Volume 4, Issue 2, June 2019, Page: 71-80
Effect of Corporate Governance on Earnings Management of Commercial Banks in Nigeria
Ubesie Madubuko Cyril Phd, Department of Accountancy, Enugu State University of Science and Technology, Enugu, Nigeria
Inyiama Ethel Chinakpude, Department of Accountancy, Enugu State University of Science and Technology, Enugu, Nigeria
Received: Mar. 21, 2019;       Accepted: May 6, 2019;       Published: Jul. 24, 2019
DOI: 10.11648/j.ijafrm.20190402.13      View  99      Downloads  38
Abstract
The research examines the effects, magnitude and strength of the relationships between corporate governance and earning management of commercial banks in Nigeria. The research made use of secondary data obtained from annual report and accounts of four commercial banks, First Bank of Nigeria Plc, Zenith Bank Plc, Diamond Bank Plc and United Bank for Africa, from year 2007 to 2017. The nature and magnitude of association between the dependent variable (DPS) and the independent variables were determined using the multiple regression model. The movement pattern of the dependent and independent variable was represented graphically while descriptive statistics was used to check the validity of the result and data. Correlation Analysis was performed to test the strength of the relationship between selected variables. Earnings Per Share was found to be negatively and significantly influenced by Board Size (BDSIZE) while Ownership concentration has a positive and insignificant effect on Earnings Per Share. Board meeting has a positive and significant effect on Earnings Per Share. In line with the agency theory and consistent with the findings, it is implied thatOwnership Concentration and Board Meetingsclosely monitored and improved on as they have positive influence on Earnings Per Share.
Keywords
Corporate Governance, Nigerian Banks, Agency Theory, Earnings Management
To cite this article
Ubesie Madubuko Cyril Phd, Inyiama Ethel Chinakpude, Effect of Corporate Governance on Earnings Management of Commercial Banks in Nigeria, International Journal of Accounting, Finance and Risk Management. Vol. 4, No. 2, 2019, pp. 71-80. doi: 10.11648/j.ijafrm.20190402.13
Copyright
Copyright © 2019 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Reference
[1]
Sanusi L. (2009). An Assessment of Current Development in the Nigerian Economy and the Central Bank of Nigeria (CBN) Policy Action. A maiden briefing by the New CBN Governor, June 2009.
[2]
Vasile Cocris & Maria C. Ungurcanu (2007). Why are banks special? An approach from the corporate governance perspective. Scientific annals-at Cuza University of Lasi, Economics series, pp 55-66, 2007.
[3]
Clarkson Max &Deck Michael (1997): Effective governance for Microfinance Institutions. CGAP focus note: No 7, Washington DC; World Bank Group.
[4]
Ofiafor E. &Imoisili O (2010). Corporate governance and the entrepreneur, in F. C. Okafor: Entrepreneurship A practical approach, Benin City: Modern Publishing Company.
[5]
Okafor F. O (2011). "50 years of Banking Sector Reforms in Nigeria, (1960-2010): past lessons and future imperatives" Enugu, Ezu books Nigeria Ltd.
[6]
Adeola F (2003). Transparent and Accountable corporate governance in the capital market challenges for market operators and stakeholders, Nigerian stock market annual.
[7]
Anya O. A. (2003). Corporate Governance as an effective tool for combating financial and Economic crimes. The Nigerian bankers. October-December.
[8]
Wolfensohn J. (1997). Cited by Anya 2003. Corporate governance as an effective tool for combating financial and economic crimes. The Nigerian banker. October-December.
[9]
Dyck A (2001). Privatisation and corporate governance: principles, evidence, future challenges. The World Bank Research Observer - Vol 16, No 1 (Spring 2001) pp. 59-84.
[10]
Shleifer A. &Vishny R (1997). A survey of corporate governance. Journal of Financial Economics, 522; 737-783.
[11]
Aguilera R, Filatotchev I, Gospel H & Jackson G (2008). An organizational approach to comparative corporate governance: costs, contingencies and complementaries. Organization science. 19, 475-492. 10.2139/ssrn. 955043.
[12]
Zahra S & Pearce J. (1989). Boards of directors and corporate financial performance: a review of integrative model. Journal of management, 152; 291-334.
[13]
Daily C, Dalton D &Najagopalan N (2003). Governance through Ownership: centuries of practice, decades of research, Academy of Management Journal 46, 115-158.
[14]
O’Sullivan, N. (2000). The determinants of non-executive representation on the boards of large UK companies. Journal of Management and Governance, 4, 283-297.
