Earnings management, corporate governance and the financial performance of listed Multinational Companies in Nigeria

Abstract

Background: Earnings management and effective corporate governance are some of the ways corporate executives respond to fierce global competition to achieved improved financial performance. Aims: The study examined the moderating effect of board structure on the interaction between earnings management and the financial performance of listed multinational entities (MNEs) in Nigeria. Board structure was classified into board size and board independence. Earnings management included accrual earning management (AEM) and real earnings management (REM), and financial performance was measured by ROA and Tobin’s Q. Methods: The study employed the ex post facto research design and panel regression estimates was utilized to test the empirical models.  Sample: Data were acquired between 2014 and 2023 from the annual reports of 32 listed MNEs in Nigeria. Results: Board structure had positive moderating influence on AEM and ROA, but negative moderating influence on AEM and Tobin‘s Q. In addition, board structure showed positive moderating influence on REM,  ROA and Tobin‘s Q. Conclusions: The findings showed that board structure significantly moderates the association of earnings management and financial performance in listed multinational companies in Nigeria. Implications: The study implies that earnings management can enhance the efficiency and value of Nigerian multinational firms when used as an informational and performance-stabilizing strategy. However, its effectiveness depends on strong corporate governance, particularly optimal board size and greater board independence, to ensure prudent oversight, protect shareholder interests, and sustain long-term financial performance.