Gusau Journal of

Accounting and Finance

(GUJAF)

Vol. 3 Issue 2, April, 2022 ISSN: 2756-665X

A Publication of
Department of Accounting and Finance,
Faculty of Management and Social Sciences,
Federal University Gusau, Zamfara State -Nigeria

i
 BOARD POWERS AND UNETHICAL ACCOUNTING OF PUBLIC
QUOTED CORPORATIONS IN NIGERIA

Usman Abbas PhD

Department of Procurement and Supply Chain Management
Faculty of Management Sciences
Kaduna State University
Kaduna-Nigeria
usmanabbas1991@kasu.edu.ng (+2348036061670)

Shehu Usman Hassan PhD

Professor of Accounting and Finance
Department of Accounting
Faculty of Management Sciences
Federal University Kashere
Gombe State-Nigeria
shehu.hassan@fukashere.edu.ng (+2348067766435)

Abstract
Numerous scandals have been committed globally due to excessive use of unethical accounting.
Various research has been conducted on board activities and unethical accounting and their
discoveries were assorted. None to the researchers’ awareness examined such association in an
entire population of the registered public non-financial corporations in Nigeria for a period of 10
years (2010-2019). Secondary data was extracted from the annual reports and accounts,
companies’, and directors’ profile of the firms. The data was analyzed using Ordinary Least Square
regression. The study found among other things that board power and its proxies except board
capability have significant impact on the unethical accounting of listed firms in Nigeria. It is
therefore, recommended that, the quoted firms in Nigeria should ensure the composition of all-
encompassing and robust audit committees. They should also guarantee the presence of assorted
gender, varied ethnic groups, directors with national honor and oversea directors on the boards.
The organizations should ensure the formation of risk management committee in the entire
corporations. The management should guarantee the existence of vastly skilled, experienced, and
knowledgeable directors on the boards as these will aid in curbing the unethical accounting. The
implication of the outcomes of this research to literature is that the discoveries of the research are
to be utilized by researchers in confirming tokenism/critical mass theory, social capital theory. Also,
to validate upper echelon theory, efficient contracting theory, resource dependency theory,
signaling theory, human capital theory, behavioral theory of corporate boards and governance and
agency theory. The discovery of the study is only applicable to listed organizations in Nigeria. The
research utilized only six proxies of board power which is a limiting factor, and the result of the

1
study might vary if other substitutions of board power are utilized. Moreover, the research did not
capture the financial sector of Nigerian economy for the reason that the unethical accounting model
utilized of Collins et al (2017) has elements which are only relevant to non-financial corporations.
If other models of unethical accounting that can capture the financial industry are applied, the
outcome of research may had been changed.

Keyword: Board power, Unethical accounting, Ethnicity and Capability

1. Introduction
Even though creative accounting is legitimate, it is perceived as unprincipled since
it spoils the integrity of organizations and capital market. It is immoral as the
management’s intention is to mislead numerous parties or to stimulate contractual
outcomes by manipulating the corporation’s books (Healy & Wahlen, 1999). The
serious issue in numeral corporate collapses was the habit of creative and
manipulative accounting practices to alter reported profitability and indebtedness.
It has been a challenge for boards, companies, investors and regulatory bodies
worldwide to addressed the issue of unethical accounting through negative earnings
management which led to inefficiencies, scandals and collapsed of many giant and
up-coming companies such as Xerox in 2000, Enron in 2001 (US), WorldCom in
2002 (US)- circumstances of mishandling of wealth and various other ones.

As accounting forms, a fundamental component of any business achievement or

otherwise, its main role is critical in understanding such scandals which have cost
stakeholders millions of money in naira, dollars and other currencies and in some
scenarios, imposing sadness on millions of individuals (Julius & Marte, 2015). The
board of directors in firms serves as a watch man to ensure adequate monitoring
and control of management opportunistic behavior towards unethical accounting.
The board discharges this responsibility through the corporate board powers vested
on it which include but not limited to ensuring gender diverse board, ethnicity,
reputation, inclusion of various nationalities as directors, formulation of risk
management committee of members with assessment and management knowledge,
skills and experience, and lastly, appointment of experienced members. These
apparatuses may prevail the boards’ role in detecting and curbing earnings
management in listed companies in Nigeria especially with the existence of audit
committee.

