Gusau Journal of Accounting and Finance (Apr 2021)
BOARD COMPOSITION AND EARNINGS MANAGEMENT OF LISTED NONFINANCIAL FIRMS IN NIGERIA
Abstract
In recent years, earnings management has gotten a lot of attention. This is owing to the fact that it is linked to the accuracy of published accounting reports. According to the academic literature, earnings management appears to be widespread among publicly traded firms. In response to calls for a higher proportion and composition of independent directors on boards and for the board of directors to be more financially sophisticated, the paper examined the effect of board composition on earnings management of listed non-financial firms in Nigeria from 2009 to 2018. Secondary data was used and extracted from various annual financial reports of the selected firms. The population for the study consisted of 117 listed non-financial firms in Nigeria as at December, 2018. This study used purposive sampling technique where 20 firms, whose data were accessible and available within the sample period of 2009 to 2018 were selected, being the most recent ten years within which the second corporate governance codes for quoted firms was introduced as a replacement to the 2003 SEC code. The sampled firms cut across 10 industrial sectors as given by NSE. The data were analysed with the use of mean and multiple regression technique. This study showed that the board size of the firms ranges from eight to twelve members while the average annual board meetings stood at 4 times within the sampled period of 2009 to 2018. The result also revealed that board composition had significant and positive effect on earnings management of listed non-financial companies in Nigeria (t = 5.454, p < 0.05). This paper concluded that board composition had significant influence on earnings management practices among quoted non-financial companies in Nigeria. It is hereby recommended that the independent directors’ appointment into the firms’ board should be based on the past records of those directors rather than stressing on their ratio to number of directors on the board. Similarly, meetings of board shall not be more than four times, because meetings held more than that does not pledge healthier monitoring.
