CORPORATE BOARD DYNAMICS AND CLASSIFICATION SHIFTING OF EARNINGS MANAGEMENT IN EMERGING ECONOMIES

Hope Ifeoma Orjinta and Emma i. Okoye
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Hope Ifeoma Orjinta: Department of Accountancy, Faculty of Management Sciences,, Postal: Chukwuemeka Odumegwu Ojukwu University, Igbariam Campus, Anambra State, https://research.icanig.org
Emma i. Okoye: Department of Accountancy, Faculty of Management Sciences, Postal: Nnamdi Azikiwe University, Awka, Anambra State, https://research.icanig.org

International Journal of Contemporary Accounting Issues-IJCAI (formerly International Journal of Accounting & Finance IJAF), 2021, vol. 10, issue 1, 1-18

Abstract: This study investigated whether corporate board dynamics of selected non financial firms in Nigeria and Kenya constrains the classification shifting of earnings management. Samples of 50 quoted nonfinancial firms were used for a period of ten years spanning from 2010 to 2019. Our study used an expost facto research design that cut across different sectors and different countries. The secondary sources of data were collected from annual reports of the quoted firms quoted in their respective stock exchange and four (4) specific objectives and hypotheses were tested and analyzed using descriptive statistics, variance inflation factor and panel regression analysis. Selecting a sample of 500 companyyear observations, the result revealed that corporate board dynamics such as female board gender has a negative and significant effect in mitigating opaque manipulation practices such as classification shifting of quoted non-financial firms in Kenya and Nigeria which was statistically significant at a 1% level of significance while other corporate board dynamics such as independent board director, foreign board membership and board financial expertise were found to have negative and insignificant effect in curbing classification shifting of firms in both Nigeria and Kenya. Again, it was discovered that adjusted R-squared which stood at 42.2% indicates that all the independent variables jointly explain about 42.2% of the system variation in classification shifting of our sampled companies while about 57.8% of the total variations were not explained, hence captured by the stochastic error term. The study, therefore, suggests that non-financial firms' corporate board should be constituted by an equal proportion of female to male directors as the presence of women on the board help mitigates classification shifting.

Keywords: Classification shifting; earnings management; corporate board dynamics; emerging economies (search for similar items in EconPapers)
Date: 2021
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