Accounting Conservatism and Firm Structure in Nigeria: Evidence from Publicly Listed Manufacturing Firms
Keywords:
Accounting conservatism, Asset structure, Cash flow, Annual stock returns, Firm structure
Abstract
This paper assessed the relation between accounting conservatism and firm structure in Nigeria. The expo facto research design was adopted and a sample of thirty-eight (38) publicly listed manufacturing firms was employed. Data of accounting conservatism (earnings accrual) and firm structure (equity-to-asset and asset tangibility ratios) were obtained from 2012-2020. The Fixed (FE) and Random effects (RE) regression statistical technique was used. We find evidence that a firm with more conservative financial disclosure of its earnings accrual adjusts its asset structure towards the companies target more rapidly; this in particular is common for publicly listed manufacturing firms that rely on external financing for adjustment. Moreover, we found that the level of accounting conservatism positively and significantly affects the firm structure and this effect arises due to debt issuance. Overall, the paper suggests that the level of accounting conservatism plays a vital role in enhancing under-levered firms’ adjustment of asset structure of publicly listed manufacturing firms in Nigeria.
References
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24. Mohammadi, M. K., Heyrani, F., Golestani, N. (2013). Impact of conservatism on accounting information quality and decision making of the shareholders and the firms listed on the Tehran Stock Exchange. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 186 197.
25. Odia, J. &Osazevbaru, H.O. (2018).Accounting conservatism and information asymmetry. International Accounting and Taxation Research Group, Faculty of Management Sciences,2(1), 72-91
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27. Vladu, A.B., &Matis, D. (2010). Corporate governance and creative accounting: Two concepts strongly connected? Some interesting insights highlighted by constructing the internal history of a literature. Annales Universitatis Apulensis Series Oeconomina, 12(1), 99-117
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29. Zhong, Y. & Li, W. (2017).Accounting conservatism: A literature review.Australian Accounting Review, 27(2), 195-213
2. Abdullah H. & Valentine B. (2009).Fundamental and ethics theories of corporate governance. Middle Eastern Finance and Economics, 4(1), 88-96.
3. Ahmed, A.S. &Duellman, S. (2011). Evidence on the role of accounting conservative in monitoring managers’ investment decisions .Accounting and Finance, 5(3), 609-633.
4. Ajina, A., Sougne, D. &Lakhal, F. (2015). Corporate disclosures, information asymmetry and stock market liquidity in France. The Journal of Applied Business Research, 31(4), 1223-1238.
5. Alkurdi, A., Al-Nimer, M. &Dabaghia, M. (2017).Accounting conservatism and ownership structure effect: Evidence from industrial and financial Jordanian listed companies. International Journal of Economics and Financial Issues, 7(2), 608-619.
6. Al-Makawi, H.N., &Pillai, R. (2012). Internal mechanism of corporate governance and firm performance: A review of theory and empirical evidence. Journal of Modern Accounting and Auditing, 8(4), 549-568.
7. Amran, N.A. &Manaf, K.B.A. (2014).Board independence and accounting conservatism in Malaysian companies. Procedia - Social and Behavioral Sciences, 164, 403-408
8. Asiriuwa, O., Akperi, R.T., Uwuigbe, O.R., Uwuigbe, U., Nassar, L., Ilogho S. &Eriabe, S. (2019) Ownerships structures and accounting conservatism among Nigeria listed firms. IOP Conf. Series: Earth and Environmental Science, 331, 1-15. doi:10.1088/ 1755-1315/331/1/012056
9. Ball, R., &Shivakumar, L. (2005). Earnings quality in UK private firms: Comparative loss recognition timeliness. Journal of Accounting and Economics, 39, 83-128.
10. Basu, S. (1997).The conservatism principle and the asymmetric timeliness of earnings. Journal of Accounting and Economics, 24(1), 33-37
11. Cheon, Y.S. (2003). The association between foreign and domestic institutional ownership and earnings quality.The Korean Management Review, 32, 1001-1032.
12. Dalvi, M.R. &Mardanloo, H. (2014).The effect of capital structure, shareholders and major of the company on the conservative practices in companies. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4(1), 128-135.
13. Donaldson.L& Davis.J. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Academy of Management Review, 20(1), 65-77.
14. Felix, U.O. &Umanhonien, R. (2015).Theory of conservatism and value relevance of accounting information. Journal of Accounting and Marketing, 49(1), 1-8.
15. Gao, P. (2013). A measurement approach to conservatism and earnings management. Journal of Accounting and Management, 55, 251-268.
16. Garcia-Lara, J.M., Garcia-Osma, B. &Penalva, F. (2014).Information consequences of accounting conservatism. European Accounting Review, 23(2), 173-198.
17. Govcopp, S.A. (2020). Ownership structure and accounting conservatism: Evidence from Portuguese and Spanish listed companies. Academy of Accounting and Financial Studies Journal, 24(6), 1-12
18. Gujarati, D. N. (2003).Basic Econometrics (4th ed.). New York: McGraw-Hill.
19. Habib, A. &Hossain, M. (2013).Accounting conservatism, environmental uncertainty and the capital structure.Corporate Ownership & Control, 10(4), 493-509
20. Habib, A. &Hossain, M. (2013).Accounting conservatism, environmental uncertainty and the capital structure. Corporate Ownership and Control, 11(1), 123-135.
21. Houcine, A. (2013). Does accounting conservatism affect firm investment efficiency in an emerging market? Evidence from Tunisian context. African Journal of Accounting, Auditing and Finance, 2(3), 209-232
22. Ibrahim, A.I., Wang, M. &Hailu, D.H. (2019). Accounting conservatism and cost of debt of African firms: Based on ownership structure. Global Journal of Management and Business Research, 19(7), 10-22
23. LaFond, R., & Watts, R. L. (2008).The information role of conservatism. The Accounting Review, 83(2), 447-22478
24. Mohammadi, M. K., Heyrani, F., Golestani, N. (2013). Impact of conservatism on accounting information quality and decision making of the shareholders and the firms listed on the Tehran Stock Exchange. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 186 197.
25. Odia, J. &Osazevbaru, H.O. (2018).Accounting conservatism and information asymmetry. International Accounting and Taxation Research Group, Faculty of Management Sciences,2(1), 72-91
26. Santhosh, R. & Yong, Y. (2018).The role of accounting conservation in capital structure adjustments. Journal of Accounting, Auditing and Finance, doi.org/10.1177/0148558 X18814119
27. Vladu, A.B., &Matis, D. (2010). Corporate governance and creative accounting: Two concepts strongly connected? Some interesting insights highlighted by constructing the internal history of a literature. Annales Universitatis Apulensis Series Oeconomina, 12(1), 99-117
28. Watts, R. L. (2003). Conservatism in accounting part 1: Explanations and implications. Accounting Horizons, 17, 207-221
29. Zhong, Y. & Li, W. (2017).Accounting conservatism: A literature review.Australian Accounting Review, 27(2), 195-213
Published
2022-03-22
How to Cite
Tonye , O., & Topman, S. P. (2022). Accounting Conservatism and Firm Structure in Nigeria: Evidence from Publicly Listed Manufacturing Firms. International Journal on Economics, Finance and Sustainable Development, 4(3), 98-107. https://doi.org/10.31149/ijefsd.v4i3.2849
Section
Articles
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