Effect of Accounting-based and Market-based Properties of Earnings Quality on Share Price of Listed Manufacturing Firms in Nigeria

Earnings quality has emerged as an issue of interest to investors, managers, analysts and other market participants in view of its association with share price and returns. This study investigated the effect of accounting and market based earnings quality properties on share price of listed manufacturing firms in Nigeria. Using some filters to arrive at an adjusted population of 20 out of 37 listed firms as at 31st December, 2013, panel data were extracted from the firms' annual financial statements based on census approach for the period 2009 – 2013 to examine the effect of earnings quality properties represented by accruals quality, income smoothing, earnings variability, timeliness of earnings and earnings conservativism on share price. The result of the robust Ordinary Least Square (OLS) revealed that accruals quality and timeliness of earnings have significant inverse relationship with share price, while earnings variability has significant positive relationship with share price. The study further revealed that income smoothing and earnings conservativism have negative but insignificant association with share price of the firms. Based on the result, the study recommended among others that the Security and Exchange Commission (SEC) should continually subject the earnings of manufacturing sector to quality tests to insulate the investing public from possible rip off. Also, management of manufacturing firms should avoid undue earnings management practice by limiting their choice of accounting treatment alternatives to the provision of IFRS in order to improve financial information quality that will reduce information asymmetry and consequently lead to share price improvement