The Relationship between CEO Dualities, Directors’ Independence and Discretionary Accruals in the Nigerian Industrial Goods Companies

Abstract

Separation of the two positions of CEO and Chairman as well as number of independent directors included in the board are important governance mechanisms that affect companies’ reported earnings, as requested by the code of governance due to the fact that managers are attempting to manipulate the earnings in order to meet their personal objectives. The objective of this study is to examine the relationship between CEO- duality, directors’ independence and discretionary accruals in the Nigerian industrial goods companies. A total of 24 companies in the industrial goods sector of the Nigerian stock exchange were analyzed using multiple linear regressions. Data was obtained from secondary sources alone using annual report and account of the companies for the periods of 2011 to 2014, using SPSS version 22. The results show that CEO-dualities is are significantly related to discretionary accruals, the result further suggests that holding two position by one person is not efficient in minimizing the possibility of managing earnings, therefore it is recommended that the, two position should be separated to minimize the likelihood of managing discretionary accruals practice, also, the study recommends more independent directors to be included on board, as it is capable of minimizing the tendency of manipulating accruals.

Keywords: CEO duality, Directors’ Independence, Discretionary Accruals


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