Corporate governance refers to the system of rules, practices, and processes by which companies are directed and controlled. Earnings management involves the manipulation of financial statements to meet managerial or regulatory objectives. The purpose of this study is to examine the effect of corporate governance attributes on earnings management practices in Nigerian listed commercial banks, focusing on board independence, audit committee effectiveness, board size, and managerial ownership. The outcome of this research is motivated by concerns that weak governance and managerial discretion allow earnings manipulation, affecting investor confidence and financial stability in the Nigerian banking sector.
Secondary data were collected from audited financial statements and corporate governance reports of 80 listed commercial banks over five years. Structured data extraction forms were used to systematically gather relevant information on governance attributes and earnings management indicators. The findings show that 72.5% of respondents agreed board independence reduces earnings management, 77.5% agreed audit committee effectiveness constrains manipulation, 68.8% confirmed board size affects reporting practices, and 68.8% agreed managerial ownership aligns interests with shareholders. Furthermore, audit committees and independent boards were identified as the most effective governance measures.
The study concludes that strong board independence and effective audit committees significantly reduce earnings management in Nigerian listed commercial banks. Balanced board size and managerial ownership also contribute to transparency, reinforcing governance mechanisms that support reliable financial reporting and investor confidence. Based on the findings, it was recommended that banks should improve audit committee effectiveness by appointing members with strong financial expertise, independence, and relevant professional experience. Also, audit committees should meet regularly and actively review financial reports and internal control systems to ensure transparency and compliance with accounting standards.
1.1 Introduction
Corporate governance is defined as the system by which companies are directed and controlled to achieve accountability, transparency, and long-term sustainability for stakeholders. It encompasses the structures, policies, and processes that guide managerial decision-making and ensure that managers act in the best interests of shareholders. Effective corporate governance is essential for enhancing investor confidence, improving financial performance, and promoting ethical behavior in organizations (OECD, 2015). In the context of the banking sector, where public trust is critical, robust governance mechanisms are particularly important due to the sensitivity of financial information and the potential systemic risk posed by mismanagement.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are significance of the study, scope of work, research hypothesis and questions, limitation of the study and definition of terms.
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