EFFECTIVENESS OF RISK MANAGEMENT COMMITTEE ATTRIBUTES IN MITIGATING EARNINGS MANAGEMENT ACTIVITIES IN NIGERIA

Auwalu Musa; Rohaida Abdul Latif; Jamaliah Abdul Majid; Ibrahim Muhammad

doi:10.33102/ra83s130

Authors

Auwalu Musa Department of Accounting, Bauchi State University, Gadau-Nigeria Author
Rohaida Abdul Latif Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Malaysia Author
Jamaliah Abdul Majid Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Malaysia Author
Ibrahim Muhammad Department of Accounting and Finance, Abubakar Tafawa Balewa University Bauchi, Nigeria Author

DOI:

https://doi.org/10.33102/ra83s130

Keywords:

Risk management committee, earnings management, corporate governance, Nigeria

Abstract

Recently, there has been a lot of debate on the issues of earnings management practices. Most of these arguments have been confirmed by past studies in developed economies, where their regulations and institutional settings of corporate governance varied from those of emerging markets. Accordingly, corporate governance best practice has been considered an effective monitoring mechanism for strengthening the credibility and reliability of financial reporting. This study examines the effectiveness of risk management committee (RMC) attributes in mitigating earnings management (EM) practices in Nigeria. The study used a sample of 365 firm-year observations of listed non-financial companies from 2018 to 2022. Driscoll and Kraay’s fixed effect standard error regression model was used to test the hypotheses. The study finds that RMC size and expertise have a negative effect on both AEM and REM. However, RMC independence is found to negative effect on REM only. Moreover, additional test validates that RMC scores (effectiveness) are significantly associated with lower EM practices. Our results are robust under alternative regression and measurements for endogeneity. The findings provide enormous insight to regulators, policymakers, and investors on the ongoing debate surrounding the effectiveness of the RMC attributes in mitigating EM practices, and the effectiveness of the revised NCCG 2018. Besides, the findings will provide important intuition to shareholders, financial analysts, and academia about the effective role of stand-alone RMC.

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