Earnings Management and Future Dividend Pay-out: A Study of Listed Non-financial Firms in Nigeria

Abstract

This scholarly inquiry examines the extent to which earnings management practices exert influence over subsequent dividend disbursements within a cohort of 32 non-financial corporations listed on the Nigerian Exchange Group, spanning the period from 2020 to 2023. Employing panel data analysis, the investigation assessed the repercussions of both accrual-based and real earnings management, while simultaneously controlling for variables such as current dividend payout, earnings per share (EPS), liquidity, firm size, and leverage. Descriptive statistical analysis indicated considerable heterogeneity in dividend payouts among the sampled firms. A fixed-effects model, corroborated by the Hausman test, was utilised for the regression analysis, producing an R-squared value of 0.457, which suggests a moderate degree of explanatory capability. The principal findings reveal that neither category of earnings management, discretionary accruals (p = 0.8154) nor real activities manipulation (p = 0.2215), exerts a statistically significant influence on forthcoming dividends, thereby necessitating the rejection of the study's principal hypotheses. In contrast, the decisions regarding dividends were chiefly influenced by fundamental financial indicators: EPS exhibited a robust positive correlation (β = 0.439, p = 0.0001), leverage demonstrated a significant adverse relationship (β = -0.694, p = 0.0397), and liquidity also presented a positive and significant effect (p = 0.0486). The study concludes that, within the Nigerian context, earnings management fails to serve as a dependable predictor of dividends. It underscores the imperative for corporations to focus on genuine profitability and prudent financial governance, and it advocates for enhanced regulatory oversight to facilitate transparent reporting, thereby safeguarding investor interests and promoting sustainable dividend policies.