Company Characteristics and Earnings Quality of Listed Non-Financial Companies in Nigeria

The quality of reported earnings has been a concern among regulators, standard setters, practitioners and researchers. To this end, the researchers examined the relationship between company characteristics and the earnings quality of listed non-financial companies in Nigeria. The non-financial firms were classified into natural, industrial and service sectors. Company characteristics were proxied using six dimensions, company size, auditor type, company leverage, company age, board size and board meetings. Income smoothing was utilized in measuring earnings quality. An ex-post facto research design was employed in conducting this study. It utilized a total of 697 firm-year observations from 95 companies for the period from 2012 to 2019. The data collected were analysed using descriptive, correlation and regression analysis. Evidence from the study revealed that company leverage and company age were the most prominent company characteristics that significantly influence earnings quality for most of the sectors and the combination of all sectors. Company leverage had a negative influence while company age had a positive impact. It is concluded that highly geared and younger firms have a greater tendency to manipulate their income to impress stakeholders. Therefore, auditors and regulatory bodies such as Financial Reporting Council should pay close attention to young and highly geared firms to curb income manipulation practices and hence enhance earnings quality.