Audit Quality, CEO Ownership, and Earnings Management: An Empirical Analysis of Listed Non-Financial Services Firms in Nigeria
Keywords:
Real earnings management, audit quality, agency theory, leverage.
Abstract
The primary objective of this study was to examine the moderating effect of Chief Executive Officer (CEO) share ownership on the relationship between audit quality and earnings management in Nigeria’s listed non-financial services firms, covering the period from 2013 to 2022. A sample of 72 firms was selected, with real earnings management employed as the proxy for the dependent variable. The study adopted a correlational and ex post facto research design, utilizing secondary data obtained from firms’ annual reports and the Nigerian Exchange Group website. Descriptive statistics and panel multiple regression analyses were conducted, with the random effects model and generalized least squares estimation applied for robustness. The findings reveal that audit quality has a negative and significant effect on earnings management, while CEO share ownership exerts a positive and significant effect. However, the moderated regression model indicates that CEO share ownership does not significantly moderate the relationship between audit quality and earnings management. The study concludes that CEO ownership levels do not influence how audit quality mitigates earnings management in Nigeria’s non-financial sector. Consequently, it recommends that regulatory efforts to curb earnings management should prioritize strengthening external audit quality and enforcing rigorous audit standards, rather than relying on CEO ownership structures as a corporate governance mechanism. Firms are advised to consistently maintain high audit quality standards to enhAdd Contributorance the credibility of financial reporting irrespective of CEO ownership levels.
References
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Efiong, E. J., Nkiri, J. E., Unah, S., Akah, G. T. & Fali I. M. (2025). Effect of Accounting Software’s on Business Performance of Manufacturing Companies in Calabar Metropolis, Cross River State. ISRG Journal Economic, Business & Management 3 (4), 42 – 51.
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Kankpang, A. K., Nkiri ,J. E., Mbu-Ogar, G. B. & Lawal, S. G. (2024). Credit Management and profitability of listed manufacturing firms in Nigeria. Nigerian Journal of Management Sciences, 25(1b).
Kankpang, A.K., Ogar-Abang, J.O., Oko, J.O., Animpuye, C. (2024). Human resource cost and profitability of oil companies in Nigeria. Nigerian Journal of Management Science 25 (1), 107 - 113
Mbu-Ogar, G. B. Nkiri, J. E., Kankpang, A. K., & Ogar-Abang, J. O. (2023). Government accountability, fiscal integrity and voluntary tax compliance: Evidence from Nigerian SMEs. Nigerian Journal of Management Sciences Vol, 24(2a).
Mbu-Ogar, G. B., Ugwoke, R. O., Nkiri, J. E., Eyo, R. E., & Abotsi, L. A. (2024). Corporate Board Diversity and Firm Performance of Companies Quoted on the Nigerian Consumer Goods Sector. Innovations 11963 (79), 1513-1533.
Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315. https://doi.org/10.1016/0304-405X(88)90048-7
Nigerian Exchange Group (NGX). (2023). Market capitalization report. Lagos: NGX Research Department.
Nkiri, J. E., Kankpang, A. K., & J. I. Otalor (2019). The impact of management information system on the operations of microfinance institution in Calabar metropolis. International Journal of Advancement in Development Studies, 14(1), 208-218.
Obigbemi, I. F., Omolehinwa, E. O., Mukoro, D. O., Ben-Caleb, E., & Olusanmi, O. A. (2016). Earnings Management and Board Structure: Evidence From Nigeria. SAGE Open, 6(3), 1–12. https://doi.org/10.1177/2158244016667992
Oboh, J. O., Animpuye, C., & Ojeka, O. P. (2024). Stock Price and Firms Attributes of Listed Deposit Money Banks in Nigeria: The Intervening Role of Creative Accounting. International Journal of Research and Innovation in Social Science, 8(7), 3336-3350.
Okegbe, T. O., Egbunike, C. F., & Echekoba, N. F. (2023). Audit Quality, Ownership Concentration and Earnings Management: Evidence from Quoted Manufacturing Firms in Nigeria. Journal of Global Accounting, 6(2), 1–21.
Okonkwo, O., Jimba, I. H., & Kayode, D. E. (2022). Effect of Audit Quality on Earnings Management of Quoted Conglomerate Companies in Nigeria. International Journal of Social Sciences and Humanities Review, 12(1), 1–10.
Olayinka, M. O., & Oluwamayowa, S. A. (2020). Corporate governance and earnings management in Nigeria: An empirical investigation. Journal of Accounting and Taxation, 12(3), 52–61. https://doi.org/10.5897/JAT2020.0406
Piot, C., & Janin, R. (2007). External auditors, audit committees and earnings management in France. European Accounting Review, 16(2), 429–454. https://doi.org/10.1080/09638180701391030
Rahman, R. A., & Ali, F. H. M. (2020). Managerial ownership, audit quality and earnings management: Evidence from Malaysia. International Journal of Financial Research, 11(1), 64–74.
