Board Independence and Earnings Management of Listed Deposit Money Banks in Nigeria Moderated by Audit Committee Expertise

Angela Ibe, Joshua Okpanachi, Achema Friday and Okonkwo Okechukwu
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Angela Ibe: Department of Accounting, Veritas University, Abuja, Nigeria
Joshua Okpanachi: Department of Accounting, Nigerian Defence Academy, Kaduna
Achema Friday: Department of Accounting, Veritas University, Abuja, Nigeria
Okonkwo Okechukwu: Department of Accounting, Veritas University, Abuja, Nigeria

International Journal of Research and Innovation in Social Science, 2025, vol. 9, issue 4, 5755-5768

Abstract: The Nigerian banking sector has been plagued by numerous financial reporting scandals stemming from creative accounting practices, commonly referred to as earnings management. This alarming trend underscores the imperative need for robust corporate governance mechanisms, particularly board independence, to prevent earnings management and uphold the integrity of financial reporting. This study investigates the effect of board independence on earnings management of listed deposit money banks in Nigeria as moderated by audit committee expertise. The study’s population consists of 14 listed deposit money banks in Nigeria as at 31st December 2023 with a sample size of 10 banks selected through purposive sampling technique. A quantitative research approach was employed, using secondary data from the annual reports and accounts of the selected banks over a 10-year period from 2014 to 2023 and analyzed using the Moderated Multiple Regression (MMR) model and STATA version 12. The study reveals that board independence has a positive and statistically significant effect on earnings management, but audit committee expertise significantly moderates this relationship, exerting a negative effect. The study underscores the critical role of independent directors in mitigating earnings management in Nigeria’s banking sector, and based on the findings, the study recommends that regulatory bodies and bank management prioritize the appointment of experienced and professionally qualified audit committee e members, and strengthen corporate governance frameworks to enforce board independence and audit committee expertise, which will enhance financial reporting quality and stakeholder confidence in the Nigerian banking sector.

Date: 2025
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