Corporate Governance and Earnings Management of Commercial Banks in Nigeria

This study examined the effect of corporate governance on earnings management among selected commercial banks in Nigeria. The study was motivated by persistent concerns regarding the effectiveness of corporate governance mechanisms in constraining earnings management practices within the Nigerian banking sector despite various governance reforms and regulatory interventions. Specifically, the study investigated the effects of board independence and audit committee characteristics, on earnings management. Earnings management was measured using Income Smoothing Ratio. The study was anchored on Agency Theory and supported by Stewardship Theory and Stakeholder Theory. An ex-post facto research design was adopted. Secondary data were obtained from the audited annual reports and accounts of ten selected commercial banks in Nigeria covering the period 2015– 2024. The study utilized panel data comprising 100 bank-year observations. Data were analyzed using descriptive statistics, correlation analysis, diagnostic tests, Hausman specification tests, and panel regression techniques. The findings revealed that board independence was found to have a positive and statistically significant effect on Income Smoothing Ratio, whereas audit committee characteristics had a positive but insignificant effect on Income Smoothing Ratio. The study concluded that corporate governance mechanisms do not consistently constrain earnings management among selected commercial banks in Nigeria. While board independence significantly influences income smoothing behaviour, audit committee characteristics do not exert significant effects on the measures of earnings management. The study further concluded that governance effectiveness depends more on the quality and practical effectiveness of governance mechanisms than on their mere existence. The study recommends strengthening the competence and effectiveness of independent directors, enhancing audit committee expertise, encouraging active shareholder monitoring, and intensifying regulatory oversight of governance practices within the Nigerian banking sector.