Determinants of Earnings Management Practices and Financial Transparency in Nigeria

A Panel Data Analysis

Abstract

This study examined the determinants of earnings management practices and their implications for financial transparency among Nigerian firms using panel data analysis. It utilized secondary data from 58 non-financial listed firms in Nigeria over a 10-year period (2015–2024) and adopted a pooled panel data approach for analysis. The findings reveal that board size has a significant negative effect on earnings management, indicating that larger boards enhance oversight and reduce managerial opportunism. However, board independence and audit committee independence do not show significant effects, suggesting that their presence alone is insufficient to curb earnings manipulation. Leverage exhibits a weak but positive relationship with earnings management, implying that highly leveraged firms may manipulate earnings to meet financial obligations. Firm size negatively and significantly affects earnings management, reinforcing the role of regulatory scrutiny in reducing earnings manipulation. The study underscores the need for stronger governance enforcement and regulatory oversight to improve financial transparency. Based on these findings, recommendations made include optimizing board effectiveness, strengthening audit committee functionality, improving debt management practices, and enhancing corporate governance regulations so as to enhance accountability, improve investor confidence, and promote sustainable financial reporting practices in Nigerian firms.