The Effect of Earnings Management on Shareholders' Wealth Maximization from the Perspective of Money Deposit Banks in Nigeria

Abstract

Financial market regulators, financial operators, and investors have studied for a long time how earnings management affects both the maximization of shareholder wealth and the opportunistic behaviour of managers. Studies on the effect of earnings management on the maximization of shareholders' wealth regularly examine the possibility that reported earnings can be altered by managers to accomplish a diversity of purposes. This paper examines the effect of earnings management on the maximization of shareholders' wealth at deposit money banks in Nigeria. Secondary data were extracted from the annual reports of the sample money deposit banks for the period 2015–2019, and multiple linear regressions were used as a tool for data analysis. The study documents that there is no significant effect of earnings management on the maximization of shareholders' wealth, and the finding implies that as earnings management increases, shareholders' wealth is not affected. The study recommends that with the occurrence of earnings management, the maximization of shareholders' wealth (concerning earnings per share and market price per share) is still maximized, and it can be incidental that other factors may hamper the actualization of shareholder wealth maximization.