The IUP Journal of Corporate Governance
Board Size and Earnings Quality in Government- Linked and Non-Linked Quoted Firms in Nigeria

Article Details
Pub. Date : Oct, 2020
Product Name : The IUP Journal of Corporate Governance
Product Type : Article
Product Code : IJCG21020
Author Name Ademola Adeniran Adewumi, Amos Olatunbosun Talabi and Godwin Gabriel Omula
Availability : YES
Subject/Domain : Management
Download Format : PDF Format
No. of Pages : 13



The aim of the study is to examine the effect of board size on earnings quality in government-linked and non-linked firms quoted on the Nigerian Stock Exchange. Discretionary Accruals (DACC), Earnings Predictability (EPRED) and Earnings Persistence (EPSIS) are used as measures for earnings quality. The study employed a sample size of 30 companies consisting of 15 firms linked to government, i.e., where state ownership exists and is listed on the NSE and then firms without government linkage. Longitudinal research design was employed for the study with data covering the period 2009-2018. Secondary data was employed for the analysis and panel regression technique was employed for model estimation. The findings of the study reveal that the effect of board size on earnings quality shows differences amongst linked and non-linked firms. For government non-linked firms, board size effect is only significant in DACC, but neutral in relation to EPRED and EPSIS, while for government-linked firms, lower board size is found to enhance EPRED, but neutral in the case of DACC and EPSIS. Based on the findings, the study recommends that for both government-linked and non-linked firms, there is a need to ensure optimal board size. Though there is currently no consensus on what an adequate board size should be, the study recommends that companies must ensure that the board represents all the stakeholders' interest as this can help to improve effectiveness.


Understanding earnings quality as part of financial reporting behavior in government-linked and non-government linked firms is of great interest to both researchers and investors. Prior literature shows that due to the differences in the institutional factors, government-linked firms exhibit different earnings quality behavior from non-linked firms (Liu and Yung, 2011; and Liu et al., 2014). Corporate governance studies often associate government-linked firms with poor corporate governance, low corporate efficiency, corporate corruptions and fraud, and more frequent earnings management and low earnings quality (Shleifer, 1998). On the other hand,

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