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ABSTRACT
The study examines financial performance and earnings management of Nigerian listed company. The research design adopted in this study was ex-post facto research design. Ordinary Least Square (OLS) method regression and the statistical tool was used for the data analysis and test of hypotheses, using a sample of 40 companies listed in Nigerian Stock Exchange.
The results indicate that earnings per share (EPS) had a positive and statistically significant relationship with earnings management (DACC) for the period of the study. It was also debt covenant had a positive and statistically insignificant relationship with earnings management (DACC) in Nigeria. The study therefore recommends that managerial caution in decisions with respect to leverage. Going by the debt default risk perspective as leveraged firms engage in income smoothing to avoid debt covenant default. The argument here is that higher leverage company is argued to have higher bankruptcy risk, which in turn will lead to litigation risk and thus, increase management’s tendency to manipulate firm’s financial reporting to overcome this risk. The financing decision should be more of equity than debt, It was also recommended that there is need for increased monitoring of companies by the relevant regulatory agencies such as the Securities and Exchange Commission (SEC), Financial reporting council, Economic and Financial Crimes Commission (EFCC) and the Institute of Charted Accountant (ICAN) amongst others.