Also, studies tend to neglect the importance of the presence of Nigerian assorted
ethnic groups on the board, the presence of same or closely related ethnic clusters
on the board may greatly contribute in committing earnings manipulation in listed
companies of Nigeria due to individuals attitude toward ethnicity bigotry, there are
a lot of boards in the listed firms of Nigeria that have no diverse ethnic groups
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especially with representation from the three major ethnic groups (Hausa/Fulani,
Yoruba and Igbo) and some minor ethnic groups in Nigeria and this is a big problem
as some companies that collapsed in previous decades due to management
opportunistic behavior have no high diverse ethnic group representation on their
boards.

Companies have been collapsing for many years because of various scandals
committed by their management. Even though the boards are in existence, many
CG codes had been adopted, implemented, and even improved severally. A lot of
laws (such as CAMA) have been enacted amended many times, policies,
guidelines, standards, and rules and regulation have been in place to ensure best
corporate practice and prevent managers from committing earnings manipulation,
but the management still find various loopholes and ways of managing earnings.
Studies conducted on the subject matter recommended a lot to tackle the issue of
unethical accounting but all still in vain. However, the researcher believes that
studies have to look at the problem beyond what is obvious, beyond compliance
with corporate governance code, other laws/standards and the direct relationship
that exist between board power and unethical accounting. There is the need to look
at the role that diverse Nigerian ethnic groups on board play on earnings
management. The AC plays a very key role in curtailing unethical Accounting, the
researcher assumes that once the audit committee is relieved of it responsibility of
ensuring financial reporting reliability and quality, many corporate bodies will
collapsed due to undetected scandals because an important part of the board which
help in detecting and mitigating earnings manipulation has been eliminated.
However, few studies exist especially in Nigeria on the effect of board ethnicity,
reputation, nationality, risk, and capability on the unethical accounting of firms and
their results were diverse. Therefore, the major question to ask now is: Does board
gender diversity, ethnicity, reputation, nationality, risk, capability, and audit
committee influence unethical accounting of public firms in Nigeria?

To answer the question, the study examined the effect of board gender diversity,
ethnicity, reputation, nationality, risk, capability, and audit committee on the
unethical accounting of public firms in Nigeria. In order to achieve the objectives
of the study, the null hypothesis was formulated: board gender diversity, ethnicity,
reputation, nationality, risk, capability, and audit committee has no significant
effect on the unethical accounting of public firms in Nigeria. The study covered
2010-2019 as years under study, that is, 10 years period.

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Theoretically, this study will be of great benefit in validating tokenism/critical mass
theory, social capital theory, upper echelon theory, efficient contracting theory,
resource dependency theory, signaling theory, corporate boards and governance
behavioral theory and human capital theory as they were used in anchoring the
variables of this study which relate to board power and unethical accounting. More
so, the attention of researchers could be drawn to the importance of looking at the
diverse ethnic groups representation on boards as it may play a substantial role in
unethical accounting. Also, the position of considering the proportion of AC
members that attended meetings as that may have a significant influence in ensuring
reliability of financial reporting. Therefore, this study will be advantageous to
scholars when furthering on contemporary research/body of knowledge.

Practically, the study will be of great significance to the management and boards of
all public quoted companies in Nigeria. Again, it will benefit regulatory entities like
Securities and Exchange Commission (SEC) in sustaining and enhancing policies
on board power and preventing unethical accounting especially on the role that the
board authority proxies play on mitigating unethical accounting of quoted
companies in Nigeria.

Methodologically, researchers will benefit from the study with new measurement
of audit committee, board ethnicity and board capability where audit committee
governance score, ethnicity score and capability score were used as their measures
respectively. This will assist researchers in widely capturing their effect on other
variables especially unethical accounting appropriately.

