DETERMINANTS OF EARNINGS MANAGEMENT: THE STUDY OF NIGERIAN NONFINANCIAL COMPANIES

The extant literature links manageress incentives to earnings management. It has globally accounted for the collapse of some well-known, established firms, since it depicts a low financial reporting quality. This study employed data from the 77 nonfinancial firms listed on the Nigerian Stock Exchange for the period 2013-2019 in order to examine the determinants of earnings management. The result showed strong evidence of an incentive to manage earnings. Profitability (Return on Assets – ROA) and the size of a firm have a strong positive impact on earnings management, while the non-debt tax shield and operating cash flows have a strong negative influence on earnings management. The study suggests that external stakeholders should observe a firm’s factors influencing its assets, non-debt tax shield and operating cash flows (such as accelerating/delaying cash receipts/payment through the use of credit sales and granting discounts), these being the crucial factors influencing earnings management even when the firm is increasing in size. Management should minimally use the above-mentioned factors of a firm as an earnings management instrument.