Earnings Management: An Investigation of Companies Listed on the Nigerian Stock Exchange

Abstract

Earnings management has attracted considerable research efforts by various scholars across the domain of finance, management and governance and investigating various jurisdictions. Studies have shown different characteristics of earnings management by the companies listed on different stock exchanges with some exhibiting income-decreasing (downward earnings management) while some have exhibited income-increasing (upward earnings management) behavior. This study examines the extent and form of earnings management exhibited by companies listed on the Nigerian Stock Exchange. To investigate this, panel data technique is used on a sample of 101 companies across all the sectors of the Nigerian economy, covering the period 2009-2012. The occurrence of earnings management is detected using the Modified Jones Model of detecting discretionary accruals as a proxy for earnings management. The empirical results show that firms listed on the Nigerian Stock Exchange in the aggregate over the four year period exhibit a downward earnings management.