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This study investigated financial leverage on earnings management in manufacturing firms in Nigeria. A total of twenty-nine (29) listed firms on the Nigeria Stock Exchange (NSE) were studied, and secondary data were extracted from their annual financial statements as reported in the factbook. Ordinary least squares (OLS) method was used to analyze the data. The results revealed that: the management of manufacturing companies in Nigeria employs all the three strategies of earnings management in their companies. The relationships between financial leverage and each of the dependent variables are positive but weak. Financial leverage does not have a significant impact on accruals earnings management in listed manufacturing firms in Nigeria; but it does on real earnings management and deferred tax earnings management; The study concludes that financial leverage has a positive impact on accrual earnings management, while both financial leverage and total leverage has a negative effect on real earning management. The study recommends that users of financial statements should factor in financial leverage in assessing reported earnings by lowering/upping their expectations as to the reliability of the earnings, depending on whether financial leverage is high or low.
Ogiriki et al. (Wed,) studied this question.