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737–783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
Undie F., Odama, P. O. Akpan, A. E., Animpuye, C., & Rufus, E-U. I. (2025). An Analysis of the Effect of Career Plateau on the Internal Audit Effectiveness of Public Institution in Calabar, Cross River State. ISRG Journal of Economics, Business & Management, 3(1), 143-150.
Usman, S., & Amran, N. A. (2015). Corporate governance mechanisms and earnings management in Nigeria. Asian Journal of Accounting and Governance, 6, 1–13.
Uwuigbe, U., Peter, D., & Oyeniyi, A. (2014). The effects of audit committee and ownership structure on income smoothening in Nigeria: A study of listed banks. Research Journal of Finance and Accounting, 5(4), 13–21.
Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. Englewood Cliffs, NJ: Prentice Hall.
Adegbie, F. F., Olayinka, M. O., & Faboyede, S. O. (2021). Earnings management and audit quality of listed firms in Nigeria. International Journal of Academic Accounting, Finance & Management Research (IJAAFMR), 5(2), 1–16.
Ajape, M. K., & Adelowotan, M. (2024). Audit Quality-Earnings Management Nexus in Selected Non-Financial Firms in Nigeria. Acta Universitatis Danubius: Œconomica, 20(3).
Anyadighibe, J. A., Bessong, P. K., Ogar-Abang, J. O., Kankpang, A. K. Nkiri, J. E., Inah, E. U., Etim, I. O., & Nwobodo, C. C. (2025). Inland water transportation attributes and marketing performance of micro-businesses. Edelweiss Applied Science and Technology 9 (1), 719-727.
Anyadighibe, J. A., Kankpang, A. K., Bessong, P. K., Efiong, E. J., & Inah, E. U. (2024). Socio-economic contributions of tourism in the development of hospitality industry. Edelweiss Applied Science and Technology, 8(4), 1472-1482.
Bassey, G. E., Effiong, S. A., Efiong, E. J., Abotsi, L. A., Williams, A. G., Gilbert, P., ... & Ita, E. U. (2023). Applicability synergy of financial technology and bank performance. Tec Empresarial, 5(2).
DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183–199. https://doi.org/10.1016/0165-4101(81)90002-1
Efiong, E. J., Nkiri, J. E., Unah, S., Akah, G. T. & Fali I. M. (2025). Effect of Accounting Software’s on Business Performance of Manufacturing Companies in Calabar Metropolis, Cross River State. ISRG Journal Economic, Business & Management 3 (4), 42 – 51.
Efiong, J., Efiong, E., Akintoye, O., Inah, E., Awan, O., & Ogban, F. (2024). Geospatial Modelling of Flood Susceptibility of the Calabar City, Cross River, Nigeria. Applied Environmental Research, 46(3).
Fali,I. M., Nyor, T. & Mustapha, L. O. (2020). Financial Risk and Financial Performance of listed Insurance Companies in Nigeria. European Journal of Business and Management 12 (12), 143- 153.
Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26(2), 301–325. https://doi.org/10.1086/467037
Financial Reporting Council of Nigeria (FRCN). (2022). Annual report on audit quality in Nigeria. Abuja: FRCN Publications.
Francis, J. R. (2004). What do we know about audit quality? The British Accounting Review, 36(4), 345–368. https://doi.org/10.1016/j.bar.2004.09.003
Gul, F. A., Chen, C. J. P., & Tsui, J. S. L. (2003). Discretionary accounting accruals, managers’ incentives, and audit fees. Contemporary Accounting Research, 20(3), 441–464. https://doi.org/10.1506/686E-NF2J-73X6-G540
Healy, P. M., & Wahlen, J. M. (1999). A review of the earnings management literature and its implications for standard setting. Accounting Horizons, 13(4), 365–383. https://doi.org/10.2308/acch.1999.13.4.365
Inyang, W., Effiong, C., Usoro, A., Efiong, E., Bessong, P., Oden, E., & Ubi, I. (2024). How social initiatives affect the value of manufacturing companies in Nigeria. Investment Management & Financial Innovations, 21(4), 128.
Irom, M. I., Okpanachi, J., Ahmed, N. M., & Agbi, S. E. (2023). Effect of Managerial Ownership and Audit Committee Financial Expertise on Earnings Management of Listed Manufacturing Companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 11(2), 15–35.
Ismael, H. R., & Kamel, H. (2021). Internal audit quality and earnings management: evidence from the UK. Managerial Auditing Journal, 36(7), 951–978. https://doi.org/10.1108/MAJ-09-2020-2830
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Kankpang, A. K., Nkiri ,J. E., Mbu-Ogar, G. B. & Lawal, S. G. (2024). Credit Management and profitability of listed manufacturing firms in Nigeria. Nigerian Journal of Management Sciences, 25(1b).
