REAL EARNINGS MANAGEMENT AND INVESTOR VALUE OF LISTED MANUFACTURING FIRMS IN SUB-SAHARAN AFRICA

Abstract

Purpose:
This study examined the effect of real earnings management (REM) on investor value among listed manufacturing firms in Sub-Saharan Africa, with a specific focus on Nigeria, South Africa, and Kenya.

Methods:
The study utilized a panel dataset comprising 76 listed manufacturing firms across the Nigerian Exchange Group, Johannesburg Stock Exchange, and Nairobi Securities Exchange for the period 2012 to 2022. Data were sourced from Thomson One Banker. Investor value was proxied using Tobin’s Q, while REM was measured as the aggregate of abnormal production costs and abnormal discretionary expenses. The Panel-Corrected Standard Errors (PCSE) technique, which accounts for contemporaneous correlation, was applied using STATA 12 to analyze the data.

Results:
Findings indicate that real earnings management exerts a positive and statistically significant effect on investor value across the sample. However, the magnitude and direction of this effect varied across countries, highlighting a significant country-specific influence.

Conclusion:
The study concludes that REM can enhance investor value among listed manufacturing firms in Sub-Saharan Africa, although the impact is context-dependent. It recommends that firms continue applying REM strategies prudently to boost investor value. Specifically, Kenyan firms are encouraged to reassess the components of their REM practices. Future research is advised to expand the geographical scope by including more Sub-Saharan African countries to enhance generalizability.