2. Review of Previous Studies

Saona et al. (2019), Alden et al. (2019), Fan et al. (2019), Triki (2018), Kyaw et al.
(2015), and Gavious et al. (2012) examined the influence of BGD on managerial
opportunistic behaviour. The studies found among other things that, there are
benefits attached to balancing gender on board. A sensible balanced board lean
towards lessens EM practices. On the other hand, Enofe et al. (2017) and Masliza
et al. (2016) evaluated the effect of board ethnicity on the earnings management of
firms. The studies found BE to be highly correlated with management opportunistic
attitude towards craft Accounting. It signals that, the appointment of different
ethnic personnel may be due to their connection rather than their technical
expertise.

Diermeier (2018) found that positive firm reputation takes a lengthy duration of
time to establish. By setting strong guiding principle and stressing the necessity to
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protect the firm’s reputation, the board of directors can assist management dodge
short-sighted errors. Moreover, reputable inside directors can enhance the value of
debtors’ financial reporting and decrease agency danger in loan contracting (Lin et
al., 2016). On the other hand, board reputation possessed a positive substantial
relationship with management earnings forecasts (Chan et al., 2013). Board
nationality was found to have an adverse and substantial connection with real
incomes management. A minimum of one foreign director should be present in the
board for the reason that a foreign director has different experiences and
qualifications that may assist to discourage real earning management practices
(Almashaqbeh et al., 2019). Wicaksana et al. (2017) contend that, board nationality
can be used as effective and efficient corporate governance supervising mechanism
in declining the level of unethical accounting in firms.

Risk management committee decreases the desire of the management to alter the
reported earnings in a firm. Setting up risk management committee lessens the real
earnings sales via abnormal production. This is a signal that creating self-
determining risk management committee will advance the excellence of reporting
(Alhaji et al., 2018). Neffati et al. (2011) contend that, the high risk rises, the further
the manager would be moved to manage earnings, the manager wishes to display
his skills by satisfying numerous views and charming fresh investors. Almashaqbeh
et al. (2019) found that board capability reduces manipulative Accounting. The rise
of board age assortment in the board of directors, lead toa rise in the supervising
task of the board of directors, thereby lessening the practice of real earnings
management. Buniamin et al. (2012) contend that board competency does not affect
the practice of discretionary accruals.

Audit committee possesses a negative connection with cosmetic Accounting and

the relationship is higher when a higher audit fee has been incurred by a company
(Bala et al., (2020). Saleem (2019) found that the existence of audit committee
declines earnings management and enhance the financial reporting quality of firms,
also, the modern financial accounting breakdowns and disasters as well as
enactment stress the rigorous role played by the audit committee in governance. If
the quantity of female in audit committee is high, the degree of earnings
manipulation will be low and the other way round (Florencea & Kurnia, 2018).
Albersmann and Hohenfels (2017) found that the involvement of financial experts
in audit committees and the rise in audit committee meetings are related with lesser
amount of earnings management and they seem to improve the efficacy of audit
committees.

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The study was based on nine theoretical accounts that aligned board power, audit
committee and unethical accounting of listed firms in Nigeria. The study was
anchored with critical mass, social capital, upper echelon, efficient contracting,
resource dependency, signaling, human capital, behavioral theory of corporate
boards and governance and agency theories.

3. Methods and Techniques

Bearing in mind the fact that this study fits post-positivist paradigm which hint at
it being quantitative in nature, the variables of the study can be measured using
numbers and therefore, it uses quantitative approach. This study adopts causal
research design in order to evaluate the association and impact of board power on
the target variable and this design is widely used in social and management sciences
research especially when assessing impact of one or more variables on another. The
choice of causal research design is due to the fact that it can be used to extract data
from historical records, and it is among the most efficient designs used in finding
the association between two or more variables and the impact of one variable on
another.

