Board of Directors and Earnings Management: Evidence from the Nigerian Exchange Group

Abstract Purpose - The purpose of this paper is to examine the effectiveness of Board of Directors in reducing earnings management activities in listed non-financial services sector in Nigeria. Design/Methodology/Approach - Earnings management is seen through discretionary accruals as suggested by Kothari et al. (2005). Board of directors is measured using six characteristics: board size, independence, meetings, CEO duality, audit committee, nomination and remuneration committee. These characteristics are tested using a sample of 75 non-financial services companies listed on the Nigerian Exchange Group. The study covers a period of 10 years (2012-2021). The hypotheses are tested using multiple regression analysis. Findings - The results show that some Board of Directors characteristics, such as size and independence, are negatively associated with earnings management at significant levels. The originality of this research is its extension of the literature on the role of Board of Directors in reducing earnings management activities in Nigeria. Research Implications - These results provide empirical evidence to assist regulators in identifying effective Board of Directors characteristics. The findings are also useful to shareholders and capital market operators in evaluating the roles of Board of Directors in reducing earnings management activities in Nigeria. Research Limitations - However, the study is limited to listed non-financial services firms because financial services companies come under strict regulations from the Central Bank of Nigeria, Nigerian Deposit Corporation and Financial Reporting Council of Nigeria. Key words: Agency Theory, Audit Committee Independence, Board of Directors, Board Independence, Board Meetings, Board Size, CEO Duality, Earnings Management, Nomination and Remuneration Committe