Audit Quality and Market Value of Listed Industrial Goods Firms in Nigeria: The Moderating Role of Earnings Management

Abstract

This study examines whether earnings management conditions the relationship between audit quality and market value among listed industrial goods firms in Nigeria. Using a balanced panel of 10 firms over the period 2015–2025, the study analyses 110 firm-year observations. Market value is measured by Tobin’s Q, while audit quality is represented by audit fee, audit tenure and Big Four auditor status. Earnings management is measured by the absolute value of discretionary accruals. The hypotheses are estimated using pooled panel regressions with firm-clustered standard errors, complemented by alternative specifications incorporating firm size, leverage, return on assets and year effects. Given the small number of firms, the interaction effects are further evaluated using wild-cluster bootstrap inference. The results show that audit fee and audit tenure are positively associated with market value, whereas Big Four auditor status has no significant direct relationship with Tobin’s Q. Earnings management is negatively associated with market value and weakens the positive relationships of audit fee and audit tenure with market value. Robustness analysis, however, indicates that the moderating effect is stronger and more stable for audit tenure; the audit-fee interaction becomes only marginal under few-cluster inference, while the Big Four interaction remains insignificant. The findings suggest that the valuation relevance of audit-quality attributes depends partly on the credibility of reported earnings, with audit tenure providing the most robust conditional evidence.