Risk Management Committee, Institutional Ownership, and Real Earnings Management

Abstract

Objective –The study investigates whether firms with an independent risk management committee and the presence of institutional investors will deter management from engaging in real earnings management. Methodology – The data are derived from 360 firm-year observations collected over five years (2015-2019). To analyze the data, the Panel Corrected Standard Error is used. Findings– According to the results, the risk management committee and institutional investors reduce management's desire to manipulate reported earnings. Novelty – The presence of a risk management committee, according to this paper, reduces managers' discretion to dwell on real earnings manipulations. The study educates regulators on the importance of firms having a separate and active risk management committee to improve internal control and assist the board in monitoring management activities. Type of Paper: Empirical JEL Classification: M40; M41; M49. Keywords: Earnings Management, Risk Management Committee, Institutional, Nigeria