Earnings Persistence and Financial Performance of Listed Firms in Nigeria

Abstract

The study focused on earnings persistence and financial performance of listed firms in Nigeria. Earnings persistence was measured using earnings persistence, discretionary accruals and earnings volatility. Financial performance on the other hand was measured using net profit margin. To achieve the objective of the study, ex-post facto research design was adopted. The data were collected through secondary source from annual report and accounts of the selected firms in Nigeria from 2015 to 2024. The population of the study comprised of all the 149 firms listed in Nigeria exchange group as at 2025. The sample size was derived using both purposive sampling and stratified sampling techniques and 70 listed firms were purposively selected. The data collected were analyzed using Panel GMM analysis. The findings revealed that discretionary accruals, earnings persistence and earnings volatility have no significant effect on net profit margin. Based on the findings, the study recommends that Analysts, investors, and stakeholders should incorporate earnings quality indicators (e.g., accrual quality, volatility) when evaluating the financial performance of Nigerian listed firms. Income smoothing practices can mask true financial performance. Using metrics beyond traditional profitability ratios can provide a more accurate assessment of financial health. Implement models like the Modified Jones Model to assess the level of discretionary accruals and uncover potential earnings management that would affect net profit margin of firms.