Journal of Finance and Accounting

Submit a Manuscript

Publishing with us to make your research visible to the widest possible audience.

Propose a Special Issue

Building a community of authors and readers to discuss the latest research and develop new ideas.

Capital Structure and Earnings Management Practices: Empirical Analysis in Sub-Sahara Africa

This study assesses the impact of capital structure (CS) on Earnings Management Practices (EMP) in selected firms in sub-Sahara Africa. EMP was proxied by real EMP using Rowchodhury's (2006) model and accrual EMP measured by Khothari et al. (2005) model. The study applied the Generalized Method of Moments (GMM) estimator to data collected from the financial statements of two hundred and seventy-six (276) firms purposively selected from Nigeria, Ghana, Kenya, Tanzania, South Africa, and Zimbabwe from 2010 to 2020, given 3,069 observations firm-years. The results show that firms in Kenya, Nigeria, and Tanzania partake in real EMP through the structure of their capital. However, firms in Ghana, South Africa, and Zimbabwe do not partake in real EMP through the structure of their capital. Furthermore, the findings reveal that firms in Ghana and South Africa use their capital structure to embark on accrual EMP, while firms in Nigeria, Kenya, and Zimbabwe do not. The study concludes that firms in selected countries in sub-Saharan Africa substitute real and accrual forms of EMP. Therefore, the study recommends that capital providers in Nigeria, Ghana, Kenya, Tanzania, South Africa, and Zimbabwe should maintain sufficient attention to both real and accrual EMP for sustainable leveraging and the management of opportunistic selections of accounting choices, but increase the use of real EMP.

Capital Structure, Accrual, Real, Earnings Management Practices, Sub-Saharan Africa

APA Style

Saheed Akande Shittu, Hakeem Olayinka Onifade. (2023). Capital Structure and Earnings Management Practices: Empirical Analysis in Sub-Sahara Africa. Journal of Finance and Accounting, 11(5), 155-163.

ACS Style

Saheed Akande Shittu; Hakeem Olayinka Onifade. Capital Structure and Earnings Management Practices: Empirical Analysis in Sub-Sahara Africa. J. Finance Account. 2023, 11(5), 155-163. doi: 10.11648/j.jfa.20231105.12

AMA Style

Saheed Akande Shittu, Hakeem Olayinka Onifade. Capital Structure and Earnings Management Practices: Empirical Analysis in Sub-Sahara Africa. J Finance Account. 2023;11(5):155-163. doi: 10.11648/j.jfa.20231105.12

Copyright © 2023 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License ( which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

