ROLE OF EARNINGS MANAGEMENT IN THE FINANCIAL STABILITY OF NIGERIAN BANKS: A STUDY ON RETURN ON ASSETS (ROA), RETURN ON EQUITY (ROE), AND NON-PERFORMING LOANS (NPLS)

Authors

  • R. A. Tolani Department of Business Administration, Banking and Finance and Insurance Ahmadu Bello University, Zaria
  • S. Abdullahi Department of Business Administration, Banking and Finance and Insurance Ahmadu Bello University, Zaria
  • A. I. Aliyu Department of Business Administration, Banking and Finance and Insurance Ahmadu Bello University, Zaria

Abstract

This study investigates the role of earnings management (EM) in the financial stability of
Nigerian banks, focusing on key performance indicators such as Return on Assets (ROA),
Return on Equity (ROE), and Non-Performing Loans (NPLs) over the period 2017-2022.
Using regression analysis, the study reveals that EM has a significant positive impact on
ROA and ROE, indicating that strategic earnings management can enhance profitability and
asset utilization. Conversely, EM is found to have a significant negative relationship with
NPLs, suggesting that effective earnings management practices can mitigate credit risk and
improve loan quality. The findings revealed the importance of transparent and judicious
earnings management in bolstering financial performance and stability in the banking sector.
Practical implications include the need for enhanced regulatory oversight, targeted training
programs for bank personnel, and investor education on the effects of earnings management.
The study recommends that Banks should invest in training programs for their management
and staff to enhance their understanding and execution of effective earnings management
strategies. Such programs should focus on best practices in financial reporting, risk
management, and ethical considerations in earnings management.

Published

2024-12-20

Issue

Vol. 2 No. 2 (2024)

Section

Articles