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Authors
Justin Iorakpen Iorun 1, Luper Iorpev 2, Michael Iorlaha 3
1 & 2 Department of Accounting, Benue State University, Makurdi, Nigeria
3 Department of Accounting, Prime University Abuja, Nigeria.
+2349021366661
Abstract
Research Objectives: This study investigates the mediating effect of accrual quality on the relationship between information asymmetry and cost of debt among listed industrial goods companies in Nigeria.
Methodology: Adopting an ex-post facto research design, the study focuses on all 11 industrial goods companies listed on the Nigerian Exchange Group (NGX) as of December 31, 2024. A twelve-year panel dataset (2013–2024) was utilized, combining time-series and cross-sectional data to capture firm-specific variations over time. Data were sourced through published annual reports of the sampled companies, and analysed using descriptive statistics, correlation and Structural Equation Modelling (SEM). Diagnostic tests for normality, multicollinearity, model validity (via Confirmatory Factor Analysis), and model fit (CFI, TLI, RMSEA, SRMR) were conducted to ensure analytical robustness.
Findings: Findings revealed that information asymmetry significantly increases the cost of debt, while accrual quality negatively influences both information asymmetry and cost of debt. Also, accrual quality was found to significantly mediate the relationship between information asymmetry and cost of debt, thereby underscoring its role as a transmission mechanism that mitigates financing costs through enhanced transparency.
Recommendations: The study therefore recommends that regulatory bodies such as the Financial Reporting Council of Nigeria (FRCN) and the Nigerian Exchange Group (NGX) enforce stricter compliance with high-quality financial reporting standards. Specifically, policies should mandate enhanced transparency in financial disclosures and incentivize firms to adopt robust accrual accounting practices.
Key words: Accrual quality, Bid-Ask Spread, Analyst forecast Dispersion, Cost of Debt, Earnings response coefficient.
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