ABSTRACT
Firm characteristics is a firm managerial and demographic variables which, in turn encompass part of the firm’s internal environment. On the other hand earnings management is viewed as an attempt by management to use specific accounting methods or other methods designed to influence or manipulate reported earnings. The study examined the impact of firm characteristics on earnings management by listed manufacturing companies in Nigeria. Seventy One (71) listed Manufacturing Companies as at 31st December, 2018 formed the study population while data was collected from a sample of 53 companies for a period of twenty years (1999 to 2018). The independent variable, firm characteristics was measured with Company’s Size (CSIZE), Profitability (ROA), Leverage (LEV), Internationality (INT), Auditor Type (AUDT) and Company’s Age (AGE) while the dependent variable Earnings Management was measured using Accrual Based Earnings Management, and Real-Activities Based Earnings Management. The dependent variable was further expanded with three proxies used in measuring Real-Activities Based Earnings Management (Abnormal Cash-flows from operation (RM1), Abnormal Production Cost (RM2) and Abnormal Discretionary Expenditure (RM3)) while Accrual Based Earnings Management was measured using The Modified Jones (1991). Pearson correlation matrix and the normality test were conducted using the econometric analysis software E-views 9. The result revealed that CSIZE is positively and statistically significant with DA (t-value 3.153165) and statistically insignificant with RM1, RM2 and RM3 (t-values -0.301244, 0.226774 and -0.024434); ROA appeared to be negatively and statistically significant with discretionary accruals DA (t-value -12.78619) and statistically significant with RM1 ( t-value 4.432808), insignificant with RM2 (t-value 0.025140) and positive significant relationship RM3 (t-value 2.563497); LEV appeared to be positively and statistically significant with DA (t-value 2.907845) and positively and statistically significant RM1and RM3 (t-values 2.886587 & 10.78161) and statistically insignificant RM2 (t-value 0.015658); INT appears to be statistically insignificant with DA (t-value 0.544155) and negatively and statistically significant with RM1 (t-value -3.378734) and insignificant impact on RM2 & RM3 (t-values 0.654069 & 0.156122); AUDT appeared to be negatively and statistically significant with discretionary accruals (DA) with the t-value put at (-2.819499), statistically insignificant with abnormal cash-flows from operation (RM1) and abnormal production cost (RM2) with their respective t-values put at 0.279145 and -0.656133, AUDT also shows a positively and significant impact on RM3 (t-values 2.491175); AGE appears to be statistically insignificant with DA (t-value -0.234479) and positively and statistically significant with RM1 and negatively significant with RM3 (t-values 2.781719 and -3.675368) also AGE is statistically insignificant with RM2 (t-value -0.4016683). From the findings the study concluded that, firm’s characteristics have various effects on earnings management in the survey of listed manufacturing companies in Nigeria, depending on the variables and proxy’s used in capturing firm’s characteristics and earnings management. The study recommended that manufacturing firms should be mandated to adopt a particular earnings management measure to reduce manipulation. The outcome of the study contributes to the existing knowledge on firm characteristics and earnings management.
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