Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria

Shamusideen Kehinde Kassim; Olaolu Ayodeji Awoniyi; Olubunmi Adewole Ogunode; Bolanle Olubunmi Amusa; Andrew Taiwo Iwala; Tolulope Ruth Omosebi; Ishola Rufus Akintoye

doi:doi:10.11648/j.jfa.20221005.12

Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria

Shamusideen Kehinde Kassim, Olaolu Ayodeji Awoniyi, Olubunmi Adewole Ogunode, Bolanle Olubunmi Amusa, Andrew Taiwo Iwala, Tolulope Ruth Omosebi, Ishola Rufus Akintoye

Published in Journal of Finance and Accounting (Volume 10, Issue 5)

Received: 2 September 2022 Accepted: 20 September 2022 Published: 28 September 2022

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Abstract

Volatilities impact the trend movements of exchange rate on earnings management and it varies from country to country and from company to company. The study investigated how exchange rate volatility has contributed to earnings management, within the manufacturing sector in Nigeria. A pooled panel regression analysis was employed on 16 manufacturing companies based on their capitalization in the Nigerian Exchange Group between the periods 2011 and 2020. The Discretionary Accrual Model was employed in deriving the earnings management series. Findings made in the study revealed that management controls its earnings based on its intentions to be actualized. This motive is either to follow the Generally Accepted Accounting Principles (GAAP) through discretionary accruals or to convincingly manipulate its earnings for self-interest, thereby misleading other stakeholders. However, findings affirmed that despite the upward swings in the Nigerian exchange rates against US Dollars in the past decade, exchange rate volatility favourably and significantly influences earnings management which consequently affects the financial achievement of firms in the manufacturing sector, both in short and long runs. The study also discovered that movements in exchange rates directly affect outputs, of the manufacturing sector, in the long run, which is more beneficial compared to the short-run effect, although the benefit is not significant. This study therefore recommends that policymakers and government reassess existing import-substitution industrialization strategies, to encourage local manufacturers to develop commodities that are currently imported.

Published in	Journal of Finance and Accounting (Volume 10, Issue 5)
DOI	10.11648/j.jfa.20221005.12
Page(s)	206-214
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Generally Accepted Accounting Principles, Earnings Management, Exchange Rate Volatility, Manufacturing Sector, Discretionary Accruals

References

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APA Style

Shamusideen Kehinde Kassim, Olaolu Ayodeji Awoniyi, Olubunmi Adewole Ogunode, Bolanle Olubunmi Amusa, Andrew Taiwo Iwala, et al. (2022). Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria. Journal of Finance and Accounting, 10(5), 206-214. https://doi.org/10.11648/j.jfa.20221005.12

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ACS Style

Shamusideen Kehinde Kassim; Olaolu Ayodeji Awoniyi; Olubunmi Adewole Ogunode; Bolanle Olubunmi Amusa; Andrew Taiwo Iwala, et al. Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria. J. Finance Account. 2022, 10(5), 206-214. doi: 10.11648/j.jfa.20221005.12

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AMA Style

Shamusideen Kehinde Kassim, Olaolu Ayodeji Awoniyi, Olubunmi Adewole Ogunode, Bolanle Olubunmi Amusa, Andrew Taiwo Iwala, et al. Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria. J Finance Account. 2022;10(5):206-214. doi: 10.11648/j.jfa.20221005.12

