Effect of Information Asymmetry, Institutional Ownership and Related Party Transaction on Real Earnings Management in Listed Companies in Nigeria

Onyinyechi Precious Edeh, Abdulhayatu Sarki Suleiman and Ovbe Simon Akpadaka
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Onyinyechi Precious Edeh: ANAN University, Kwall, Plateau State, Nigeria.
Abdulhayatu Sarki Suleiman: ANAN University, Kwall, Plateau State, Nigeria.
Ovbe Simon Akpadaka: ANAN University, Kwall, Plateau State, Nigeria.

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Abstract: This study examines the effect of information asymmetry, institutional ownership, and related party transactions on real earnings management (REM) among listed manufacturing firms in Nigeria over the period 2018–2022. Drawing on agency theory and signalling theory, the study employs an ex-post facto research design and utilises panel data regression techniques to analyse secondary data extracted from the audited annual reports of ten purposively selected firms. The analysis, conducted using STATA 15, reveals that information asymmetry exerts a positive and statistically significant influence on REM, indicating that firms with less transparent information environments are more likely to engage in earnings manipulation through operational activities. Additionally, institutional ownership is found to have a significant and positive effect on REM, suggesting that institutional investors in Nigeria may exert short-term performance pressures or lack the monitoring intensity typically observed in more developed markets. In contrast, related party transactions exhibit a negative but statistically insignificant relationship with REM, implying a limited role in shaping earnings manipulation practices during the review period. The findings underscore the need to enhance financial reporting transparency, promote active and independent institutional shareholding, and maintain stringent oversight of related party transactions. The study contributes to the growing body of literature on earnings management in emerging markets and offers practical insights for regulators, investors, and corporate boards seeking to strengthen financial accountability and market integrity in Nigeria.

Date: 2025-06-20
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Published in Asian Journal of Economics, Finance and Management , 2025, 7 (1), pp.575-586. ⟨10.56557/ajefm/2025/v7i1296⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05124111

DOI: 10.56557/ajefm/2025/v7i1296

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