The study made use of all the 113 non-financial companies in Nigeria publicly
quoted on NSE as at 31st December, 2019 the study population. The 113 non-
financial firms have been utilized as the study sample by espousing census
technique of sampling. The choice of the listed non-financial companies in Nigeria
as the population of this study is in order to have a full representation of the firms
and considering the study’s nature and also owing to the fact that the model of
Collins et al. (2017) can only accommodate or detect unethical accounting in non-
financial firms because of its variables or components. The population and sample
of this study are listed based on classification by sector on the Nigerian Stock
Exchange.

For this research study, only data from secondary source was utilized and it was
extracted from the publicized yearly accounts and reports (financial Statements),
company and directors’ profile of the firms in Nigeria quoted on the NSE as at
31st/12/2019 for a period of ten (10) years (2010-2019). The secondary source of
data was used because the variables of the study can be measured quantitatively,
and the information needed to measure these variables are available in the annual
reports and accounts, company, and directors’ profile of the listed firms in Nigeria.
The study used panel multiple linear regression as technique of data analysis using
STATA as tool of analysis. Ordinary Least Square regression technique was used
because of its efficiency in estimating the causes and effects of the relationships
6
among variables under study. Since the study adopted quantitative approach,
therefore, a parametric tool is expected to be used. Moreover, ordinary least square
regression is not just one technique but a household of methods that can be used to
explore the connection between one explained variable and several explanatory
variables. Ordinary least square regression is based on correlation that permits
further complex examination of the interconnection amongst established variables.
This is what promotes it to be frequently used for examination of many complex
real-life rather than laboratory-based research objectives/hypotheses. Furthermore,
it was used because, the technique can show how fit a set of variables is able to
foresee a certain result. Also, they are better in providing the researcher with
information about the model in total with the role of individual variables that
formed the model.

The explained variable of the study which is unethical accounting proxied with
DACC was measured by the absolute values of the residuals of discretionary
accruals using modified Collins et al. (2017). Board diversity was measured by
taking the percentage or proportion of females’ representation on board over the
entire sum of members of the board. Board ethnicity was measured using ethnicity
score, that is, four proxies of ethnicity were used which are Hausa/Fulani, Yoruba,
Igbo, and Minority Tribes, for each year whichever ethnic group is present on the
board was given value as 1 otherwise 0, the total was then divided by the whole
sum of proxies which is four. Board reputation was measured as the percentage of
members of the board with national honor over the total board members. Board
nationality was measured as the proportion of foreign directors serving on the board
of directors over the total sum of members serving on board. Board risk was
measured as the ratio of directors serving in the risk management committee within
the board over the total sum of directors serving the board. Board capability was
measured using capability score with five (5) proxies (tenure, experience, multiple
directorship, educational qualification and skills/competency), a value of 0 was
given if all the directors are serving first tenure otherwise 1, the study used a
threshold that a director must serve in the board or other boards for five (5) years
and above in other to have experience, therefore, only members of the board with
board experience of five years and above are considered as experienced directors.
For experience directors a value of 1 was given otherwise 0. The presence of
director serving on 2 or more boards was given a value of 1 otherwise 0, the
presence of director with educational qualification higher than first degree was
given a value of 1 otherwise 0. For skills/competency, director with industry
experience is scored 1 and otherwise 0.

7
Audit committee was measured using audit committee governance score where six
proxies (Audit committee meeting attendance, frequency of meeting, gender,
independence, financial expertise and size) were used. For each proxy, if the firm
complied with the requirement of 2019 National Code of Corporate Governance
(NCCG) issued by the Financial Reporting Council of Nigeria (FRCN) a value of
1 was given to that proxy for the year otherwise 0, a total was taken for all the six
proxies and then the total was divided by six which gave the audit committee
governance score for the year. Company size was measured with NLOG (natural
logarithm) of total assets while sales/revenue growth was measured as present
sales-previous sales/previous sales.

