Board Dynamics and Earnings Management of Listed Industrial Goods Firms in Nigeria

Abstract

The increasing complexity of corporate operations in Nigeria has intensified concerns about earnings management and the credibility of financial reporting. This study examined the effect of board dynamics proxied by gender diversity, nationality diversity, and financial expertise on earnings management among listed industrial goods firms in Nigeria. Anchored on stakeholder theory, an ex-post facto research design was adopted, covering thirteen (13) firms listed on the Nigerian Exchange Group (NGX) between 2014 and 2023. Secondary data were extracted from audited annual reports, while discretionary accruals, estimated using the Modified Jones Model, served as a proxy for earnings management. Panel regression analysis was conducted using STATA 17. The empirical results show that board gender diversity has a significant negative effect on earnings management (β = –0.214, p < 0.05), indicating that firms with higher female board representation engage less in earnings manipulation. Board nationality diversity also exerts a significant negative influence (β = – 0.187, p < 0.05), suggesting that the inclusion of foreign directors enhances monitoring effectiveness. Similarly, board financial expertise significantly reduces earnings management (β = –0.263, p < 0.01), confirming the role of accounting and finance professionals in strengthening board oversight. Among the control variables, firm size (β = 0.142, p < 0.10) and leverage (β = 0.118, p < 0.05) were positively associated with earnings management, implying that larger and more leveraged firms are more prone to discretionary accruals. Robustness checks using the Hausman specification and heteroscedasticity tests validated the model’s reliability. The study concludes that board composition significantly mitigates earnings management in Nigeria’s industrial goods sector. It recommends that regulatory authorities enforce stronger corporate governance codes that promote gender inclusion, international diversity, and financial expertise on boards to enhance financial reporting quality and investor confidence.