Abstract
The quality of accounting information has attracted considerable interests among many scholars, investors, and other stakeholders worldwide. Earnings management is one of the factors responsible for this development. However, studies have shown that sustainability reporting can assist companies in reducing information asymmetry which encourages earnings’ manipulation. Hence, the paper investigated how sustainability reporting could influence accrualsbased earnings management among multinational corporations in Sub-Saharan Africa countries. The research’ design was ex-post facto. All the 48 multinational companies in thesub-Saharan Africa countries constituted the study’s population. Purposive sampling technique was used in selecting 5 multinational companies from each of 10 sampled countries based on data availability. The data for the period 2010-2019 were obtained from the published annual financial reports of the sampled multinational companies and the Global Reporting Initiatives (GRI)’s sustainability guidelines. The study revealed that the lag of discretionary accruals, corporate governance sustainability reporting and economic sustainability reporting had positive relationship with discretionary accruals, while social sustainability reporting and environmental sustainability reporting were negatively linked to discretionary accruals. Additionally, the study found that sustainability reporting jointly had significant effect on discretionary accruals of multinational corporations in Sub-Saharan Africa (Adj. R 2 = 0.33, W (6, 444 ) = 668.67, P <.05).This study concluded that sustainability reporting exerted significant influence on discretionary accruals of multinational corporations in Sub-Sahara Africa. The study recommended that management of multinational corporations in sub-Saharan Africa should ensure strict compliance with sustainability reporting so as to improve the earnings quality. Keywords: Sustainability reporting, environmental reporting, economic reporting, social reporting, corporate governance reporting, earnings management, discretionary accruals. DOI: 10.7176/RJFA/12-24-02 Publication date: December 31 st 2021
Highlights
The quality of accounting information has been brought to the fore by many scholars, investors, and other stakeholders worldwide
Discussion of Findings The main goal of the paper is to account for how sustainability reporting affects discretionary accruals of multinational corporations in Sub-Saharan Africa for the period of 2010-2019.The result of the study reveals that the lag of discretionary accruals, corporate governance sustainability reporting and economic sustainability reporting has positive relationship with discretionary accruals, while social sustainability reporting and environmental sustainability reporting are negatively linked to discretionary accruals
The focus of the study was to assess how discretionary accruals of earning management could be influenced by sustainability reporting among fifty (50) multinational corporations in Sub-Saharan Africa for the period 20102019
Summary
The quality of accounting information has been brought to the fore by many scholars, investors, and other stakeholders worldwide. This phenomenon is not unconnected with the recent accounting scandals caused the bankruptcy of many large organizations like Enron, Parmalat and Maxwel across the world (Hussain, Akbar, Khan, Akbar, Panait, & Voica, 2020). Earnings management is reputed for having the capacity to distort actual accounting information presented to multiple users (Hussain, et al, 2020; Mason, & Morton, 2020). The distortions occasioned by these manipulations of earnings reporting portend grave consequences to stakeholders in terms of confidence in accounting reporting, corporate image, and borrowing capacity. Investors and financial analysts who rely on such manipulated accounting information for measuring the present value of future earnings are misled (Oraby, 2017). Earnings management exerts negative impact on corporate reputation and reduces the entity’s capacity to access loans and debts (Setiawan & Hermawan, 2018)
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