An Assessment of the Determinants of Earnings Management in Nigeria

Abstract

This study is based on the assessment of Tax Aggressiveness, Share Price, Return on Assets as determinants of Earnings Management among quoted industrial and consumer goods sectors in Nigeria between the periods of 2012-2022. A sample of thirty-two (32) firms were drawn out of the listed non-financial firms in Nigeria. The study was quantitative in nature and made use of secondary data which was sourced from the Nigerian Stock Exchange (NSE) factbook, National Bureau of Statistics, and annual reports of selected industrial and consumer goods firms. Descriptive statistics and correlation analysis was used to determine the nature of the data as well as the relationship between the independent and dependent variables. The pooled panel regression analysis, the Hausman test and the random effect model (REM) method of model estimation employed was used in the study. The findings revealed that share price and return on assets are the primary determinants that significantly affect the earnings management of publicly traded companies in the industrial and consumer goods sectors during the observed timeframe. Moreover, firm size is perceived as a significant control factor in determining earnings management. Tax aggressiveness on the other hand showed no significant impact on earnings management. Based on the findings the study recommended that Projects that enhance the firms' profitability should be at the center of the investment objective of managers overseeing industrial and consumer goods firms that are publicly traded. In addition, projects with favourable net present values should be embarked on by managers of industrial and consumer goods firms listed on the stock exchange. Furthermore, cutting edge earnings management strategies should be adopted by managers of industrial and consumer goods firms that are publicly traded. They can as well prioritize the utilization of tax aggressiveness.
 Keywords: Earnings Management, Tax Aggressiveness, Share Price, Return on Assets, Hausman Test.