Effect of Corporate Governance on the Earnings Management of Listed Manufacturing Firms in Nigeria

Abstract

The study examined the effect of corporate governance on the earnings management of listed manufacturing companies in Nigeria. The specific objectives of the study were to investigatethe effect of board size, board gender diversity, board independence, audit committee size, and ownership structure onEarnings Management of Listed Manufacturing Companies in Nigeria. Ex-post facto research design was adopted while panel data was collected a sample of 19 consumer goods companies listed on Nigerian Stock Exchange.The Generalised Least Square Regression Model aided by STATA 14.2 statistical package as used to estimate the effect of corporate governance on the earnings management of listed manufacturing companies in Nigeria.The study found that board size had negative and no significant effect on earnings managementof listed manufacturing companies in Nigeria;board gender diversity hadnegative and no significant effect on earnings management of listed manufacturing companies in Nigeria; board independence had positive and no significant effect on earnings managementof listed manufacturing companies in Nigeria, audit committee size had positive and no significant effect on earning managementof listed manufacturing companies in Nigeria and ownership structure hadnegative and significant effect on earnings managementof listed manufacturing companies in Nigeria.The implications of the findings are that, the size of the firm's corporate board does not influence the volatility in discretionary accruals within the period studied and moreso, the presence of female board members does not determine the earnings manipulation in the firms significantly.The study concluded that increase in the number of independent directors reduces the occurrence of earnings manipulation and the number of directors that make up the audit committee does not affect earnings policy of manufacturing firms.This affirms that directors' holding many shares can influence the occurrence of earnings manipulation. The study recommended that board composition should include a greater proportion of independent outside directors with corporate experience. Independent directors’ ratio to the total board size should be more to allow unbiased decisions on the financial statements.

Characteristics of the Board of Commissioners, Financial Performance and Audit Quality on Earnings Management

“…The larger the size of the board of commissioners, the greater the earnings management carried out by the company, so this study indicates that the size of the independent board of commissioners is not the main determinant in carrying out the effectiveness of the functions and duties of the independent board of commissioners because of the possibility of adding independent members of the board of commissioners in a company only aims to comply with formal provisions and is not intended to enforce good corporate governance, while majority shareholders still play many roles. This research is in line with previous research, namely Bala et al (2015). However, it is contrary to research conducted by Suleiman et al (2014) which states that independent commissioners have a negative effect on earnings management.…”

“…The Board of Commissioners' Financial Expertise has no effect on Earnings Management. This research is supported by the results of research from Bala (2015) which states that the financial expertise of the board of commissioners has no effect on earnings management. The results of this study prove that the board of commissioners who are experts in finance have not been able to influence the decline in earnings management.…”

An Assessment of the Nexus Between Firm Attributes and Financial Reporting Quality in Nigeria

“…However, it is important to note that the mere presence of independent directors does not guarantee improved financial reporting quality. The effectiveness of the board's oversight depends on factors such as active engagement, independence, and expertise (Bala & Kumai, 2015). Establishing a culture of accountability, transparency, and ethical behavior within the board is crucial for promoting high-quality financial reporting.…”

Tác động của đặc điểm hội đồng quản trị đến hành vi quản trị lợi nhuận của các công ty niêm yết tại Việt Nam

“…(1) ❖ Mô hình 2: Giai đoạn không có Covid-19: DA2it = α + β1*TVHĐQTit + β2*KIEMNHIEMit + β3*HĐQTTCit + β4*HĐQTĐLit + β5*HOPit + β6*HĐQTNUit + β7*NGUOINNit + β8*SIZEit + β9*BIG4it + β10*ROAit + β11*CFOit + . (2)Trên thế giới có rất nhiều mô hình đo lường hành vi QTLN dựa trên biến dồn tích DA: mô hìnhHealy (1985), mô hình DeAngelo (1986), mô hìnhJones (1991), mô hình Jones điều chỉnh(Dechow & ctg., 1995); mô hìnhKothari, Leone, và Wasley (2005), ... Các nghiên cứu trước đây(Bala & Gugong, 2015; Hooghiemstra & ctg., 2019;Lassoued & Khanchel, 2021;Orazalin, 2019; Rauf & ctg., 2012) sử dụng mô hình Jones đã sửa đổi(Dechow & ctg., 1995) để tính khoản dồn tích bất thường (DA) làm hành vi điều chỉnh lợi nhuận. Dựa trên các tài liệu nghiên cứu trước đây có thể nhận thấy mô hình Jones điều chỉnh là mô hình nổi tiếng và phổ biến được nhiều nghiên cứu sử dụng nên tác giả sử dụng mô hình Jones điều chỉnh(Dechow & ctg., 1995) để đo lường biến dồn tích (DA).…”