The ordinary least square regression model is specified in order to evaluate the
effect of board powers on unethical accounting of public firms in Nigeria. The
models are specified below:
DACCit=β0+β1BDit+β2BEit+β3BRPit+β4BNit+β5BRit+β6BCit+β7AUCit+β8FSit+β9S
Git+µit

4. Results and Discussion

This section presents the outcome of regression technique run in STATA for the
data collected. Ordinary least square regression was run and a test for
heteroskedasticity which shows an insignificant value. By implication, the outcome
signifies the absence of heteroskedasticity which indicated the appropriateness of
ordinary least square regression. In the case of multicollinearity, all the VIF values
are consistently less than 10 and above 1 while all the tolerance values are less than
1. The result indicates the absence of multicollinearity. Therefore, Table 4.1 shows
the ordinary least square regression result obtained from the STATA.

Table 4.1: Ordinary Least Square Regression

VIF Tolerance Model
Variable Coeff. T-value P-Value Value
Boardgd -0.347 -4.95 0.000 1.14 0.877
Boardeth -0.212 -5.09 0.000 1.09 0.921
Boardrep -1.364 -19.82 0.000 1.05 0.953
Boardnat -0.468 -10.86 0.000 1.09 0.916
Boardrisk 0.118 2.98 0.003 1.07 0.931
Boardcap -0.064 -0.43 0.665 1.04 0.965
Auditcom -1.362 -21.33 0.000 1.02 0.984
Firmsize 0.002 0.79 0.428 1.15 0.867
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 Sgrw 0.014 0.16 0.876 1.10 0.905
2
R 0.998
Adjusted R2 0.998
F- Statistics 68671
Sig. Value 0.000
Hettest 0.04 0.837
Source: Output from STATA, 2022

4.1 Board Gender Diversity and Earnings Management

Table 4.1 up displays that board gender diversity possessed beta coefficient of -
0.347 and t-digit of -4.95 that is significant at 0.000. This suggests that the variable
has negatively, strongly and significantly affected the earnings management of
listed companies in Nigeria. This reveals that for each female director addition on
the board, their earnings management decreases by thirty-five percent
approximately. The result is in agreement with the initial expectation of the study
that, when a board is control by a combination of male and female directors the
monitoring mechanism tendency of women helps to a greater extent in curtailing
earnings management. However, the result may be as a result of the attitude of
women towards compliance with organizational ethics, laid down rules &
regulations and policies and with this they have great monitoring power to be able
to minimize earnings manipulation. In reality, most organizations that are been
headed by women do very well in terms of performance and reducing earnings
management except in few cases where they committed frauds. The outcome is in
line with tokenism/critical mass theory and also in line with the findings of Fang et
al. (2019), Saona et al. (2019), Triki (2018) and contrary to the findings of
Osayantin and Embele (2019), Nelson and Ponsian (2018) and Nahar and Nor
(2016).

4.2 Board Ethnicity and Earnings Management

From Table 4.1, board ethnicity possessed strong negative influence on the EM of
listed organizations in Nigeria. This can be deep-rooted from the coefficient digit
of -0.212 and t-figure of -5.09 that is significant at one percent (0.000). This implies
that, for each 1% intensification in the ethnic diversity of the board, their earnings
management decreases by 21%. The effect was not astonishing as it was in
agreement with research initial prediction that, ethnic diverse board decreases the
level of earnings manipulation. In reality, when a board has members from different
ethnic background that serves as monitoring mechanism because of their norms and
values. Some ethnic groups see the commitment of irregularities, fraud and earnings
9
manipulation as a taboo. Therefore, they do there possible best to ensure that
earnings management is curtail or minimize to its barest minimum in the
organization they serve.

The result is also in line with social capital theory and upper echelons theory. Social
capital involves advantages that separate or joint parties have due to their location
in the social link structure. Therefore, the social capital theory suggests for diversity
on boards assumed that an assorted board of directors is capable of bringing in
diverse types of social capital from its members (Alqatan, 2019). The upper
echelons theory advocates that the manager’s demographic attributes are related
with the manager’s sole cognitive values and style which influence on the decision
making of management (Hambrick & Mason, 1984; Kim & Sun, 2014; and
Tianshu, 2018). When diverse ethnic groups exist in a board, it is believed that,
with their different background and values they will be able to checkmate earnings
manipulation. The result is in agreement with the discovery of Enofe et al. (2017)
and contrary to the findings of Masliza et al. (2016) and Reggy et al. (2015) where
the studies discovered that board ethnicity has a positive effect on unethical
accounting.

