Ownership Structure and Real Earnings Management: Evidence from Nigeria

Abstract
Financial statements are expected to assist users in decision making by reporting the true and fair value of companies. However,
there always exists the potential risks of manipulations of the reported results if the numbers were intentionally prepared to
misrepresent the actual performance or conditions of the companies. Manipulating the reported earnings to achieve pre-set
objectives is an art known as earnings management which can be classified into real or accrual manipulations. This study
examines the effects of ownership structures (managerial, institutional, and foreign) on real earnings management in Nigeria. The
analyses involve a sample of 72 non-financial firms with 360 firm-year observations for a period 2014-2018. Data was collected
from the financial reports of these companies, Thompson Reuters, and Bloomberg databases. The multiple regression technique
was employed for panel data analysis. The results show that managerial ownership increase management’s desire to manipulate
the reported earnings, while institutional ownership have insignificant relationship with real earnings management. Also, the
findings reveal that foreign ownership prevent managers’ from manipulating the financial statement. Thus, the study recommends
that listed companies in Nigeria should consider higher percentage of foreign ownership to improve their monitoring and have
quality financial statement.