Effects of Discretion Accruals on Stock Prices of Quoted Manufacturing Companies in Nigeria

This study examines the effect of discretion accruals on stock prices of Quoted manufacturing firms in Nigeria. We have accruals components identified as facilitator of firm’s earnings increase or decrease with abnormal effect on stock price performance. The researcher considered four years annual data prior to the adoption of international financial reporting standard (IFRS) from ten (10) quoted manufacturing companies. The study adopted expo-facto design that necessitated the determination of the pre-existing independent variables used in this study. Data were gathered using on-line retrieval method. Also, panel regression model was employed to combine the properties of time series and cross sectional data. The results demonstrated increase and existence of a unique long-run relationship between discretion accruals and stock prices. This implied that firms whose share prices were very high and recorded high returns in the stock market used discretionary accruals to influence their performance. The findings indicate that managers capitalize on the inefficiency of the stock market and information irregularities between investors and insiders (director) to manipulate earnings. This study recommends that regulatory authorities should enforce compliance with Accounting Standards, particularly; International Financial Reporting Standards (IFRS) in accounting disclosure such that financial information manipulation undertaken by firms to improve earnings is eliminated.