EARNINGS MANAGEMENT AND CORPORATE GOVERNANCE IN NIGERIA BANKING INDUSTRY

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The issue of earnings management and corporate governance mechanisms has received considerable attention in recent years from academics, market participants, and regulators. It continues to receive attention due to recent corporate failures that has bought about doubts in the minds of stakeholders on the credibility and reliability of financial report.

Earnings management occurs when managers use judgment in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers (Healy & Whalen 1998). There has been a considerable debate in recent times concerning the need for strong corporate governance (Adeyemi & Fagbemi 2010; Adeyemi & Uadiale 2010; Dabor & Adeyemi 2009; McConomy & Bujaki 2000) with countries around the world drawing up guidelines and codes of practice to strengthen governance (Cadbury 1992; Corporate Governance Code of Nigeria 2005). Little wonder therefore that several studies and initiatives have been undertaken by countries and International Institutions on the subject “corporate governance”. As a result of the