Moderating Effect of Information Asymmetry on Earnings Management

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Moderating Effect of Information Asymmetry on Earnings Management

ABSTRACT

This study investigated the moderating effect information asymmetry on earnings management of selected non-financial firms quoted in Nigeria. Considering the fact that managers may have relative tendencies for larger amount of value-relevant and firm-specific information not revealed to markets, information asymmetry hence becomes high given this circumstance. The current study therefore specifically ascertained the relationship between share price volatility and discretionary accrual; determined the moderating effect of board size on the relationship between share price volatility and discretionary accrual and investigated the moderating effect of board independence on the relationship between share price volatility and discretionary accrual. The study was hinged on the ‘agency theory’. The study adopted the ex-post facto research design. The population of the study included all manufacturing firms quoted on the Nigerian Exchange Group (NXG) as at 31st June 2021. The study thus relied on secondary sources of data. The Ordinary least square regression analysis was employed in validating the hypotheses. The study found a significant positive relationship between share price volatility and discretionary accrual. The study also found that board size moderates the relationship between share price volatility and discretionary accrual; and board independence moderates the relationship between share price volatility and discretionary accrual. Consequent on the findings, the study therefore recommends amongst others that a sound internal governance system should be ensured to provides an intensive monitoring package which curbs opportunistic earnings management and reduce information asymmetry.

Keywords: Information Asymmetry, Discretionary accrual, Share Price Volatility, Earnings Management, Covid-19

Authorship
1Obiora, Fabian C. Ph.D.; 2Onuora, Josuha K. Ph.D and 3Ibida, Nneka Jane-Frances | Full PDF

 

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