Corporate Ethical Culture and Earnings Management Among Listed Firms in Nigeria

This study examines the relationship between corporate ethical culture (EC) and earnings management (EM) among 151 listed firms in Nigeria for the period 2010 to 2024. Using a panel dataset of 2,265 firm-year observations and employing the Modified Jones Model to compute discretionary accruals as the proxy for earnings management, the study combines pooled ordinary least squares (OLS), fixed effects model (FEM), random effects model (REM), and system generalised method of moments (GMM) estimations to ensure robustness. Drawing on agency theory, institutional theory, and legitimacy theory as its theoretical anchors, the study hypothesises that a stronger ethical culture significantly constrains accrual-based earnings manipulation. The empirical results consistently confirm a negative and statistically significant relationship between ethical culture and earnings management across all estimators (EC coefficient: −0.0934, FEM; −0.1023, GMM; p < 0.01). Among the control variables, firm size (FS) and industry type (INDT) are positively associated with earnings management, while firm age (FA), board size (BS), R&D expenditure (R&DE), and financial performance (FP) exhibit significant negative relationships. CEO characteristics (CEOC) and ownership structure (OWNS) are positively associated with earnings management, consistent with entrenchment and opportunism hypotheses. These findings survive post-estimation tests for heteroskedasticity, serial correlation, cross-sectional dependence, and endogeneity. The study contributes to the emerging literature on the ethics-governance-financial reporting nexus in Sub-Saharan Africa and offers actionable policy insights for regulators, boards, and institutional investors seeking to promote financial reporting integrity in emerging markets.