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@article{10.11648/j.jfa.20221005.12,
  author = {Shamusideen Kehinde Kassim and Olaolu Ayodeji Awoniyi and Olubunmi Adewole Ogunode and Bolanle Olubunmi Amusa and Andrew Taiwo Iwala and Tolulope Ruth Omosebi and Ishola Rufus Akintoye},
  title = {Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria},
  journal = {Journal of Finance and Accounting},
  volume = {10},
  number = {5},
  pages = {206-214},
  doi = {10.11648/j.jfa.20221005.12},
  url = {https://doi.org/10.11648/j.jfa.20221005.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20221005.12},
  abstract = {Volatilities impact the trend movements of exchange rate on earnings management and it varies from country to country and from company to company. The study investigated how exchange rate volatility has contributed to earnings management, within the manufacturing sector in Nigeria. A pooled panel regression analysis was employed on 16 manufacturing companies based on their capitalization in the Nigerian Exchange Group between the periods 2011 and 2020. The Discretionary Accrual Model was employed in deriving the earnings management series. Findings made in the study revealed that management controls its earnings based on its intentions to be actualized. This motive is either to follow the Generally Accepted Accounting Principles (GAAP) through discretionary accruals or to convincingly manipulate its earnings for self-interest, thereby misleading other stakeholders. However, findings affirmed that despite the upward swings in the Nigerian exchange rates against US Dollars in the past decade, exchange rate volatility favourably and significantly influences earnings management which consequently affects the financial achievement of firms in the manufacturing sector, both in short and long runs. The study also discovered that movements in exchange rates directly affect outputs, of the manufacturing sector, in the long run, which is more beneficial compared to the short-run effect, although the benefit is not significant. This study therefore recommends that policymakers and government reassess existing import-substitution industrialization strategies, to encourage local manufacturers to develop commodities that are currently imported.},
 year = {2022}
}

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TY  - JOUR
T1  - Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria
AU  - Shamusideen Kehinde Kassim
AU  - Olaolu Ayodeji Awoniyi
AU  - Olubunmi Adewole Ogunode
AU  - Bolanle Olubunmi Amusa
AU  - Andrew Taiwo Iwala
AU  - Tolulope Ruth Omosebi
AU  - Ishola Rufus Akintoye
Y1  - 2022/09/28
PY  - 2022
N1  - https://doi.org/10.11648/j.jfa.20221005.12
DO  - 10.11648/j.jfa.20221005.12
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 206
EP  - 214
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20221005.12
AB  - Volatilities impact the trend movements of exchange rate on earnings management and it varies from country to country and from company to company. The study investigated how exchange rate volatility has contributed to earnings management, within the manufacturing sector in Nigeria. A pooled panel regression analysis was employed on 16 manufacturing companies based on their capitalization in the Nigerian Exchange Group between the periods 2011 and 2020. The Discretionary Accrual Model was employed in deriving the earnings management series. Findings made in the study revealed that management controls its earnings based on its intentions to be actualized. This motive is either to follow the Generally Accepted Accounting Principles (GAAP) through discretionary accruals or to convincingly manipulate its earnings for self-interest, thereby misleading other stakeholders. However, findings affirmed that despite the upward swings in the Nigerian exchange rates against US Dollars in the past decade, exchange rate volatility favourably and significantly influences earnings management which consequently affects the financial achievement of firms in the manufacturing sector, both in short and long runs. The study also discovered that movements in exchange rates directly affect outputs, of the manufacturing sector, in the long run, which is more beneficial compared to the short-run effect, although the benefit is not significant. This study therefore recommends that policymakers and government reassess existing import-substitution industrialization strategies, to encourage local manufacturers to develop commodities that are currently imported.
VL  - 10
IS  - 5
ER  -

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Author Information

Shamusideen Kehinde Kassim

Department of Accounting, Babcock University, Ilishan, Nigeria
Olaolu Ayodeji Awoniyi

Department of Accounting, Babcock University, Ilishan, Nigeria
Olubunmi Adewole Ogunode

Department of Accounting, Babcock University, Ilishan, Nigeria
Bolanle Olubunmi Amusa

Department of Banking and Finance, Babcock University, Ilishan, Nigeria
Andrew Taiwo Iwala

Department of Accounting, Babcock University, Ilishan, Nigeria
Tolulope Ruth Omosebi

Department of Banking and Finance, Babcock University, Ilishan, Nigeria
Ishola Rufus Akintoye

Department of Accounting, Babcock University, Ilishan, Nigeria

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Shamusideen Kehinde Kassim, Olaolu Ayodeji Awoniyi, Olubunmi Adewole Ogunode, Bolanle Olubunmi Amusa, Andrew Taiwo Iwala, et al. (2022). Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria. Journal of Finance and Accounting, 10(5), 206-214. https://doi.org/10.11648/j.jfa.20221005.12

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ACS Style

Shamusideen Kehinde Kassim; Olaolu Ayodeji Awoniyi; Olubunmi Adewole Ogunode; Bolanle Olubunmi Amusa; Andrew Taiwo Iwala, et al. Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria. J. Finance Account. 2022, 10(5), 206-214. doi: 10.11648/j.jfa.20221005.12

