International Journal of Accounting and Taxation

Governance Attributes and Real Activities Manipulation of Listed Manufacturing Firms in Nigeria
Shehu Usman Hassan, Garba Ibrahim

Abstract
This paper provides empirical evidence to the effect of governance attributes on real activities manipulation practices of listed manufacturing firms in Nigeria.. The study used four variables for audit committee characteristic-audit committee independence, financial literacy, audit committee size and audit committee meetings and four features of board of directors- inside directors, outside directors, gray directors and women directors for the purpose of explaining and predicting real activities manipulation practice by managers in the listed Nigerian manufacturing firms. Longitudinal panel multiple regression is used as a tool of analysis. The probability of Hausman specification test became less than 5% for all regressions, fixed effect model is interpreted as a panel specification. Secondary data was extracted from the audited annual reports of the sampled firms from 2007–2012. The results reveal that outside directors; gray directors and women directors have found to be positively associated with real activity manipulation which implies that, managers’ opportunistic manipulative accounting can be constrained or deter by them. While the inside directors could not prevent managers from abusive accounting. On the other hand, audit committee independence; financial literacy; audit committee size and audit committee meetings are significant in checkmating real activities manipulation. by management in preparing financial statements of the sampled firms. It is therefore recommended among others that the regulatory authorities like SEC and NSE should enforce strict compliance with corporate governance best practice for shareholders and other stakeholders’ interest to be fully protected. Also, the financial reporting counsel of Nigeria should make it mandatory that board of listed manufacturing firms should increase the proportion of inside directors on the board as they appear to be efficient in deterring manipulative accounting practice of their companies.

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