EFFECT OF REAL EARNINGS MANAGEMENT ON FINANCIAL PERFORMANCE OF LISTED OIL AND GAS COMPANIES IN NIGERIA

Abstract

This study examined the effect of real earnings management on the financial performance of listed oil and gas companies in Nigeria. The study adopted the correlational research design. A sample size of 8 listed Oil and Gas Companies was drawn from a total population of 10 listed Oil and Gas Companies as at 31st December 2020. Panel data were extracted from the annual financial statements of listed Oil and Gas Companies for the period 2011 –2020.  Panel regression analysis was conducted to evaluate the relationship between financial performance and real earnings management. The significance of the association and relationships was tested at 5% confidence level with a 2-tailed test. The results from the study revealed that abnormal levels of cash flow from operation, abnormal level of discretionary expenses and abnormal production cost from operation have no significant effect on the financial performance of listed oil and gas companies in Nigeria proxied by profit after tax. In view of these findings, it was concluded that real earnings management has not exerted a significant effect on the financial performance of listed Oil and Gas Companies when measured in terms of real earnings management through abnormal levels of cash flow from operation, abnormal level of discretionary expenses and abnormal production cost from operation. The study therefore recommended amongst others the need for management to desist from all inclinations to indulge in real earnings management with the sole aim of presenting a deceptive performance to interested stakeholders in the organization.