Influence of Possession Formation on Earnings Management of Quoted Chemical and Paints Firms in Nigeria
Musa Adeiza Farouk, Shehu Usman Hassan

This study examines influence of Possession Formation and earnings management of listed Chemical and Paints in Nigeria. Possession Formation is proxied with managerial ownership, institutional ownership and Block-Holder Ownership, while Earnings management is represented by modified Jones (Dechow et’ al 1995) model. Using 40 firm-year paneled observations, panel Ordinary least square (OLS) was estimated. The study employed the use of criteria to arrive at the sample size consisting of eight (8) listed Chemical and Paints firms in Nigeria out of nine(9). Secondary data source was extracted from the audited annual reports of the sampled firms from 2007-2011. Various test such as normality test, and multicolinearity test were conducted to diagnose the result. The findings revealed that, there is a positive and significant relationship between Managerial ownership, Institutional ownership and earnings management. While the relationship between the Block-Holders’ ownership and earnings management was found to be negative and statistically significant at 1%, Therefore it is recommended amongst others that the users of financial statement information who are interested in the reporting of earnings should base their reliability of earnings on the Block-Holders’ ownership as it has been proven empirically by our research that the higher the Block-Holder’s the lesser the manipulated earnings.

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