Earnings Management and Financial Performance of Deposit Money Banks in Nigeria

Abstract

The study was aimed at assessing the influence of accrual-based earning management on financial reports of deposit money banks in Nigeria. The research was motivated by the corporate collapse and failures experienced in the banking sector amidst the clean audit reports. The methodology adopted was ex-post facto. Using descriptive and inferential statistics, a sample of ten (10) deposit money banks (DMBs) were judgmentally selected for a period of eight (8) years, which resulted in eighty (80) data points. The data were obtained basically from published annual reports of accounts and accompanied notes to the financial statements. The results of Pearson Product-Moment Correlation and Linear multiple regression, revealed that discretionary accruals exerted significant negative relationship on the  returns  on asset of deposit money banks in Nigeria in pre ( p = .004) and post ( p = .005) International Financial Reporting Standards (IFRS) era. The results also showed that there existed relationships between accrual-based earnings management and financial performance of DMBs. Findings from the study revealed that earnings management existed in the DMBs. Based on the results; it was recommended that proper and adequate measures should be put in place for the evaluation, examination, and scrutiny of financial statements of DMBs.

Keywords: Earnings Management, Financial Performance, Return on Assets, International Financial Reporting Standards