Determinants of Earnings Management: Evidence from Nigerian Real Sector

Author(s)

Akhalumeh Paul , Izevbekhai Monday , Ohenhen, Monday ,

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Volume 7 - January 2018 (01)

Abstract

This study examines the effective factors determining earnings management among Nigerian companies the variables considered include: financial performance, firm size, board characteristics (board size and independence) and audit committee independence; external auditor type was used as a control variable. The study employs the panel data multiple regression designs. Data were extracted from annual financial statements of the selected firms. A sample of 72 firms was used to provide data for a period of 10 years. The results of the analysis show that all the studied variables exerted a positive effect on earnings management, but only financial performance (proxied by EPS) and firm size (proxied by the log of total assets). Board size and independence and audit committee independence and external auditor type are not significant determinants of earnings management of earnings management. The study recommends that concerted   efforts must be made to prevent manipulative and misleading earnings management practices; Investors should never make profitability and size their major indicators for making investment decisions; they must always look beyond the numbers; regulators should set guidelines to moderate the accounting choices available to preparers of accounting reports so as to make such reports more reliable; accountants must balance their responsibilities to service the information needs of all stakeholders 

Keywords

Discretionary accrual: Income smoothening, Performance, Board of directors 

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