The Moderating Roles of Macroeconomic Volatility, Economic Policy Uncertainty, and Terrorism in the Relationship between Corporate Governance and Earnings Management in Nigeria: A Case of Manufacturing Firms

This study investigates the effect of corporate governance on earnings management among listed manufacturing firms in Nigeria over the period 2013–2023. The study employs the panel Autoregressive Distributed Lag (ARDL) model as the baseline estimation technique and the System Generalised Method of Moments (GMM) as a robustness estimator to address potential econometric issues, including endogeneity, heterogeneity, serial correlation, and cross-sectional dependence. Earnings management is proxied by discretionary accruals, while corporate governance is measured using board size, board governance and remuneration committee, number of board meetings, shareholders'committee, remuneration committee, and audit committee. The study further incorporates consumer price index, exchange rate, and interest rate as control variables, while macroeconomic volatility, global economic policy uncertainty, and terrorism are included as moderating variables. Preliminary analyses reveal that the variables are not normally distributed but are integrated at acceptable levels, while Pedroni and Kao cointegration tests confirm the existence of a long-run relationship among the variables. Diagnostic tests further indicate the absence of serial correlation and heteroscedasticity, while the Hausman test supports random effects for Models 1, 4, and 5 and fixed effects for Models 2, 3, and 6. Empirical findings from the ARDL and System GMM estimations demonstrate that corporate governance significantly influences earnings management, with the direction varying across governance indicators and model specifications. The results further reveal that macroeconomic volatility, global economic policy uncertainty, and terrorism significantly moderate the governance–earnings management nexus. These findings suggest that stronger governance mechanisms enhance financial reporting quality and constrain managerial opportunistic behaviour. The study contributes to the literature by incorporating multiple governance dimensions, moderating variables, and robust econometric techniques within a unified framework. It recommends strengthening regulatory oversight, enhancing board independence and audit quality, promoting compliance with International Financial Reporting Standards (IFRS), and fostering ethical corporate cultures to minimise earnings management and improve investor confidence in Nigeria;s manufacturing sector.