Combined effects of board and audit committee characteristics on earnings management in listed manufacturing firms

Abstract

The credibility of financial reporting may be undermined when managers use accounting discretion to alter reported earnings, with possible consequences for investors’ confidence. This study investigates the individual and joint relationships between board and audit committee attributes and earnings management for 49 manufacturing companies listed on the Nigerian Exchange Group (NGX) from 2012 to 2024. Using an ex post facto panel design, the analysis relies on secondary information extracted from audited annual reports. Earnings management is proxied by the performance-matched discretionary-accrual measure developed by Kothari et al. (2005). Fixed- and random-effects models are estimated, and the Hausman specification test guides the preferred model. Results show negative associations between earnings management and board independence (β = -0.015), board financial expertise (β = -0.012), and board gender diversity (β = -0.009), all significant at p < 0.05, while board size is positively associated with earnings management (β = 0.005, p < 0.05). Taken together, the governance variables are statistically significant (R² = 0.624; F = 27.46; p < 0.001). The evidence highlights the importance of substantive board and audit committee monitoring within Nigeria’s corporate-governance framework (Nurjanah et al., 2025).