The impact of the ownership structure and board characteristics on earnings management in Nigeria’s listed deposit money banks

What is it about?

In many countries, there are a certain number of organizations going through severe crises due to a failure in corporate governance. In this study, the main aim is to determine how the ownership structure and the characteristics of the boards of Nigeria’s listed deposit money banks (DMBs) affect aggressive earnings management for a period of 5 years (2011-2016). The ownership structure is a proportion of the shares held by different parties in the equity (ordinary shares) of the company while aggressive earnings management is the term used to describe managers’ intentional act to manipulate the reported net income by relying on specific accounting methods in order to make changes that favored their respective interests.

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Why is it important?

This study has established the fact that private, foreign and government shareholdings have an inverse relationship with aggressive earnings management. Also, the directors’ tenures status has a significant effect on aggressive earning management, whereas the board size, the gender and the size of the firm do not have any significant effect for the investigated period. These findings clearly show that the influence of independent board members, which is also an important characteristic of the board, is excluded as a part of the variables investigated. Also, the small sample size of 84 and the 5 years period of investigation are rather too short. Nevertheless, the short time period, the sample size and the inclusion of the other characteristics of the board in this study provide a research focus for future research studies

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