Board Diversity and Manipulative Accounting Practice among Listed Conglomerates in Nigeria

One of the main characteristics of an effective Board of Directors (BOD) is its membership diversity. Well-managed diversity on the BOD is expected to enhance a board's capacity and effectiveness to monitor the opportunistic behaviour of managers, which more often than not motivates them to among other things engage in manipulative accounting practice. This paper examines the effect of board diversity on manipulative accounting practice among listed conglomerates in Nigeria for the period 2007 – 2014. The paper hypothesises that foreign directors, board gender, non-executive directors and board competence have no significant effect on manipulative accounting practice among the firms. It utilises panel data extracted from the financial statements of the six (6) conglomerates listed on the Nigerian Stock Exchange (NSE) as at December 2014. The result of the robust fixed effects model reveals that foreign directors and non-executive directors have significant negative influence on manipulative accounting of the firms. The analysis further shows that board gender and board competence have no significant effect on manipulative accounting practice among the firms. This implies that an increase in the number of foreign directors and non-executive directors will reduce the opportunistic tendencies of management as their presence plays a crucial role in reducing manipulative accounting activities of the firms. In line with the result, the paper recommends that management of listed conglomerates in Nigeria should increase the number of foreign and non-executive director to average of 44% and 47% respectively. This is because at these respective percentages, foreign and non-executive directors have significant negative effect on manipulative accounting. Also, shareholders of listed conglomerates in Nigeria need not to bother about the number of females and competent directors on their board whenever they are to decide on how to curtail manipulative accounting practice