Corporate Governance and Earnings Management in Nigerian Conglomerate Firms: Evidence from South West Nigeria

This study examines the effect of corporate governance mechanisms on earnings management in Nigerian conglomerate firms headquartered in South West Nigeria. Earnings management, the practice of using accounting discretion to influence reported profits, distorts the information content of financial statements and undermines investor confidence. Conglomerate firms, with their complex organisational structures and diverse subsidiary portfolios, present unique governance challenges that may facilitate earnings manipulation. Drawing on agency theory, this study evaluates how governance mechanisms including board independence, audit committee quality, and ownership structure relate to the extent of earnings management. A quantitative research design is adopted, using secondary data from annual reports of eight conglomerate firms over five years. Earnings management is estimated using the modified Jones model, and governance data are extracted from corporate governance reports. Panel data regression analysis is applied, controlling for firm size and financial leverage. The study anticipates that stronger governance structures, particularly board independence and audit committee financial expertise, are associated with lower levels of discretionary accruals. Findings will be instructive for investors, auditors, and the Financial Reporting Council of Nigeria in evaluating governance quality in conglomerate structures. This research contributes to the South West governance literature and adds to the growing empirical evidence on the governance-earnings management nexus in Nigeria. Keywords: corporate governance, earnings management, conglomerate firms, South West Nigeria, agency theory.