4.3 Board Reputation and Earnings Management

Table 4.1 reveals that board reputation has beta coefficient figure of -1.364 and a t-
digit of -19.82 that is significant at 1% (0.000). This indicates that, it has an adverse
robust effect on the EM of registered quoted corporations in Nigeria. This denotes
that, for each growth in board members with national reputation, the unethical
accounting decreases by 136% percent approximately. The finding is in line with
the priori expectation of the research study that, when members with national honor
are serving on the board they serve as monitoring mechanism in curtailing earnings
management. It is also in line with the efficient contracting theory which proposes
that executive job markets resourcefully offer board members with implicit
incentive contracts such as reputation, employment and remuneration (Fama &
Jensen, 1983; and Lin et al., 2016). This research study believed that directors on
board with national honor have high sense of integrity. Therefore, they would not
like a scenario whereby their reputation is destroyed when earnings manipulation
takes place in a firm while they are serving in it. Therefore, they would do their
possible best in mitigating opportunistic actions of management. The discovery is
in agreement with the outcome of Diermeier (2018) that board reputation reduces
earnings management.

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4.5 Board Nationality and Earnings Management
From Table 4.1, board nationality has coefficient number of -0.468 with a t-digit of
-10.86 that is significant at one percent (0.000). This indicates that, the variable has
negatively, strongly and significantly influenced the earnings management of listed
companies in Nigeria. This signifies that for each rise in overseas directors serving
on the board, the EM decreases by 47% approximately. The result is in line with
the work's priori expectation that when foreign director(s) is serving on the board,
that helps in minimizing earnings manipulation due to their experience, knowledge,
adherence to ethics and monitoring power. The finding is in line with resource
dependency theory. It is understood that foreign board members have many
resources to share with the firm they are serving such as skill, experience, expertise,
connections and many other resources. Therefore, they could assist much in
preventing unethical accounting. The finding is in line with the findings of
Almashaqbeh et al (2019), and Musa and Aminu (2018) and contrary to the findings
of Osayantin and Embele (2019), and Hooghiemstra et al. (2015).

4.6 Board Risk and Earnings Management

Board risk has coefficient figure of 0.118 & t-figure of 2.98 that is substantial at
one percent (0.003). This suggests that it has a powerful positive effect on the EM
of quoted firms in Nigeria. This denotes that, the presence of risk management
committee increases earnings management by 12% approximately. However, the
finding was not in line with prior expectation the study that when a risk
management committee is constituted, it complements the effort of board in
reducing earnings management. It is also contrary to signaling theory which
advocates that the existence of RMC in a firm promises the stockholders that the
board of directors is solid sufficient to device upright corporate governance that
bring into line the interest of management with that of their interest (Oluyemisi et
al., 2017). The existence of an efficient risk management committee within the
board of a firm is indicating that management’s earnings manipulative activities
could be checkmate and curb. The finding is in agreement to revelation of Neffati
et al. (2011) and contrary to the outcome of (Alhaji et al., 2018). However, this
finding may be as a result of the fact that many companies within the listed non-
financial sector of Nigeria have no risk management committee and therefore, the
responsibility of the committee has been discharged by the audit committee of the
firms.

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4.7 Board Capability and Earnings Management
Table 4.1 revealed that, board capability has a beta coefficient number of -0.064
and a t-figure of -0.43 that is insignificant at 67% (0.665). This shows that, board
capability has no impact on the EM of registered quoted corporations in Nigeria.
The prior expectation of the researcher was that board capability helps to a greater
extent in dealing away with earnings management. This is because directors that
served two or more terms on boards, directors with more than five years’ experience
serving on the board, directors with qualification higher than first Degree, members
serving on higher than 1 board and directors with industry experience are expected
to mitigate earnings management effectively and efficiently.

