Effect of Financial Statement Fraud on Organisational Performance of Manufacturing Firms in Nigeria

Abstract

This study examined the effect of financial statement fraud on the organisational performance of manufacturing
firms in Nigeria. The study was motivated by the increasing cases of financial misappropriation of accounting
irregularities among corporate organisations in Nigeria. The study adopted an ex post facto research design,
utilising secondary data from the audited annual financial reports of ten manufacturing firms listed on the Nigerian
Exchange Group from (2015–2024). Panel data regression analysis was employed to evaluate both the individual
and composite effects of financial statement fraud on firm performance, measured using profitability and
operational efficiency metrics. The results indicated that all individual fraud indicators significantly reduce
organisational performance: overstatement of revenue (β = -0.163, p = 0.001), understatement of expenses (β = -
0.147, p = 0.003), improper asset valuation (β = -0.182, p = 0.000), and misleading disclosures (β = -0.139, p =
0.005). The composite regression analysis demonstrates a stronger negative effect, with a coefficient of β = -0.281
(p = 0.000), R² = 0.643, F-statistic of 29.33 (p < 0.05), indicated that the combined fraudulent practices explain a
substantial proportion of the variation in organisational performance and that the model is statistically robust.
These findings highlight that financial statement fraud, individually and collectively, distort financial reporting,
undermines governance, and threatens long-term sustainability. The study recommended enhancing corporate
governance, enforcing regulatory compliance, improving transparency, conducting regular internal audits, and
fostering an ethical corporate culture to strengthen accountability and restore investor confidence in the Nigerian
manufacturing sector.