Earnings Management and Financial Statement Reporting Quality of Deposit Money Banks in Nigeria

Abstract

This study examined the effect of earnings management on the financial statement reporting quality of deposit money banks (DMBs) in Nigeria using panel data spanning 1994 to 2024. Specifically, it investigated the influence of earnings management on six dimensions of financial statement reporting quality: value relevance, timeliness, transparency, persistence and predictability, accrual quality, and accounting conservatism. An ex-post facto research design was adopted, and secondary data were obtained from the published audited annual reports of seventeen (17) purposively selected deposit money banks listed on the Nigerian Exchange Group. Earnings management was proxied using the Performance-Adjusted Modified Jones Model, and the Panel Least Squares (PLS) regression technique was employed for data analysis. The findings revealed that earnings management had a negative and statistically significant relationship with value relevance (β = -0.107823, p < 0.05), indicating that improved value relevance constrains earnings manipulation. Timeliness, transparency, and persistence and predictability exhibited statistically insignificant relationships with earnings management. However, accrual quality (β = 0.000379, p < 0.05) and accounting conservatism (β = 0.0000585, p < 0.05) showed positive and statistically significant relationships with earnings management. The study concludes that earnings management significantly influences selected dimensions of financial statement reporting quality among Nigerian deposit money banks, particularly value relevance, accrual quality, and accounting conservatism. It recommends that regulatory authorities strengthen monitoring and enforcement mechanisms, that banks improve corporate governance and internal control systems, and that external auditors intensify scrutiny of discretionary accruals to minimise earnings manipulation and enhance the credibility of financial reporting in the Nigerian banking sector.