A REVIEW OF EARNINGS MANAGEMENT DETERMINANTS
Ibrahim Adamu , Aliyu Idris Said , Mahmud Nura Ringim and Hasan Galadanci
Volume 3 Issue 2
Abstract
Provision of useful information that can permit informed economic decision by investors is a primary function of accounting. A fundamental characteristic of accounting information lies in the predictive ability of information provided to users. Such information can enhance the ability of investors to predict performance of an entity. Firms manipulate earnings in order to report a favorable performance and protect the image of the company. This act misleads investors with the aim of inducing them to increase investment in the firm or attract prospective investors. The study aims at reviewing earnings management determinants. The study adopts review approach within the range of documentary literature. The study reveals that, among the issues of earnings are determining factors of earnings management which includes Performance, Leverage, firm size, corporate governance, auditors, ownership concentration, dividend policy, effective tax rate etc. These factors are useful to investors in making informed decision regarding their investments. The earnings quality of a firm’s reported earnings can boost the confidence of investors and attract further investments in the Nigerian capital market which will foster growth in the economy. The contribution of this study is to highlight the issues and relevant variables that affect earnings management in reporting of corporate financial performance. This study recommends that management should introduce ways to curb earnings management practices among unscrupulous individuals. Further, both existing and potential investors are advised to increase vigilance in the activities of firms through observation of a firms’ financial statement to detect earnings management practice in order to make informed investment decision. Keywords: Earnings Management, Agency Theory, Stakeholder Theory, Corporate governance, Leverage.
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