A proposed framework on the effectiveness of board of directors in mitigating earnings management in Nigeria: Pre and post NCCG 2018 reform

Abstract

In recent decades, there has been a significant focus on the issue of earnings management practices through real-activities manipulation, which needs effective monitoring. These propositions have been confirmed by past studies in developed economies, where their regulations and institutional settings of corporate governance varied from those of emerging economies. Thus, corporate governance best practice is considered an effective monitoring mechanism for strengthening the credibility and reliability of financial reporting. This study proposes a framework to empirically investigate the effectiveness of the board of directors (size, independence, expertise, meeting frequency, and gender diversity), and using the aggregate
board attributes (board effectiveness) on earnings management practices among non-financial service firms listed on the Nigerian Exchange Group. The study proposes to utilize the periods from 2013 to 2018, and 2019 to 2024 as the pre–and post–Nigerian code of corporate governance [NCCG] 2018 reform, respectively. Evidence from prior studies suggested that boards of directors are an important part of the corporate structure and responsible for monitoring the quality of the information contained in financial reports. It is argued that the board of directors’ effectiveness can mitigate earnings management practices. Besides, the study will provide important intuition to shareholders, financial analysts, and academia about the effectiveness of the revised NCCG 2018 in mitigating earnings management practice.