Published June 3, 2025
| Version v1
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CORPORATE GOVERNANCE AND EARNINGS QUALITY EFFECT: EVIDENCE FROM NIGERIAN MANUFACTURING INDUSTRY
Authors/Creators
- 1. College of Management Sciences, Department of Banking and Finance, FPW
- 2. Scholar, College of Business and Leadership, Eastern University, St Davids, Pennsylvania
Description
| The study examined the effect of corporate governance mechanisms on earnings quality of manufacturing companies in Nigeria. The study specifically examined the effect of board composition, audit committee independence, institutional ownershipand executive compensation on earnings quality of manufacturing companies in Nigeria. The study adopted the Agency theory as the anchor theory whilepanel data was extracted from the annual financial statements of the companies for the period 2012 to 2022. Regression analysis was used for test of hypotheses. The study found that: board composition significantly and positively affect earnings quality of manufacturing companies in Nigeria (β=0.38, z=2.42, and p=0.005); there is no significant effect of audit committee independence on earnings quality of manufacturing companies in Nigeria as results revealed β=-0.32, z=-0.84, and p=0.402; institutional ownership has no significant effect on earnings quality of manufacturing companies in Nigeria (β=0.42, z=1.02, and p=0.310); and there is significant positive effect of executive compensation on earnings quality of manufacturing companies in Nigeria (β=0.42, z=3.96, and p=0.000). The study concluded that good corporate governance practice has a significant effect in reducing earnings manipulations which by extension improves on quality of earnings. Companies that have more non-executive directors in their board composition and high executive compensation in terms of shareholding and remuneration would have quality financial reports than firms whose boards of directors do not contain reasonable number of independent and directors their executive do not enjoy executive compensation. It recommended thatmanufacturing companies in Nigeria should ensure that more non-executive directors are included in their board composition in order to enhance effective monitoring, and that; managers of manufacturing and other companies should be encouraged to own shares in the companies they are managing as managers with shares are less susceptible to manipulative accounting practices. |