Corporate Social Responsibility and Earnings Quality of Listed Nigerian Companies

Despite the growing importance of corporate social responsibility (CSR) in business operations, there remains a lack of consensus regarding the relationship between CSR and earnings quality. While some studies suggest that CSR initiatives can improve the accuracy and reliability of a company's financial statements, others have argued that such initiatives may be used to deflect attention away from underlying financial problems, potentially compromising the quality of a company's earnings. This lack of clarity has important implications for investors, regulators, and other stakeholders, as they seek to understand the true economic performance of companies and make informed decisions about whether to invest, regulate, or otherwise engage with them. The event of corporate scandals and the current failure of significant corporate organisations in the United States of America (USA), Germany, China, and Nigeria, which is highly rated in financial misappropriation, have been crucial in highlighting the critical role of earnings quality in corporate institutions and expanding understanding of the concept of "earnings quality." The study focused on the relationship between corporate social responsibility and the earnings quality of listed manufacturing companies in Nigeria. Ex-post facto study design was used in this study to gather information from the Nigerian Stock Exchange (NSE). The sample for this study consists of all manufacturing firms listed on the Nigerian Stock Exchange (NSE). Out of the twenty (20) consumer goods companies, a total of ten (10) were chosen; the sample technique employed for this study was the purposive method. This will assist the researcher better understand the research questions and ensure that specific population features are emphasised. The sample size for this study was made up of the chosen companies, and several quoted consumer products companies were excluded because they were not yet listed on the Nigerian Stock Exchange in 2010, the study’s base year (NSE).This makes a total of one hundred and twenty observations that will be applied in the panel data analysis. Purposive sampling technique was used for this study. The research revealed that hypothesis one shows a positive relationship of community relations on earning persistence (EP). This is indicated by the sign coefficient that β1 = 4.415>0. This result is consistent with the a priori expectation as it was expected that community relations will have a positive relationship on earning persistence, hypothesis two shows that employee relations (ER) has a negative (-8.864) effect on discretionary accruals (DA). This is indicated by the sign coefficient that β = (-8.864) < 0. This shows that a 1% increase in employee relations will lead to 8.8% decrease discretionary accruals. This result is inconsistent with the a priori expectation as it was expected that the employee relations will have a positive effect on its discretionary accrual, hypothesis three findings demonstrates a negative correlation between corporate social responsibility and earning quality (EQ). This shows model three’s negative coefficient from is not significant. This finding revealed an increment in corporate social responsibility which led to a reduction in earning quality due to real activities in firm earnings manipulation. Therefore, to sustain positive impact of CSR on earning quality in this study, real activities on firm manipulation must be suspended on the listed companies. On the basis of the research recommends a increase corporate social responsibility, there must be transparency in information disclosure to maintain a reliable earnings persistence, avoidance of firm manipulation of earnings must be consistency, Management are to develop a sustainable activities to portray a good image of the company