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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
...
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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Likewise, accruals in the company's income statement can be used as a prediction of future cash flows
that can provide positive or negative signals so that the company can predict the company's future
conditions
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2
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In his renowned work, Coase focused
on the ascertainment of Knight in the first place, establishing the science of the theory of the firm
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Also, management's effort in operating the firm is not
directly observable to outsiders
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Efficient contracting is an important component of this
alignment
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For good corporate governance, these contracts should be efficient
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For example, a firm
may benefit from lower borrowing costs if it incurs costs to reassure lenders, such as pledging specific
assets as security or accepting a covenant to limit further borrowing, which would water down the
security of existing lenders
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3 Empirical Review
Taiwo et al (2020) examined the impact of volatility on the earnings predictability of Nigerian quoted
firms
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The causal relationship research design was adopted
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The system generalized method of moment (GMM) was used to estimate the dynamic panel
regression models of the study
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The study
also found that volatility hurts earnings predictability
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Redhwan & Ku Nor (2013) researched governance structure, ownership structure and earnings
predictability: Malaysian evidence
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Using a
sample of 330 firms for the period of 2008 through 2009, the findings revealed that the predictive ability
of earnings is high when firms have small boards, an independent chairperson, and high shareholding
by institutions
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The results also demonstrated that investors do not perceive
182

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

independent audit committees, more active audit committees, competent audit committees, and a high
shareholding of management, as good indicators of earnings numbers with a high predictive value
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This was borne out of the empirical study on earnings
predictability, value relevance, and employee expenses
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Hassan & Abubakar (2019) investigated firm characteristics and financial reporting quality:
evidence from listed consumer goods companies in Nigeria for the period of ten years, from 2008-2017
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From the functional model, Y = f (X1, X2, X3, X4) the adapted model is shown thus:
Earnings quality = f (firm attributes)
i
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EQ = f (FAT)
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12, and t = 1,2,3,4,5
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Each proxy of the independent variable, the dependent variable, and regression parameters are
presented and coded thus:
EQ
=
Earnings quality
FAT =
Firm’s attributes
EPR =
Earnings predictability
FAGE =
Firm age
FSG
=
Firm size
LEV =
Leverage
LIQ =
Liquidity
𝑎0
=
Regression intercept
β1- β4 =
Regression parameters
𝜇
=
Stochastic term
The independent variable of this study is the firm attributes - firm age, firm size, board size, liquidity
and leverage, while the dependent variable in this study is earnings quality which was measured by
earnings predictability
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1: Measurement of Variables
Variable
Type
Description Measure
Name
Firm Age
Independent FAG
Number of years since
listing
Firm Size
Independent FSZ
Log of Total Asset
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0 Data Analysis and Discussion of Findings
Table 4
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3333
7
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4942
1
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0138
Mean
0
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3028
2
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0948
-
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600
-
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074
0
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589
Skewness
5
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412
19
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211
13
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00
5
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47
0
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55
Minimum
35
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56
23
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45
1
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The mean values of the variables were 20
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3028, 2
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0948 and -
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Equally, the median values for the generated data set were 0
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3028, 2
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0948 and -
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Furthermore, the Skewness values obtained were 2
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689, 4
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822 and 2
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The
kurtosis values of 5
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412, 19
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211 and 13
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This suggests that the data series for the variables were flatter
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The
minimum values were 17
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38, 0
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10 and -
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00, 8
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17, 2
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14 respectively
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1
HO1:

Test of Hypotheses
Firm age has no significant effect on the earnings predictability of listed manufacturing
companies in Nigeria
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3: Summary of Linear Regression Results for Firm Age on Earnings Predictability
Model Summary
Model R
R Square Adjusted
R Std
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111a

...
005
a
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21861

Mean Square

Regression

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034
1
Residual
2
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048
Total
2
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Dependent Variable: EARNINGS PREDICTABILITY
b
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399b

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

Coefficientsa
Model

Unstandardized Coefficients Standardized
Coefficients

B
Std
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091

...
005

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111
a
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849


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399

Tables A, B and C show the result of hypothesis one
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111
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Rela
Research, 3(10), 97-114
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O
...
F
...
O
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Effect of audit quality on accrual quality of
Nigeria
...

Uwuigbe, U
...
An empirical investigation of the association between firms’ characteristics and
corporate social disclosures in the Nigerian financial sector
...

Uyar, A
...
(2012)
...

Journal of Intellectual Capital, 13(3), 363-376
...
, Kilic, M
...
(2013)
...
Intangible Capital, 9(4), 10801112
...
, & Jenkins, D
...
(2006)
...

Vincent, L
...
The assessment and implication of earnings quality: an investor perspective, Kellogg
School of Management working paper
...
H
...
The influence of leverage and profitability on earnings quality
...
, Zhang, R
...
(2010)
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Advances in accounting, incorporating advances
in international accounting, Journal of Scientific research, 26(1), 47–54
...
(2018)
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published Masters Degree Dissertation, Department of Accounting
Ahmadu Bello University, Zaria, Nigeria
...
M
...
& Wah, K
...
(2016)
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Procedia Economics and Finance,
35, 287–296

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