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Title: Are abnormal accruals values relevant? Evidence from Sub-Saharan Africa

Authors: Godfrey Akileng; Diana L.K. Ssekiboobo; Eric Nzibonera

Addresses: College of Business and Management Sciences, Makerere University, University Rd., Kampala, Uganda ' College of Business and Management Sciences, Makerere University, University Rd., Kampala, Uganda ' College of Business and Management Sciences, Makerere University, University Rd., Kampala, Uganda

Abstract: This study examines whether the market values abnormal accruals differently in Sub-Saharan Africa. Abnormal accruals signal managers' valuations of a firm. Alternatively, abnormal accruals are opportunistic and, therefore, misrepresent the value of the firm. We use panel data from listed firms in securities markets in South Africa, Nigeria, and East Africa for the period 2006-2020 collected from annual reports and financial market databases. Ohlson's (1995) price model is used as the basis for regression analysis to measure value relevance. We find that abnormal accruals are value-irrelevant and thus discounted by the market. Rational investors perceive abnormal accruals to represent managers' opportunistic actions. This study contributes to the literature on the value relevance of accounting information and market-based accounting research on African markets.

Keywords: value relevance; abnormal accruals; financial markets; Africa.

DOI: 10.1504/IJEBR.2025.144285

International Journal of Economics and Business Research, 2025 Vol.29 No.8, pp.1 - 23

Received: 28 Jun 2024
Accepted: 14 Dec 2024
Published online: 04 Feb 2025 *