[15]
Davis H, David S, Donaldson L. (1997). Toward a stewardship theory of management review. 22.20.10.2307/259223.
[16]
Diwedi, N. and Jain A. (2002). Corporate Governance and Performance of Indian Firms: The Effect of Board Size and Ownership. Review of Economics and Statistics, February, 104–107.
[17]
Jensen M, Meckling W. (1976): A theory of the firm: Governance, Residual Claims and Organizational forms, Harvard University Press. December 2000. Journal of Financial Economics (JFE). Vol 3, no 4, 1976.
[18]
Williamson Oliver E (1975). Markets and Hierarchies: Analysis and Antitrust Implications; A study in the economics of internal Organization. University of Illinois at Urbana. Champaign’s Academy for Entrepreneurial Leadership Historical Research.
[19]
Padilla A (2002). Can Agency theory justify the regulation of Insider Trading. Quarterly Journal Austrian Economics. (202) 5: 3.
[20]
Jensen M, Fama E (1983). Foundation of Organizational Strategy. Harvard University Press 1998; Journal on Law and Economics, Vol. 26 June 1983.
[21]
Filatachev I., Jackson G., Gospel H., Allcock D. (2007). Key Drivers of “Good” Corporate governance and the appropriateness of UK Policy Responses, London: Dept of Trade and Industry.
[22]
Stiles P., & Taylor B. (2001). Boards at work: how directors view their roles and responsibilities, Oxford University Press.
[23]
Donaldson L., Davis J. (1991). ‘Stewardship Theory or Agency Theory.’ CEO governance and Shareholder Returns, Australian Journal of Management, 16, 1, 49-64.
[24]
Donaldson L., Muth M. (1998). Stewardship Theory and Board Structure: a contingency Approach, corporate governance, 6, 1, 5-28.
[25]
Nicholson G., Kiel G (2007). Corporate governance: an international review, vol. 15, 4, pp 585-608, July 2007.
[26]
Helmer H. W (1996). A director's role in strategy. Directors and Boards, 20 (3) 22-25.
[27]
Klein, A., (2002). Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics, 33 (3), 375–400.
[28]
Ghosh A. and D. Moon (2010). Corporate Debt Financing and Earnings Quality, journal of business finance & accounting, 37, (2010), 538-559.
[29]
Abed, Suzan; Al-Attar, Ali; Suwaidan, Mishiel (2012). “Corporate Governance and Earnings Management: Jordanian Evidence”. International Business Research Vol. 5, No. 1; January.
[30]
Al-Amarneh, A. (2014). Corporate governance ownership structure and bank performance in Jordan. International Journal of Economics and Finance, 6 (6), 192-202.
[31]
Owolabi, S. A., Owolabi, T. J. &Olanrewaju, G. O. (2014). Corporate Governance and Banks’ Profitability: An Assessment of Post Consolidation Period (2006-2010). Unique Journal of Business Management Research. Vol. 2, No. 1: 1-16.
[32]
Liu, J., Harris, H., andOma, N., (2013). Board committees and earnings management. Corporate Board: Role, Duties & Composition/Volume 9, Issue 1.
[33]
Swastika D. L. The (2013). Corporate Governance, firm size and earnings management. Evidence in Indonesia Stock Exchange. IOSR Journal of Economics and Finance (IOSR-JEF) 10 (4); 77-82.
[34]
González, J. S., & García-Meca, E. (2014). Does corporate governance influence earnings management in Latin American markets? Journal of Business Ethics, 121 (3), 419–440.
[35]
Jegede, C. A., Akinlabi, B. H. and Soyebo, Y. A. (2013). Corporate Governance Efficiency and Bank Performance in Nigeria. World Journal of Social Sciences, 3 (1): 178 – 192.
[36]
Ehikioya, B. I. (2009). Corporate governance structure and firm performance in developing economies: Evidence from Nigeria. Corporate Governance, 9 (3), 231-243.
[37]
Iraya, C. Mwangi, M. &Wanjohi, G. (2014). The effect of corporate governance practices on earnings management of companies listed at the Nairobi securities exchange, European Scientific Journal January 2015 edition Volume 11, No 1.
[38]
Patrick E, Paulinus E, Nympha A (2015). The influence of corporate governance on Earnings Management practices: a study of some selected quoted companies in Nigeria. American journal of Economics, Finance and Management. Vol. 1, No 5, pp 482-493.