The finding is also contrary to human capital theory and behavioral theory. The
human capital theory is constructed on personal qualities such as experience and
level of education of persons. Based on this, Becker (1964) claims that, experience,
skills, productive capabilities, and level of education of labor force are beneficial
for the firm. Behavioral theory proposes that company’s board of directors’
decision making might not only be impacted by their skills, knowledge, and
expertise but as well their values, experiences, and beliefs. The presence of
experienced, skilled, knowledgeable, and competent directors on board could be
capable of checkmating and curbing management’s opportunistic actions towards
unethical accounting in firms. This discovery is in agreement with the result of
Bunjamin et al. (2012) and contrary to the findings of Almashaqbeh et al. (2019)
and Wicaksana et al. (2017).

4.8 Audit Committee and Unethical accounting

From Table 4.1, audit committee has coefficient number of -1.362 with a t-digit of
-21.33 that is significant at one percent (0.000). This indicates that, the variable has
negatively, strongly and significantly influenced the earnings management of listed
companies in Nigeria. This signifies that for each improvement in audit committee
serving on the board, the EM decreases by 136% approximately. The result is in
line with the work's priori expectation that when a sound audit committee is serving
on the board, that helps in minimizing earnings manipulation due to their expertise,
experience, knowledge, adherence to ethics and monitoring power. The finding is
in line with agency theory. It is understood that the audit committee has financial
experience expertise, therefore, they could assist much in preventing unethical
accounting. The finding is in line with the findings of Bala et al. (2020), Saleem
(2019), Sudarman and Hidayat (2019), Albersmann and Hohenfels (2017) and
contrary to the findings of Sunny et al. (2018) and Issa (2017).

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Cumulatively, Table 4.1 shows that, the R2 value for the relationship between board
power and unethical accounting is 0.998 (99%) which 99% level of relationship
between the explained and the explanatory variable. The adjusted R2 value is 0.998
(99%) which signifies that, the independent variable (proxied with board gender
diversity, board ethnicity, board reputation, board nationality, board risk, board
capability and audit committee) of the research study has clarified the whole
difference in earnings management of quoted companies in Nigeria to a degree 99%
and the outstanding 1% is taken care by other variables not captured in the model.
With regards to model fitness, the F-statistics value of 68671 which is significant
at 1% (0.000) confirms that the model is well tailored, consequently, the variables
of the study were robustly chosen, joint and appropriately employed. Cumulatively,
it was found that board power has influence on the unethical accounting of listed
companies in Nigeria negatively, strongly, and significantly.
The hypotheses of the study are all rejected except in the case of board capability
which has no significant effect on the unethical accounting of listed public firms in
Nigeria.

5. Conclusions and Recommendations

Based on the results and discussion in the previous section, the following
conclusions are made.

Board GD has a negative and substantial contribution on the unethical accounting

of quoted companies in Nigeria. This makes the research study to conclude that the
level of unethical accounting of the firms decreases with a rise in the number of
female members on the board.

It was also concluded that board ethnicity played a negative role on the unethical
accounting of the listed firms in Nigeria if there is presence of diverse Nigerian
ethnic groups which serves as a strong monitoring mechanism because of their
different norms and values and background environment.

The study also concluded that the higher the number of members with national
honor on the board of companies of Nigeria, the lower its earnings management
would be as board reputation curtails the unethical accounting statistically.

The board nationality of listed firms in Nigeria diminishes their earnings

management. This research study concluded that it played a negative role on their
unethical accounting through the presence of foreign directors that used their

13
expertise, experience, knowledge, connections, and monitoring power to reduce
earnings management.

The board risk of listed companies in Nigeria rises the degree of their EM. The
research study concluded that if all the companies will constitute a sound risk
management committee, the direction of the finding might change to negative. This
is because presently most of the firms did not establish the risk management
committee, the function of the committee has been discharged by the audit
committee of the firms.

