Corporate governance and corporate earnings misconduct

Purpose This study looks at the influence of corporate governance mechanisms on accrual earnings management taking into consideration the moderation of internationalization. Design/methodology/approach This study used data from nonfinancial and noninsurance companies listed on the Nigeria and Ghana stock exchanges for the period 2012–2022. Data extracted from the annual financial report with some provided on the Wall Street Journal Database. The two countries have a total listed nonfinancial and noninsurance companies of 137. Companies with serious missing annual financial data were dropped, given a total of 103 companies from both countries (Nigeria and Ghana) with a total observation for the study being 1,122. To assess the effect of corporate governance mechanisms on earnings management of various listed firms in Nigeria and Ghana, using the estimated residuals of accrual-based earnings management. Findings This study uses fixed effects and two-step system generalized method moment (GMM) estimation to test hypotheses. The results of the analysis revealed that corporate governance implementation reduces corporate earnings misconduct. Several board committees, the size and independence of audit committees, and joint audits are significantly effective in curbing earnings management. The overall corporate governance measure suggests a significant negative moderation of internationalization. Internationalization enhances the quality of the corporate governance mechanism, which reduces earnings manipulation to avoid de-legitimation in the minds of host-nations. Practical implications This study gives evidence of good corporate governance mechanisms' ability to reduce earnings management practices by managers of listed firms to enhance operational efficiency, which will lead to maximization of shareholders’ wealth. Taking West Africa into consideration, suggesting intensified research in this area for corruption reduction at the firm level. Originality/value This study provides interesting findings to policymakers in full implementation of corporate governance codes as stated by the Organization for Economic Co-operation and Development (OCED) by West African firms since most sub-Sahara African countries are currently going through restructuring phases of corporate governance codes implementation leading to countries attracting investors since earnings management is one of the key area of interest to foreign investors.