Impact of COVID-19 Pandemic on the Earnings Quality of Deposit Money Banks in Nigeria

Abstract

The study examines the earnings quality of the Nigerian deposit money banks during the COVID-19 pandemic for the period of 2017 – 2020. A sample size of fourteen (14) listed banks was selected using the purposive sampling technique. DMBs as the independent variable was proxy by dummy 0 and 1 representing the data before and during the pandemic respectively, while the residuals from the Modified Jones Model by Kothari et al., (2005) were used as a proxy of earnings quality. The study adopts the techniques of multiple panel regression and the data were sourced from secondary sources of data collection through the accounts and annual reports of the banks. Return on equity and return on assets are used as control variables in the study, as they constitute vital indicators of the financial performance of the banks. The findings reveal that DMB as a variable of interest has no significant relationship with the earnings quality of the Nigerian banks during the COVID-19 pandemic, while return on the asset has a significant negative impact on the earnings quality of the banks during the pandemic. Return on assets has no significant relationship with the earnings quality of the Nigerian banks. The study recommends that the federal government interventions in the banking industry and the economy as a whole should be sustained to further cushion the effect of the COVID-19 pandemic. With low economic activity currently in the country due to the pandemic, a further investment of stockholders’ equity should be put on halt, to avoid the risk of loss or low return that could result in earnings management.