Earnings management practices and financial performance of listed insurance firms in Nigeria

This study examines the effect of earnings management practices on the financial performance of listed insurance firms in Nigeria. The study focuses on three dimensions: real activities earnings management (RAEM), small profit earnings management (SPEM), and timely loss recognition earnings management (TLREM). An ex-post facto research design was adopted, using secondary data obtained from Nigerian Exchange Group fact books and the annual reports of 20 listed insurance firms over the 2015–2024 period, producing 200 firm-year observations. Financial performance was measured by return on total assets, while the explanatory variables were operationalized using the Roychowdhury real activities earnings management model and threshold-based indicators for small profit reporting and timely loss recognition. Descriptive statistics, correlation analysis, diagnostic tests, and panel regression were employed. The Hausman specification test supported the fixed-effects model, while the presence of groupwise heteroskedasticity motivated the use of cluster-robust standard errors. The results show that RAEM has a negative but statistically insignificant effect on financial performance (β = −0.814, p = 0.090). SPEM has a positive but statistically insignificant effect (β = 0.228, p = 0.500). TLREM has a negative and statistically significant effect on financial performance (β = −3.003, p < 0.001). The findings indicate that the three earnings-management dimensions do not have uniform effects on financial performance. The study highlights the importance of reporting quality, monitoring, and regulatory attention to practices associated with timely loss recognition in the Nigerian insurance sector. Keywords: Earnings Management, Real Activities Earnings Management, Small Profit Earnings Management, Timely Loss Recognition, Financial Performance, Insurance Firms, Nigeria.