measure of how well the past earnings of a firm can explain its current earnings. Earnings measurement is very important in accounting since the performance of the firm can be seen by a wide range of users. The primary role of the financial statement is to disclose the financial statement information to internal and external users in a timely and reliable manner. This study was to ascertain the relationship between firm attributes and earnings predictability of quoted manufacturing companies in Nigeria. The population of the study consisted of all the listed manufacturing companies in Nigeria for the year ending 2021. Purposive sampling was used to sample 12 manufacturing firms that were continuously listed and actively trading on the floor of the Nigerian Exchange Group (NXG) Ltd. during the period 2017 to 2021 and whose financial statements are available and have been consistently submitted to NXG for the period under study. The ex post facto research design was used to establish the effect of firm attributes on earnings predictability. The firm attributes reviewed were firm size, age, leverage and liquidity, while earnings predictability was measured by operational cash flows on total assets. Panel regression data using a pooled estimate of ordinary least squares method was used for data analysis. The result revealed that firm age, firm size, firm leverage and firm liquidity all have weak effects on the dependent variable. Based on the findings, it was concluded that firm attributes have weak but positive effects on earnings predictability. It was recommended that manufacturing companies should provide quality earnings reports stating the earnings per share, operational cash flow, and total assets. This will showcase the accrual quality which could assist investors in estimating future earnings thereby making decisions to avoid security mispricing.