The powers of audit and risk committees in constraining earnings management

ABSTRACT This study examines the effects of audit committee and risk committee on earnings management of 13 listed banks in Nigeria, over a period of five (5) years (2017-2021). Audit committee is proxied by audit committee size, while risk committee is proxied by risk committee size. However, earnings management is proxied by Beneish-M Score. Generalized Method of Moments is used to run the panel regression in order to overcome both within and between differences of endogeneity. The results show that audit committee has a negative and significant effect on earnings management. In the same vein, risk committee shows negative and significant effect on earnings management. Overall, both audit and risk committees are determinants of earnings management in banks in Nigeria. Furthermore, the results provide evidence that audit committee and risk committee play important roles in constraining earnings management in Nigeria. These results have implications for regulators, market participants, lenders, shareholders, scholars, policy-makers, and other stakeholders. The study is limited by the number of observations. It is expected that further research would increase the number of observations by adding to the research period or using samples from non-banking sectors. Our results show that the R2 is xx%. Further research is expected to add other variables that may influence earnings management activities