Kankpang, A.K., Ogar-Abang, J.O., Oko, J.O., Animpuye, C. (2024). Human resource cost and profitability of oil companies in Nigeria. Nigerian Journal of Management Science 25 (1), 107 - 113
Mbu-Ogar, G. B. Nkiri, J. E., Kankpang, A. K., & Ogar-Abang, J. O. (2023). Government accountability, fiscal integrity and voluntary tax compliance: Evidence from Nigerian SMEs. Nigerian Journal of Management Sciences Vol, 24(2a).
Mbu-Ogar, G. B., Ugwoke, R. O., Nkiri, J. E., Eyo, R. E., & Abotsi, L. A. (2024). Corporate Board Diversity and Firm Performance of Companies Quoted on the Nigerian Consumer Goods Sector. Innovations 11963 (79), 1513-1533.
Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315. https://doi.org/10.1016/0304-405X(88)90048-7
Nigerian Exchange Group (NGX). (2023). Market capitalization report. Lagos: NGX Research Department.
Nkiri, J. E., Kankpang, A. K., & J. I. Otalor (2019). The impact of management information system on the operations of microfinance institution in Calabar metropolis. International Journal of Advancement in Development Studies, 14(1), 208-218.
Obigbemi, I. F., Omolehinwa, E. O., Mukoro, D. O., Ben-Caleb, E., & Olusanmi, O. A. (2016). Earnings Management and Board Structure: Evidence From Nigeria. SAGE Open, 6(3), 1–12. https://doi.org/10.1177/2158244016667992
Oboh, J. O., Animpuye, C., & Ojeka, O. P. (2024). Stock Price and Firms Attributes of Listed Deposit Money Banks in Nigeria: The Intervening Role of Creative Accounting. International Journal of Research and Innovation in Social Science, 8(7), 3336-3350.
Okegbe, T. O., Egbunike, C. F., & Echekoba, N. F. (2023). Audit Quality, Ownership Concentration and Earnings Management: Evidence from Quoted Manufacturing Firms in Nigeria. Journal of Global Accounting, 6(2), 1–21.
Okonkwo, O., Jimba, I. H., & Kayode, D. E. (2022). Effect of Audit Quality on Earnings Management of Quoted Conglomerate Companies in Nigeria. International Journal of Social Sciences and Humanities Review, 12(1), 1–10.
Olayinka, M. O., & Oluwamayowa, S. A. (2020). Corporate governance and earnings management in Nigeria: An empirical investigation. Journal of Accounting and Taxation, 12(3), 52–61. https://doi.org/10.5897/JAT2020.0406
Piot, C., & Janin, R. (2007). External auditors, audit committees and earnings management in France. European Accounting Review, 16(2), 429–454. https://doi.org/10.1080/09638180701391030
Rahman, R. A., & Ali, F. H. M. (2020). Managerial ownership, audit quality and earnings management: Evidence from Malaysia. International Journal of Financial Research, 11(1), 64–74.
Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. The Journal of Finance, 52(2), 737–783. https://doi.org/10.1111/j.1540-6261.1997.tb04820.x
Undie F., Odama, P. O. Akpan, A. E., Animpuye, C., & Rufus, E-U. I. (2025). An Analysis of the Effect of Career Plateau on the Internal Audit Effectiveness of Public Institution in Calabar, Cross River State. ISRG Journal of Economics, Business & Management, 3(1), 143-150.
Usman, S., & Amran, N. A. (2015). Corporate governance mechanisms and earnings management in Nigeria. Asian Journal of Accounting and Governance, 6, 1–13.
Uwuigbe, U., Peter, D., & Oyeniyi, A. (2014). The effects of audit committee and ownership structure on income smoothening in Nigeria: A study of listed banks. Research Journal of Finance and Accounting, 5(4), 13–21.
Watts, R. L., & Zimmerman, J. L. (1986). Positive Accounting Theory. Englewood Cliffs, NJ: Prentice Hall.
Published
2025-07-14
How to Cite
Efiong, Eme Joel, PhD, Ibrahim Mallam Fali, PhD, Ogar- Abang, John Oyong, PhD, Animpuye Canice, Adamu Haruna Sezuo, Oboh John Ogenyi, & Umagu Udemeobong Bahakongfe. (2025). Audit Quality, CEO Ownership, and Earnings Management: An Empirical Analysis of Listed Non-Financial Services Firms in Nigeria. International Journal of Economics, Business and Innovation Research, 4(05), 1-16. https://doi.org/10.63922/ijebir.v4i05.2077
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