Effect of board committee characteristics on real real earnings management in commercial banks in Nigeria

This study examined the effect of audit committee characteristics on real earnings management in listed commercial banks in Nigeria. Specifically, the study investigated the influence of audit committee independence, audit committee financial expertise, and audit committee size on real earnings management. Real earnings management was measured using abnormal cash flow from operations, loan growth manipulation, and abnormal operating expenses. The study was anchored on Agency Theory, which posits that effective corporate governance mechanisms reduce managerial opportunistic behaviour and improve the quality of financial reporting. An ex-post facto research design was adopted, and secondary data were obtained from the annual reports of listed commercial banks in Nigeria over a ten-year period (2016–2025). The study employed descriptive statistics, Pearson correlation analysis, Variance Inflation Factor (VIF), Breusch-Pagan Lagrangian Multiplier test, and robust regression analysis to analyse the data. The findings revealed that audit committee financial expertise has a statistically significant negative effect on real earnings management, indicating that audit committees with members possessing accounting, finance, or banking expertise are more effective in constraining managerial manipulation of real operating activities. Conversely, audit committee independence and audit committee size exhibited negative but statistically insignificant relationships with real earnings management, suggesting that these governance attributes alone are insufficient to significantly reduce earnings manipulation within the Nigerian banking sector. The study concludes that financial expertise is the most influential audit committee characteristic in mitigating real earnings management, while mere compliance with independence and committee size requirements does not necessarily guarantee effective monitoring. The study therefore recommends that commercial banks and regulatory authorities prioritize the appointment of professionally qualified and financially knowledgeable audit committee members and strengthen the practical enforcement of audit committee independence to enhance financial reporting quality and corporate governance in Nigerian commercial banks. Keywords: Audit Committee Characteristics, Audit Committee Independence, and Real Earnings Management.