Ownership Structure and Earnings Management of Listed Industrial Goods Companies in Nigeria

Abstract

The persistent occurrence of earnings manipulation and declining firm value has raised concerns about the effectiveness of corporate governance mechanisms in Nigeria. Ownership structure has been identified as a key mechanism for monitoring managerial behavior and enhancing the credibility of financial reporting. This study examined the influence of ownership structure on earnings management among listed industrial goods companies in Nigeria. The study adopted an ex-post facto research design and utilized panel data obtained from the annual reports of selected listed industrial goods companies over a ten-year period (2015–2024). Data were analyzed using descriptive statistics and panel regression techniques, while appropriate diagnostic tests were conducted to ensure the validity of the model. The findings revealed that managerial ownership has a positive and statistically significant effect on earnings management (B = 0.002, p= 0.031). In contrast, foreign ownership exhibits a positive and insignificant effect on earnings management (B = 0.000, p= 0.641). Institutional ownership also shows a significant relationship with earnings management (B = 0.0008, p= 0.041). In contrast, concentrated ownership demonstrates a positive and significant effect on earnings management (B = 0.001, p= 0.0464). The study concluded that ownership structure plays a critical but heterogeneous role in influencing earnings management practices in Nigeria. While managerial and foreign ownership improve financial reporting quality, concentrated ownership may exacerbate opportunistic behavior. The study recommended regulatory authorities, such as Securities and Exchange Commission Nigeria and Financial Reporting Council of Nigeria, should establish guidelines or thresholds on managerial shareholding to prevent excessive ownership that may lead to managerial entrenchment and earnings manipulation.