Corporate Governance, Ownership Structure and Earnings Management of Listed Consumer Goods Firms in Nigeria: Moderating Role of CEO Financial Compensation
- Jul 20
- 2 min read
Authors: Musa Ibrahim Muhammad, Abba Mohammed and El-Maude Jibreel Gambo
Abstract
Motivated by persistent concerns over the effectiveness of governance structures in curbing opportunistic reporting in emerging markets, the study sought to provide sector-specific evidence covering an eleven-year (11 years) period from 2014 to 2024. Adopting an ex post facto research design, secondary data were extracted from the published annual reports accounts of consumer goods firms listed on the Nigerian Exchange Group (NGX). Earnings management was proxied by discretionary accruals estimated using the Modified Jones (1995) model, while corporate governance, ownership structure proxies are board size, audit committee independence, managerial ownership and block ownership. CEO financial compensation was treated as both an independent and moderating variable given that CEO pay may bond managers to shareholder interests. Data analysis was conducted using panel regression techniques and moderation was assessed through interaction terms. The findings revealed that board size, managerial ownership, and audit committee independence each had a positive and significant effect on earnings management, suggesting that larger boards, entrenched insiders, and nominally independent audit committees encourage opportunistic reporting. Block ownership exhibited a negative but insignificant effect, indicating a weak monitoring role. CEO financial compensation, however, demonstrated a negative and significant effect, implying that remuneration contracts can directly reduce earnings manipulation. With respect to moderation, CEO financial compensation significantly weakened the board size–earnings management relationship and marginally reinforced the unexpected positive effect of audit committee independence on earnings management, while interactions with managerial ownership and block ownership. The study recommends that policy makers should strengthen the effectiveness of board size through quality, not just numbers by emphasizing functional efficiency and competence rather than prescribing minimum or maximum numbers alone.
Keywords: Corporate Governance, Earnings Management, Ownership Structure, CEO Financial Compensation