Title: Corporate board monitoring, political connection and real earnings management practice in Nigeria

Authors: Armaya'u Alhaji Sani; Rohaida Abdul Latif; Redhwan Al-Dhamari

Addresses: Department of Accounting, Faculty of Management Sciences, Federal University Dutse, 7156, Jigawa State, Nigeria ' Tunku Puteri Intan Safinaz School of Accounting, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia ' Tunku Puteri Intan Safinaz School of Accounting, Universiti Utara Malaysia, 06010 Sintok, Kedah, Malaysia

Abstract: This study examines the influence of corporate board monitoring on real earnings management practice in Nigeria. It also explores whether the presence of politically connected directors weakens/strengthen the board by using 385 firm-year observations of listed companies on the Nigerian Stock Exchange for the period between 2012 and 2016. The study uses Driscoll-Kraay standard error regression to estimate the model parameters. The results show that politically connected directors have significant positive influence on real earnings manipulations. We also establish that the interaction of politically connected directors with the board weakened the board monitoring power, and thus led to breach of corporate governance. The results also indicate that foreign CEOs and CEOs with financial expertise decrease the propensity of real earnings manipulations in Nigeria. Hence, we draw the attention of regulators to improve the independence of the board in order to control politically connected directors from weakening the board monitoring power.

Keywords: real earnings management; REM; board of directors; political connection; chief executive officer.

DOI: 10.1504/AAJFA.2021.115668

Afro-Asian Journal of Finance and Accounting, 2021 Vol.11 No.3, pp.423 - 446

Received: 14 Jan 2019
Accepted: 13 Jan 2020
Published online: 16 Jun 2021 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article