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AKSU Journal of Administration and Corporate Governance, Volume 3 Number 2, August 2023

Firm Attributes and Earnings Predictability of Listed Manufacturing Companies
in Nigeria
Ememobong David Johnson
Department of Accounting
Akwa Ibom State University
Email: mayon29@gmail
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edu
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com
Phone: +234 8023227940
https://doi
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61090/aksujacog
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015
Abstract
Earnings predictability is a measure of how well the past earnings of a firm can explain its current
earnings
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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
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The population of the study consisted of all the listed manufacturing companies
in Nigeria for the year ending 2021
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during the period 2017 to 2021 and whose financial statements are available and have been
consistently submitted to NXG for the period under study
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The firm attributes reviewed were
firm size, age, leverage and liquidity, while earnings predictability was measured by operational cash
flows on total assets
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The result revealed that firm age, firm size, firm leverage and firm liquidity
all have weak effects on the dependent variable
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It was recommended that
manufacturing companies should provide quality earnings reports stating the earnings per share,
operational cash flow, and total assets
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Keywords: Firm attributes, earnings predictability, listed manufacturing companies
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0 Introduction
Companies can be differentiated from each other based on certain attributes they possess
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These attributes are generally termed firm attributes
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Hassan and
Bello (2013) perceive firm attributes as those incentive variables that relatively are sticky at the
company's level across time
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Firm attributes can also be defined as the behavioural pattern of a company's operation which
can enable them to achieve their objectives throughout their operations
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They
are seen as factors that are mostly under the direct control of management and often account for interfirm differences in financial performance (Kazeem, 2015)
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Earnings predictability is a desirable attribute because it is indicative of sustainable
earnings
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Earnings
predictability is also a desirable attribute of accounting earnings as it aids in forecasting activities, a
critical aspect of valuation
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, 2010)
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, 2004;
Dechow et al
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This is done if the firm's earnings exhibit steady growth over the years which can
also be reasonably maintained in future periods
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This definition shows that earnings predictability is measured as the
variance of the error term in a model where the current year earnings of Firm "J" is regressed on a oneyear lag of earnings for the firm
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As a result, different proxies have been
used by academics to infer earnings quality
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, 2004)
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However, seven attributes of earnings – accrual quality, persistence, predictability,
smoothness, value relevance, timeliness, and conservatism – have been defined by Francis et al
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In their research, the first four attributes are normally measured by using accounting information only
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In addition, the proxies for the last three
attributes are defined by the relations between the accounting data and market data
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, 2004)
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1
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One of these proxies, earnings predictability refers to the extent to which investors can predict the future
earnings and/or future cash flows of a firm
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Investors use earnings
information to analyse a particular firm's current performance and estimate its prospects
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Moreover, the importance of the predictive nature of accounting earnings
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AKSU Journal of Administration and Corporate Governance, Volume 3 Number 2, August 2023

is manifested when taking into consideration, for instance, the use of accounting earnings in the
valuation of a firm's equity, which requires investors to anticipate the firm's expected future cash flows
(Velury & Jenkins, 2006)
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The
significance of the predictive value of earnings figures appears in the use of accounting numbers in
equity valuation, which requires the anticipation of expected future cash flows (Velury & Jenkins, 2006)
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Recently, several studies
have introduced earnings predictability as a proxy for earnings quality (Atwood et al
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, 2010)
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Earnings predictability is tested using the slope
coefficient from a baseline regression between future cash flows and

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