JOINT EFFECT OF DIVIDEND POLICY AND EARNINGS MANAGEMENT ON FIRM VALUES OF LISTED CONSUMER GOODS FIRMS IN NIGERIA

Abstract

Earnings Management and dividend policy remain the two pivotal financial strategies influencing firm value. These mechanisms, while instrumental in corporate decision-making, can have profound implications on investor perception and market valuation. This study examined the joint impact of earnings management and dividend policy on the firm values of listed consumer goods firms in Nigeria. A correlational research design in a sample of 16 firms for a period of 12 years (2012-2023) was applied in the study. Panel regression technique of data analysis was used, and the study found after controlling for the effect of firm size that earnings management significantly and positively affects the market values of listed consumer goods firms in Nigeria. The study concludes, after controlling for firm size, that the dividend payout ratio is a strong determinant of firm value in the Nigerian consumer goods sector. The finding confirms that investors appear to reward firms with consistent and higher dividend payouts, reflecting a preference for current income and reduced uncertainty. Lastly, the study found, after controlling for firm size, that dividend per share alone is insufficient to drive firm value, and that a consistent payout policy is likely more important to investors than the amount paid per share. Additionally, firm size does not significantly influence market valuation, implying that efficiency and strategic positioning, rather than asset base alone, are more critical in determining firm value in Nigeria's consumer goods sector. The study recommends, amongst others, that regulatory bodies such as the Financial Reporting Council of Nigeria (FRCN) and the Securities and Exchange Commission (SEC) should enhance surveillance and monitoring mechanisms to detect and curb earnings management. Although the study found a positive short-term relationship between earnings management and firm value, this practice undermines the integrity of financial reporting and may lead to long-term harm to the firm's reputation and investor trust.