Effect of Financial Quality on the Financial Performance of Listed Manufacturing Firms in Nigeria
CHAPTER ONE
Objectives of the Study
The main objective of this study is to examine the impact of financial Quality on financial performance of quoted manufacturing firms in Nigeria, while the specific objectives are to;
- -determine the relationship between the quality of financial reporting and profit after tax of the quoted companies in Nigeria.
- -ascertain the effect of quality of financial reporting on return on asset of quoted companies in Nigeria.
- -evaluate the Impact of quality of financial reporting on return on equity of quoted companies in Nigeria.
CHAPTER TWO
LITERATURE REVIEW
This Chapter contains the work of other researchers relating to financial reporting. It comprises of the conceptual Review, Theoretical Review and Empirical Review. The conceptual Review defines concepts like financial reporting and financial performance. It emphasized that Financial Reporting involve the communication of related financial information to the different stakeholders. The conceptual review also shows that financial performance can be measured using return on asset, and return on equity. While the theoretical review section mention theories like Stakeholders theory, Voluntary disclosure theory, and Asymmetric theory to mention a few. Finally, the empirical theory section of the literature review contains the findings relating to financial reporting and financial performance.
Conceptual Review
Concept of Financial Reporting
Financial reporting involves recording financial information according to relevant accounting standards. According to (Vargiya, 2015), Financial Reporting includes the exposure of related financial information to the different Stakeholders about anorganisation over a predefined timeframe. These Stakeholdersinclude – investors, lenders, suppliers, and government organisations. Financial Reporting is considered as the final result of Accounting. It comprises of various important statement which include – financial related explanations fromStatement of financial position, Statement of comprehensive income, Statement of cash flow, Statement of changes in equity, notes to financial related explanations, Quarterly and Annual reports (if there should be an occurrence of quoted organizations),Prospectus (if there should be an occurrence of organizations going for Initial Public Offers) and Management Discussion and Analysis (if there should be an occurrence of open organizations).
CHAPTER THREE
METHODOLOGY
This chapter describes the statistical methods used in analyzing the data obtained during the course of this study and the relevant interpretation for the statistical output, and this interpretation was used to determine the nature of relationship that exist between the dependent and independent variables. The variables considered by this study are financial quality and financial performance, which were represented with profit after tax, return on equity and return on asset. This chapter comprises of the area of the study, research design, study variable, population of the study, sampling techniques, sample size, sources of data, method of data collection, method of data analysis and model specification.
Area of the Study
The area of study for this research work is Lagos, this area was chosen because this is where most of the thirty four (30) selected quoted companies have their headquarters and also because it is where they conduct their major commercial activities. Lagos State is located in the south- western part of the Nigerian Federation. On the North and East, it is bounded by Ogun State. In the West, it shares boundaries with the Republic of Benin. Behind its southern borders lies the Atlantic Ocean. 22% of its 3,577 km2 land mass is made up of lagoons and creeks. It is located on Coordinates: 6°35′N 3°45′E of Nigeria.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
This chapter is about the statistical analysis used in this research work and the supporting interpretation. The statistical analysis was done using Ordinary least square Regression analysis.This involves the use of panel data analysis for testing of the hypothesis. The panel data analysis approach was adopted because we are considering more than one sector of quoted companies and over a period of five years. Furthermore to determine whether the fixed or random panel data approach should be adopted, this study conducted a fixed redundant test which established that there is a relationship between the dependent and the independent variable. Also to reduce the variance in the qualitative and quantitative data, the logarithm value for the qualitative data was used in the hypothesis three of this research work
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Summary
The study focuses majorly on financial quality and financial performance in quoted companies in Nigeria. It emphasizes that financial reporting quality of quoted companies in Nigeria are governed by various rules and regulation which helps to strengthen the credibility of the report prepared by the accountant. It also establishes that management of quoted companies ensure that financial report are understandable and comparable with that of organisation in the same line of business, so that investors will have enough information to be able to make the right economic and investment decision. The main objective of the study is determine if there is significant relationship between quality financial reporting and financial performance in quoted companies, while its specific objectives are to examine if there is relationship between quality of financial reporting and profit after tax, return on asset and return on equity. The study is significant because it will help investors, shareholders and other stakeholders take better investment decision. Some of the terms defined. The second chapter of this study is the Literature review and it contains the conceptual review, theoretical review and empirical review. Some of the concept discuss on the Conceptual framework include financial reporting, which was defined as the means of exposure of financial related information to different stakeholders of various organization over a given period of time. It also state that some the measures for determining financial performance are return on asset and return on equity. Empirically, the study emphasized that most financial report are usually inadequate because they lack key information(Okike, 2000).The chapter three of this study looks at the Methodology of the entire research, it used survey research design and cross-sectional research design method, it also show that the sample have not been arbitrarily determine but were determine using proportional stratified sampling method for selecting the quoted companies. The respondents for the questionnaire were obtained using the infinite formula. The total numbers of quoted companies considered were thirty (30) and were proportionally selected, after distributing the entire companies to 11 stratums, the total number of questionnaire distributed were 450. The model of the study was adopted because it has been used by researchers,Asaolu,(2013) who used the ordinary least square regression(panel data design)statistical tool to examine the nature of financial reporting practice in Nigeria quoted companies.
The Chapter four of this study is about the statistical analysis used for study and the treatment and interpretation of the Hypotheses. The Hypotheses were analyzed based on Panel data using the ordinary list square regression (Fixed Effect). The fixed effect was used because the Fixed Redundant test shows that the independent variable and dependent variable have strong relationship with each other. The Chapter five of this study focused on the summary, conclusion and recommendation of the study.
Conclusion
- The study concludes that there is strong relationship between profit after tax and financial quality of the quoted companies in Nigeria, this is because the P-value obtained (0.0000) was lower than the benchmark value of 5% specified in Eviews for this analysis.
- The study also concludes that financial reporting has significant effect on return on asset of the quoted companies in Nigeria, because the P-value (i.e.0.0000) obtained using Eviews statistical software was lower than benchmark value of 5% specified in this analysis.
- The study finally concludes that quality financial reporting has no positive impact on return on equity of the selected quoted company, because the P-value (i.e.0.2844) obtained using Eviews statistical software was higher than benchmark value of 5% specified in this analysis.
Recommendations
Management of quoted companies must introduce new strategies to improve their financial reporting quality; so that the level of their profit can significantly increase since this study has confirmed that both variables have significant influence on each other.
Stakeholders and potential Investors in quoted companies should question any fluctuation in value of return on asset, because quality of financial reporting has direct impact on the variable and which will eventually affect the profit value.
Quoted organization should ensure they adopt best practices in financial reporting, so as to improve shareholders wealth since this study has established statistically that both variables do not have significant impact on each other.
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