Corporate governance mechanisms and earnings management of non-financial firms in Nigeria

Akano, Latifat Omolara (2016)

xiv,107p

Thesis

The study examined the trend and pattern of earnings management;and investigated the influence of corporate governance mechanisms on earnings management of non-financial firms in Nigeria. It also analysed the impact of earnings management on the performance of non-financial firms in Nigeria. These were with a view toproviding information on the influence of corporate governance on earnings management practice in Nigeria non-financial firms. The study employed secondary data. The study population consisted of 159 non-financial firms listed on the NSE between 2006 and 2014. A sample of 50 firms was purposively selected whose shares were traded during the sampled period and with complete data. Data on board independence, board size, board sex ratio, audit committee independence, board meeting, managerial ownership, ownership concentration, leverage, return on asset and firm size of non-financial firms across sectors in Nigeria were obtained from the Nigerian Stock Exchange factbooks and the companies’ annual reports and accounts. Data collected were analysed using percentages, graphs; and fixed effect model technique. The result of trend analysis of earnings management indicated a non-linear trend with a changing direction of (11.37%, 13.21%, 16.10%, 16.08%, 14.43%, 16.02%, 16.68%, 16.71% and 14.69%) between 2006 and 2014. Also, it showed a fluctuating result with computer and office equipment sector having the highest trend (16.73%), followed by breweries (14.37%), food and beverages (13.91%), oil and gas (12.75%),packaging (11.91%),conglomerates (11.56%), services (11.57%), paints (11.29%) and industrial firms (11.07%).Furthermore, the result showed that board sex ratio (t = 3.76, p < 0.01), and return on assets (t = 1.69, p < 0.10) had positive significant influence on earnings management whileboard independence (t = -2.87, p < 0.01) and managerial ownership (t = -2.37, p <0.05) had negative significant influence on earnings management of non-financial firms. In addition, the result revealed that cash-based earnings management (t = 5.762, p < 0.01),leverage (t = 2.499, p < 0.01) and size (t = -7.210, p < 0.01) had significant effect on the performance of non-financial firms. The study concluded that corporate governance has a significant effect on earnings management of non-financial firms in Nigeria.

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