Author(s): Egiyi, Modesta Amaka, Chukwuani, Victoria Nnenna
The study looks at the relationship between non-GAAP earnings and stock price crash risk in Nigeria. The hypotheses were linearly modelled and estimated using the Panel ordinary least squares method. The findings corroborate agency theory, which emphasizes firm leaders' capacity to conceal unfavourable news about the company through obfuscated financial reporting, by indicating a significant relationship between non-GAAP earnings and stock price crash risk in the companies studied. The findings show that non-GAAP profits might cause investors to overestimate business worth, increasing the probability of the stock price crashing in the long run. Given the significant influence of non-GAAP profits and future accounting performance on stock price crash risk, the study thus recommends that companies should be prevented from using false reporting techniques, any changes in accounting legislation and standards, as well as ethical norms set by regulatory bodies, should be implemented. The Financial Reporting Council of Nigeria and other regulatory agencies should be more aggressive in carrying out their responsibilities since this will prevent preparers from manipulating financial data for personal advantage.