Corporate Diversification, Managerial Shareholding and Accrual-Based Earnings Management: Evidence from Nigeria

Previous studies hold that information asymmetry and offsetting accrual hypotheses explain the role of diversification in earnings management. Our paper adds to this line of research by examining the effect of corporate diversification on earnings management and investigating whether managerial shareholding matters in the relationship between diversification and earnings management in the context of an emerging economy. The study used a sample of 45 companies listed on the Nigerian Stock Exchange from 2008 to 2018 and the Generalized Least Square (GLS) regression technique. The results revealed that industrial and geographical diversification have significant positive effects on earnings management. The result also showed that managerial shareholding has a significant negative moderating effect on the relationship between industrial diversification and earnings management. These findings suggest the need for regulators to encourage managerial shareholding in diversified firms through share-based remuneration to have more reliable earnings.