[39]
Heugens, P. P., Essen, M., and Oosterhout, J. (2008). Meta-analyzing ownership concentration and firm performance in Asia: Towards a more fine grained understanding. Asia Pacific Journal of Management, 26 (3), 481-512.
[40]
Busta, I. (2008). Corporate Governance in Banking - A European Study. Business. Mohammed, F. (2012). Impact of corporate governance on banks performance in Nigeria. Journal of Emerging Trends in Economics and Management Sciences, 3 (3).
[41]
Mohammed F, Wajdi Ben R. (2012). The impact of Good corporate Governance practices on Stakeholder's satisfaction in Tunisian listed companies. (Oct 20, 2012) International Journal of Business as Management Studies, Vol 4, 2, 2012.
[42]
Onakoya A, Ofoegbu D, Fasanya I (2012). Corporate governance and Bank Performance: A pooled study of selected Banks in Nigeria.
[43]
Pulic A. (1998). "Measuring the performance of Intellectual potential in knowledge economy" paper presented at the 2nd McMaster Word Congress in Measuring and Managing Intellectual Capital by the Austria team for Intellectual Potential.
[44]
Firer S, Williams M. (2003). Intellectual Capital and traditional measures of corporate performance - Journal of Intellectual Capital. Vol 4, issue 3, pp. 348-360.
[45]
Chen M. C., Cheng S. J., Hwang Y (2005). An empirical Investigation of the relationship between Intellectual Capital and Firms market value and financial performance. Journal of Intellectual Capital, Vol. 6, No 2, pp. 159-176.
[46]
Ahangar R (2011). The relationship between Intellectual Capital and Financial Performance: An empirical investigation in an Iranian company. African Journal of Business Management. Vol 5 (1) pp 88-95.
[47]
Chiang, N. (2005). An Empirical study of corporate governance and corporate performance, Journal of American Academy of Business, Cambridge.
[48]
Fischer M., RosenzweigK., (1995). Attitudes of Students and Accounting Practitioners Concerning theEthical Acceptability of Earnings Management, Journal of Business Ethics, volume 14, issue 6, pp. 433-444.
[49]
Hijazi, Q & Al-Thuneibat, A. 2015, Auditor’s opinions and earnings management: evidence from Jordan, Proceedingsof The Third International Conference on Innovation Economy, University of Jordan, Amman, Jordan, 14-15 April, 2015.
[50]
Kirkbride J. B., Fearon P., Morgan C., Dazzan P., Morgan K., Murray R. M., Jones P. B. (2007). Neighbourhood variation in the incidence of psychotic disorders in Southeast London. Social Psychiatry and Psychiatric Epidemiology. 2007; 42 (6): 438–445.
[51]
La Porta R. Lopez-De-SilanesF., and Shleifer A. (1999). Corporate ownership around the world. The Journal of Finance 54 (2), April 1999.
[52]
Laing, D., and Weir, C. M. (1999). Governance structures, size and corporate performance in UK Firms. Management Decision, 37 (5), 457-464.
[53]
Lefort, F., and Urzua, F. (2008). Board independence, firm performance and ownershipconcentration: Evidence from Chile. Journal of Business Research, 61 (6), 615-622.
[54]
Lipton, M., and Lorsch, J. (1992). A Modest Proposal for Improved Corporate Governance. Business Lawyer, 48 (1), 59-67.
[55]
Lopez, F., Azofra, V., and De Andres, P. (2005). Corporate boards in OECD Countries: Size, composition, functioning, and effectiveness. Corporate Governance: An International Review, 13 (2), 197-210.
[56]
Oman, C. P. (2001), Corporate Governance and National Development, OECD Development Centre, Working Paper No. 180, Research programme on: Corporate Governance in Developing Countries and Emerging Economies.
[57]
Onakoya, A. B. (2013). Stock Market Volatility and Economic Growth in Nigeria (1980-2010), International Review of Management and Business Research, 2 (1), 201 –209.
[58]
Owusu-Ansah S. (1998). The Impact of Corporate Attributes on the Extent of Mandatory Disclosure and Reporting by Listed Companies in Zimbabwe. The International Journal of Accounting, 33 (5).
[59]
Paul M. Healy and James M. Wahlen (1999) A Review of the Earnings Management Literature and Its Implications for Standard Setting. Accounting Horizons: December 1999, Vol. 13, No. 4, pp. 365-383.
[60]
Shivdasani, A., and Zenner, M. (2002). Best Practices in Corporate Governance:What two decades of research work. New York: Salomon Smith Barney.
[61]
Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40 (2), 185-211.
Browse journals by subject