ENVIRONMENTAL DISCLOSURE, AUDIT COMMITTEE ATTRIBUTES AND EARNINGS MANAGEMENT: EVIDENCE FROM LISTED MANUFACTURING FIRMS IN NIGERIA

Abstract

The study examines the nexus between audit committee features, environmental disclosure and earnings management (EMA) of listed Nigerian manufacturing firms. Specifically, it investigates how audit committee female gender diversity, audit committee meeting frequency, audit committee independence, and environmental practice disclosure, alongside firm-specific variables such as returns on assets, leverage, firm size, and revenue growth, influence earnings management, proxied by the Modified Jones model. Using panel data from thirty-six selected manufacturing firms over a specified period from 2015 to 2024. The study employed regression analysis to test the relationship between the variables. From the fixed effect model, the findings revealed that environmental disclosure practices have a negative but statistically insignificant effect on EMA, which suggests that increased disclosure does not necessarily constrain opportunistic reporting practices. Among the governance variables, audit committee female gender diversity exhibits a significant negative effect on EMA, indicating that greater female representation enhances monitoring and reduces earnings manipulation. In contrast, the frequency of audit committee meetings is positively related to EMA at a marginal level of significance. Also, audit committee independence shows a significant positive effect on EMA, which implies potential limitations in the effectiveness of independent members. Regarding the control variables, revenue growth significantly reduces earnings manipulation, while firm size demonstrates a weak negative relationship with earnings management. Leverage also shows a significant negative relationship with earnings management. Conversely, return on assets is positively and significantly associated with earnings management, suggesting that more profitable firms may engage in income smoothing. The study concludes that certain audit attributes are effective in constraining EMA while others highlight the need for stronger enforcement.