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.