INCOME SMOOTHNESS AND FINANCIAL REPORTING QUALITY OF LISTED INSURANCE COMPANIES IN NIGERIA

Abstract

The study examined income smoothness and financial reporting quality of listed insurance companies in Nigeria. The specific objectives are; examine the relationship between income smoothness and faithful representation of listed insurance companies in Nigeria, evaluate the relationship between income smoothness and relevance of listed insurance companies in Nigeria and investigate the effect of firm size on the relationship between income smoothness and quality of financial reporting in listed insurance companies in Nigeria. The expo facto designs. The population of the study was the twenty-five (25) listed insurance companies in the Nigerian Stock Exchange during the period 2013 -2019 (7) years. The sample size of this study is twenty-one (21). This number is derived by the application or use of Taro Yamane formula for sample size determination. Out of the twenty-four (24) companies, three (3) companies have incomplete financial statements which leave the sample size to be twenty-one (21) listed insurance companies. The study employed the use of secondary data. The formulated research questions were analyzed with descriptive statistics. The hypotheses were tested using the simple regression analysis with the aid of E-view (10).  The findings of the study were that there is insignificant relationship between income smoothness and faithful representation of listed insurance companies in Nigeria. There is insignificant relationship between income smoothness and relevance of insurance companies in Nigeria. There is significant influence of firm size in the relationship between income smoothness and quality of financial reporting in listed insurance companies in Nigeria. The study recommend that insurance companies should reduce the rate of income smoothness to enhance the credibility and financial reports quality. Regulators should not mainly rely on accounting numbers to govern the listed insurance firms, but should make sure they strictly abide by the rules, regulations, and ethics of international standards governing the preparation and presentation of financial reporting in order to avoid continuous smoothing of income and presenting falsified financial statements. The peer review mechanism of audit committees in the industry should be encouraged and implemented vigorously and be used as a platform to set benchmarks for effective monitoring.