MODERATING EFFECT OF GOVERNANCE QUALITY ON THE RELATIONSHIP BETWEEN CFOs’ NARCISSISM AND CORPORATE EARNINGS MANAGEMENT IN NIGERIA

Abstract

Upper echelons in an organization such as chief financial officers (CFOs) have been implicated in corporate fraudulent earnings management. Their narcissistic traits have also been linked with unethical accounting practices while little is known on the moderating effect of corporate governance quality on this relationship. Hence, this study investigated the moderating effect of corporate governance quality on the relationship between CFOs' narcissistic trait and earnings management in troubled, non-listed companies in Nigeria. The primary data for the study was obtained from the survey of 80 non-listed companies indebted to the Asset Management Corporation of Nigeria (AMCON). The survey involved the distribution of copies of a structured questionnaire to two hundred and forty (240) CFOs and other financial officers in the sampled companies. Two hundred and four (204) copies of the questionnaire, which represents a response rate of 85%, were found suitable for data analysis. Descriptive statistics involves the computation of means and standard deviations. Moderated regression analysis was employed to test the hypothesis of the study. Our findings revealed high CFOs' narcissism (Mean = 3.6961, SD = 1.03428, Min = 1, Max = 5), upward earnings management (Mean = 3.8137, SD = 1.00472, Min = 1, Max = 5) and moderate corporate governance quality (Mean = 3.2353, SD = 1.25299, Min = 1, Max = 5). The study also revealed a significant positive relationship between earnings management and CFOs' narcissistic trait (beta = 0.636, t-value = 21.628, P<.05, Sig. = 0.000). A significant negative relationship was observed between corporate governance quality and earnings management (beta = -.360, t value = -12.251, P<0.05, Sig. = 0.000). However, further finding revealed that corporate governance quality has a significant moderating effect on the relationship between CFOs' narcissistic trait and corporate earnings management (beta = 0.145, t-value = 9.582, P<0.05, Sig. = 0.000). The policy implications of these outcomes include the need to strengthen corporate governance quality in non-listed companies in Nigeria. Consequently, the study recommends sensitization of the stakeholders of non-listed companies in Nigeria on the implementation of the Nigerian Code of Corporate Governance 2018 to reduce unethical accounting practices and promote corporate financial reporting quality in the country.