Accrual - Based Earnings Management, Corporate Policies and Managerial Decisions of Quoted Companies in Nigeria

Augustine Oke Okolie


Managers use a variety of strategies to deliberately manipulate company earnings to match a predetermined target by performing certain activities that alter or smooth income, achieve high earnings level or sway company share prices. This study examines the relationship and effects of managerial decisions on earnings management of companies in Nigeria using directors’ remunerations, dividend payments, changes in earnings, and changes in total net assets as surrogates for corporate managerial policies and decisions. The study relies on secondary data derived from various companies’ financial statements and the Nigerian Stock Exchange fact book to determine and measure the level of earnings manipulations of corporate financial statements, applying an all-inclusive multivariate analysis. The empirical analysis shows that earnings management intensity, measured by the absolute values of discretionary accruals reflects mixed outcomes when regressed on change in profits, dividend policy, directors’ remunerations and change in assets values. The finding suggests a need to further study board room dynamics as managerial decisions investigated in isolation may not provide a satisfactory clarification to the causal effects of earnings management. Perhaps, these accounts for the clear polarity in empirical conclusions since firm specific effects may well interface with managerial decisions structure.

Keywords: Corporate Earnings, Directors’ remunerations, Discretionary accruals, dividend Payments, Earnings management, Net total assets,

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ISSN (Paper)2222-1697 ISSN (Online)2222-2847

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