DETERMINANTS OF FINANCIAL REPORTING QUALITY: EVIDENCE FROM LISTED AGRICULTURE AND NATURAL RESOURCES FIRMS IN NIGERIA

Abstract

This paper investigates the determinants of financial reporting quality in listed Agriculture and Natural Resources firms in Nigeria. Owing to the widespread advocacy to diversify the Nigerian economy, the choice of the Agriculture and Natural Resources sectors, being a prospective mainstay of the economy is necessary, so that investors and other stakeholders will understand the financial reporting practices in the sectors. The sectors comprise of 9 listed Agriculture and Natural Resources Firms, made up of 5 Agriculture and 4 Natural Resources firms. A sample of 7 firms was drawn from the population. Data was collected through secondary sources from annual financial reports of the firms from 2008-2015. The study adopted the correlation and ex-post factor research designs and employed the use regression as a tool for data analysis. The results showed a positive significant relationship between leverage, liquidity, board size and financial reporting quality, measured using residuals from the modified Jones model by Dechow, Sloan and Sweeney (1995). It is recommended among others that managers of firms in the Agriculture and Natural Resources sectors maintain an optimum liquidity level and finance their operations from more of debt instruments, so as to ensure quality of reported accounting numbers. Emphasis should not be placed on the number of independent members of the audit committee, but on their ability to checkmate management tendencies to manipulate the financials. The Nigeria Stock Exchange (NSE) should review its monitoring rules to ensure specific rules for the prevention of window dressing activities by management in financial reporting