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AMA Style

Shamusideen Kehinde Kassim, Olaolu Ayodeji Awoniyi, Olubunmi Adewole Ogunode, Bolanle Olubunmi Amusa, Andrew Taiwo Iwala, et al. Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria. J Finance Account. 2022;10(5):206-214. doi: 10.11648/j.jfa.20221005.12

Copy | Download

@article{10.11648/j.jfa.20221005.12,
  author = {Shamusideen Kehinde Kassim and Olaolu Ayodeji Awoniyi and Olubunmi Adewole Ogunode and Bolanle Olubunmi Amusa and Andrew Taiwo Iwala and Tolulope Ruth Omosebi and Ishola Rufus Akintoye},
  title = {Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria},
  journal = {Journal of Finance and Accounting},
  volume = {10},
  number = {5},
  pages = {206-214},
  doi = {10.11648/j.jfa.20221005.12},
  url = {https://doi.org/10.11648/j.jfa.20221005.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20221005.12},
  abstract = {Volatilities impact the trend movements of exchange rate on earnings management and it varies from country to country and from company to company. The study investigated how exchange rate volatility has contributed to earnings management, within the manufacturing sector in Nigeria. A pooled panel regression analysis was employed on 16 manufacturing companies based on their capitalization in the Nigerian Exchange Group between the periods 2011 and 2020. The Discretionary Accrual Model was employed in deriving the earnings management series. Findings made in the study revealed that management controls its earnings based on its intentions to be actualized. This motive is either to follow the Generally Accepted Accounting Principles (GAAP) through discretionary accruals or to convincingly manipulate its earnings for self-interest, thereby misleading other stakeholders. However, findings affirmed that despite the upward swings in the Nigerian exchange rates against US Dollars in the past decade, exchange rate volatility favourably and significantly influences earnings management which consequently affects the financial achievement of firms in the manufacturing sector, both in short and long runs. The study also discovered that movements in exchange rates directly affect outputs, of the manufacturing sector, in the long run, which is more beneficial compared to the short-run effect, although the benefit is not significant. This study therefore recommends that policymakers and government reassess existing import-substitution industrialization strategies, to encourage local manufacturers to develop commodities that are currently imported.},
 year = {2022}
}

Copy | Download

TY  - JOUR
T1  - Exchange Rates Volatility and Earnings Management in Listed Manufacturing Companies in Nigeria
AU  - Shamusideen Kehinde Kassim
AU  - Olaolu Ayodeji Awoniyi
AU  - Olubunmi Adewole Ogunode
AU  - Bolanle Olubunmi Amusa
AU  - Andrew Taiwo Iwala
AU  - Tolulope Ruth Omosebi
AU  - Ishola Rufus Akintoye
Y1  - 2022/09/28
PY  - 2022
N1  - https://doi.org/10.11648/j.jfa.20221005.12
DO  - 10.11648/j.jfa.20221005.12
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 206
EP  - 214
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20221005.12
AB  - Volatilities impact the trend movements of exchange rate on earnings management and it varies from country to country and from company to company. The study investigated how exchange rate volatility has contributed to earnings management, within the manufacturing sector in Nigeria. A pooled panel regression analysis was employed on 16 manufacturing companies based on their capitalization in the Nigerian Exchange Group between the periods 2011 and 2020. The Discretionary Accrual Model was employed in deriving the earnings management series. Findings made in the study revealed that management controls its earnings based on its intentions to be actualized. This motive is either to follow the Generally Accepted Accounting Principles (GAAP) through discretionary accruals or to convincingly manipulate its earnings for self-interest, thereby misleading other stakeholders. However, findings affirmed that despite the upward swings in the Nigerian exchange rates against US Dollars in the past decade, exchange rate volatility favourably and significantly influences earnings management which consequently affects the financial achievement of firms in the manufacturing sector, both in short and long runs. The study also discovered that movements in exchange rates directly affect outputs, of the manufacturing sector, in the long run, which is more beneficial compared to the short-run effect, although the benefit is not significant. This study therefore recommends that policymakers and government reassess existing import-substitution industrialization strategies, to encourage local manufacturers to develop commodities that are currently imported.
VL  - 10
IS  - 5
ER  -

Copy | Download