The board capability of quoted public firms in Nigeria does not contribute to the
lessening of EM in the firms. Therefore, this research study concluded that, if the
directors with high skills, experience, knowledge, and expertise are well monitored
in discharging their duties, board capability may contribute significantly to the
reduction of earnings management to its barest minimum.

Audit committee of quoted firms in Nigeria contributes to minimizing the EM. This
research study concluded that, audit committee plays a negative role on unethical
accounting through the combined effect of female members, financial expertise,
independent members, proper size, frequent meetings, and meeting attendance by
members.

In agreement with the overall finding of the study, this study concluded that, board
power plays an important role on the unethical accounting of quoted firms in
Nigeria and contributes a lot to the reduction of earnings manipulation in the firms.
Therefore, a strong relationship/association exists between board power and
unethical accounting.

Based on the outcomes of this research, the subsequent general recommendations

were made:
Researchers should use this study in validating tokenism/critical mass, social
capital, upper echelon, efficient contracting, resource dependency, signaling,
human capital and behavioral theories, agency theory. They should use the study as
reference to literature. Board ethnicity, board capability and audit committee should
be used to conduct studies in different environment and periods especially by
adopting ethnicity score, capability score and audit committee score as their
measurement across the globe.

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Regulatory bodies such as SEC should use the findings of this study and come up
with policies that will improve the quality of the corporate governance codes and
prevent bad unethical accounting.

Potential and existing investors should use the conclusions of the study in order to
take wise investment choices especially by avoiding companies that were involved
in bad EM.

Moreover, based on the outcomes and conclusions of this study, it was specifically
recommended that:
The management of public quoted companies in Nigeria should increase the
presence of women directors on boards. The portion of female members on board
should be 50% and that of male members should be 50% as this will promote gender
balance on the board as advocated by sustainable development goals. The existence
of more females on board will greatly assist in mitigating earnings management
because of their monitoring mechanism and adherence to laid down rules,
regulations, standards, policies and organization’s ethics.

The listed companies in Nigeria should try as much as possible to maintain the
presence of at least four different Nigerian ethnic groups on their board since the
appointment of directors from different ethnic background has proven to curtail
earnings management level. This is because of their different norms and values and
religious background and that serves as monitoring mechanisms.

The quoted firms in Nigeria should boost the appointment of directors with national
honor as it has proven to reduce the earnings manipulation of the firms. This is
because the reputable directors try as much as possible to ensure that fraud,
irregularities, and earnings manipulation have not been committed under their
watch because they have integrity to protect. At least 40% of the board members
should be allocated to reputable directors.

Board nationality cuts the degree of unethical accounting of quoted firms in

Nigeria. Therefore, the listed companies of Nigeria should allocate at least 30% of
their board membership to foreign directors especially those from advanced
countries because foreign directors have proven to possess the ability of reducing
earnings management through their connections, expertise, knowledge, experience,
skills, and monitoring power.

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Board risk increases the level of the unethical accounting in quoted companies of
Nigeria based on the statistical outcome of this study. Therefore, the boards should
ensure that all boards establish sound risk management committees in their firms
as this study discovered that most of the firms have not established the risk
management committee but rather their function has been handled by audit
committee. If the all the firms establish the committee, it’s possible the outcome of
this research might differ.

Board capability has no contribution to unethical accounting of quoted firms in

Nigeria. If the outcome of this finding is to be differed, therefore, the companies
should put in place control mechanisms that will ensure the highly skilled,
knowledgeable, experienced directors on the boards are highly utilize and
monitored to ensure that they display well of expertise and knowledge in reducing
the degree of EM in the firms.

AUDCOM was found to be supporting in reducing the unethical accounting of

quoted firms in Nigeria. Therefore, the boards of the companies should ensure audit
committees’ compliance with corporate governance codes especially by ensuring a
gender diverse audit committee, having the right size, holding meetings frequently,
attendance of meetings regularly by members, having financial expertise as
members of the committee and having independent members when constituting the
committee.

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