Income Smoothing: A Means for Organizational Survival

doi:10.7176/rjfa/12-14-04

Abstract

This study examined the influence of income smoothing on organizational survival of selected quoted companies in Nigeria. The research study embraced the ex-post facto study design with a substantial dependence on secondary data produced from the annual reports of companies through 2007-2018. The population of the research study included 168 companies quoted on the Nigerian Stock Market (NSE) where a sample of 20 companies were attracted utilizing the judgmental sampling strategy. The Eview 9.0 analytical software application was utilized to examine the data. The research study wraps up that there is a connection in between the dimensions of income smoothing and organizational survival. Based upon the findings, the research study advises that appropriate and ideal procedure must be established for sufficient examination, evaluation and scrutinization of financial declarations of quoted companies. Likewise, the Nigerian Accounting Standard Board (NASB) ought to be more equipped to prepare a well-structured framework of accounting regulation, approve, review and examine financial declarations of all companies quoted on the Nigeria Stock market to guarantee conformity with GAAP, IFRS, CAMA and various other financial coverage Act. The paper advocates for extra strict supervisory system with operational implementation tools to ensure compliance with International Financial Reporting Standard and Auditing standards with the purpose of reducing income smoothing practices. The introduction of punitive measures could also assist in curbing the act of income smoothing amongst Nigerian companies. Keywords: Income smoothing, Organizational survival, Nigerian Stock Market DOI: 10.7176/RJFA/12-14-04 Publication date: July 31 st 2021

Highlights

The great need for sound economic and financing choices by resource providers in addition to other stakeholders leads to ever increasing demand for financial statements that are relevant to investors’ in that they are accurately denoted and made available on time
Accounting humiliations such as Enron, WorldCom, Pamalat, Cadbury and others have a tendency to advise that the above anticipations are not constantly met by financial report presented by the managers of some corporations
Research Hypotheses Based on the specific objectives, the following null hypotheses are to be tested in this study: H01: There is no significant effect of income smoothing on organizational profitability of quoted companies in Nigeria

Summary

Introduction

The great need for sound economic and financing choices by resource providers in addition to other stakeholders leads to ever increasing demand for financial statements that are relevant to investors’ in that they are accurately denoted and made available on time. Fund suppliers demand that financial report must accurately reveal the economic fact of actions and trades that occurred including provisions that subsisted at the reporting date. It is anticipated that stated revenues ought to strictly estimate the cash flows stemming from the conventional activities of the firm and cash flows from its capitalizing and sponsoring actions. Accounting humiliations such as Enron, WorldCom, Pamalat, Cadbury and others have a tendency to advise that the above anticipations are not constantly met by financial report presented by the managers of some corporations. The yearning by managers to have remarkable accomplishment in their company is expected but the drawback is the method of achieving such targets

Objectives

Methods

Conclusion