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MODERATING EFFECT OF FREE CASH FLOW ON THE RELATIONSHIP BETWEEN OWNERSHIP STRUCTURE AND EARNINGS MANAGEMENT OF LISTED DEPOSIT MONEY BANKS IN NIGERIA
ABSTRACT
The crises in Nigeria deposit money banks (DMBs) and inconsistency in the findings of the preceding studies practically motivate the study. Therefore, the study examine the moderating effect of the free cash flow on the relationship between Ownership Structure and Earnings Management (EM) of listed DMBs in Nigeria. The population and sample of the study comprises the fourteen DMBs listed on the Nigerian Stock Exchange (NSE). The study uses data from published annual report of the fourteen DMBs listed on the Nigeria Stock Exchange for the period of 2007 to 2016 and carry out different tests including Hausman specification test and Lagrange multiplier test which specify that OLS regression analysis is efficient. The findings reveal that the executive director ownership (exed) and ownership concentration (ownc) are positive and significantly related to EM. The result also shows that non- executive director ownership (nexed), institutional (instow) and foreign ownership (forown) are negative and significantly related to EM. It further reveals that the free cash flow moderate the relationship between executive director ownership, non- executive director ownership and institutional ownership. It is therefore conclude that ownership structure influences earnings management. While the exed and ownc manipulate accounting information, the nexed, instow and forown provide monitoring mechanism against EM. The study recommends, among others, that the codes of corporate governance for DMBs should be reviewed to discourage executive director from earnings manipulation, encourage more non- executive director ownership, long term institutional ownership and foreign ownership holdings in DMBs to intensify their monitoring mechanism against earnings management. The utilization of free cash flow source internally or externally in Nigeria DMBs should be regulated to discourage over- trading or over investment so as to avoid earnings management.
MODERATING EFFECT OF FREE CASH FLOW ON THE RELATIONSHIP BETWEEN OWNERSHIP STRUCTURE AND EARNINGS MANAGEMENT OF LISTED DEPOSIT MONEY BANKS IN NIGERIA