1. Abubakar, A. H. Lawal, A. M. & Mohamed, M. I. (2020) Ownership Structure and Real Earnings Management: Evidence from Nigeria. Journal of Management Theory and Practice (JMTP), 1 (3), 43-50.
2. Alomush, A. M. S., Al-Attar, A. M., & Masadeh, W. M. (2018). The impacts of free cash surplus flows, audit quality and ownership on earnings management: The Jordan case. Corporate Ownership & Control, 15 (4), 222-230.
3. Alsharairi, M. & Salama, A., (2011), “Does High Leverage Impact Earnings Management? Evidence from Non-Cash Mergers and Acquisitions”, Journal of Financial and Economic Practice, 12 (1), 17-33.
4. Anabelen, T. P., Younghwan, L. & Jeong, H. K. (2020). Effect of Leverage on Real Earnings Management: Evidence from Korea. MPDI. 3 (5), 1-20.
5. Anagnostopoulou, S., & Tsekrekos, A. (2016). The Effect of Financial Leverage on Real and Accrual-Based Earnings Management, Accounting and Business Research, 1-46 and the Caribbean Accounting and Management, 63 (2), 1–21.
6. Bassiouny, S., Soliman, M., & Ragab, A., (2016), “The Impact of Firm Characteristics on Earnings Management: An Empirical Study on the Listed Firms in Egypt”, the Business and Management Review, 7 (2), 91-101.
7. Das, R. C., Mishra, C. S. & Rajib. P. (2018). Firm-specific Parameters and Earnings Management: A Study in the Indian Context. Global Business Review 19 (5), 1240–1260.
8. Doukakis, L., (2014). The Effect of Mandatory IFRS Adoption on Real and Accrual-Based Earnings Management Activities, Journal of Accounting and Public Policy, 33 (6), 551-572.
9. Elkala, T. (2017). An Empirical Investigation of Earnings Management in the MENA Region. Unpublished Ph. D dissertation. University of the West of England.
10. Emiaso, D. & Okafor, G. O. (2023). Board Dynamics and Corporate Performance: The Moderating Effects of CEO Power A Study of Listed Non-Financial Firms in Sub-Sahara Africa. Journal of Finance and Accounting. 11 (3), 07-112. doi: 10.11648/j.jfa.20231103.16.
11. Emmanuel M. & Christopher B. (2023). Corporate Governance Mechanisms and Earnings Management: The moderating role of Female Directors, Cogent Business & Management, 10: 1, 2167290, DOI: 10.1080/23311975.2023.2167290.
12. Ghaleb, B. A. Kamardin, H. & Tabash, M. I. (2020) Family ownership concentration and real earnings management: Empirical evidence from an emerging market, Cogent Economics & Finance, 8 (1), 45-56.
13. Gujarati, D. & Porter, D. (2003) Multicollinearity: What Happens If the Regressors Are Correlated? In: Basic Econometrics, 4th Edition, McGraw-Hill, Boston, MA, 363.
14. Hassan, T. M. & AbdulRahaman, A. (2020). The Role of Corporate Governance on the Relationship Between IFRS Adoption and Earnings Management: Evidence from Bangladesh. International Journal of Financial Research. 11 (4), 329-345.
15. Jha, A. (2013). Earnings Management around Debt Covenant Violations – An Empirical Investigation using a Large Sample of Quarterly Data, Journal of Accounting, Auditing, and Finance, 28 (4): 369-396.
16. Khanh, T. & Thu, J. (2019). The effect of financial leverage on real and accrual-based earnings management in Vietnamese firms. Economics and Sociology, 12 (4), 299-312.
17. Kim, J. H., Lee, S. H., & Yoo, Y. K. (2020) Real earnings management and the cost of debt capital: international evidence, Asia-Pacific Journal of Accounting and Economics, 27 (2), 151-172.
18. Kothari, S., Leone, P., & Wasley, C., (2005), “Performance Matched Discretionary Accrual Measures”, Journal of Accounting and Economics, 39 (11), 163-197.
19. Lara, J., Osma, B., & Penalva, F. (2012). Accounting Conservatism and the Limits to Earnings Management,
20. Lastari, N. & Aeni, N. (2019). The Effect of Audit Quality and Earnings Management on Firm Performance. Advances in Social Science, Education and Humanities Research 3(7), 36-41.
21. Lemma, T., Negash, M., & Mlilo, M. (2013). Determinants of Earnings Management: Evidence from around the World,
22. Leuz, C., Nanda, D., & Wysocki, P. (2003). Earnings management and investor protection: An international comparison, Journal of Financial Economics, 69 (4), 505–527.
23. Mercedes, P. M., Ester G. G. & Jose, M. S. (2019). Corporate social responsibility and its effect on earnings management: an empirical research on Spanish firms, Total Quality Management & Business Excellence, 2 (3), 1-17.
24. MohdSuffian, M. T., Osman, A. H., MohdSanusi, Z., & Ridzuan, A. R. (2020). The Effects of Earnings Management, Free Cash Flow and Industry on Firm Performance: Empirical Evidence from Shariah-Compliant Firms in Malaysia, International Journal of Academic Research in Accounting, Finance and Management Sciences, 10 (1), 367-377.
25. Musa, A. F., & Muhammad, A. I. (2018). Earnings Management of Listed Deposit Banks (DMBs) in Nigeria: A Test of Chang, Shen and Fang Model, International Journal of Finance and Accounting, 7 (2), 49-55.
26. Nanik, L., & Nur, A. (2019) The Effect of Audit Quality and Earnings Management on Firm Performanc. Advances in Social Science, Education and Humanities Research, 3 (77), 36-41.
27. Neeraj, K. S., Amit, K., Nandita, L., Satvik, B., & Tanya, A. (2019). Impact of Corporate Governance on Earnings Management: Large Sample Evidence from India, Asian Economic and Financial Review, 9 (12), 1335-1345.
28. Nelson, M. W., & Ntui, P. P. (2018). Corporate governance compliance and accrual earnings management in eastern Africa: Evidence from Kenya and Tanzania, Managerial Auditing Journal, 33 (2), 171-191.
29. Ningrum, A. S., Wardhani, R., & Mita, A. F. (2019). A Cross Country Study of Indirect Effect of IFRS Adoption on Earnings Management. Journal of Accounting and Investment, 20 (3), 198-212.
30. Nyatichi, V., Iraya, C., Mwangi, M. & Njihia, J. (2020). Corporate Governance, Firm Characteristics and Earnings Management of Companies Listed At Nairobi Securities Exchange. 10 (4), 54-70.
31. Ogiriki, T., & Iweias, S. S., (2020). Financial Leverage on Earnings Management of Quoted Manufacturing Firms in Nigeria: International Journal of Management Science and Business Administration, 6 (4), 7-21.
32. Okafor, T. G., Ezeagba, C. E., & Onyali, C. I. (2018). Effect of Earnings Management on Performance of Corporate Organisation in Nigeria, International Journal of Business Management and Economic Review. 1 (3), 88-101.
33. Onaolapo, A. R. & Shittu, S. A. (2022). Factors Influencing Earnings Management Practices among listed Companies in Nigeria: Generalized Method of Moments (GMM) Approach. International Journal of Social Sciences and Management Review. 5 (1): 207-220.
34. Orazalin, N. & Akhmetzhanov, R. (2019). "Earnings management, audit quality, and cost of debt. Evidence from a Central Asian economy", Managerial Auditing Journal, 15 (43), 342-351.
35. Oscar, A. M. & Contard, D. S. (2023). The Potential Contributions of Leveraged Buyout (LBO) to the Development and Integration of African Countries. Journal of Finance and Accounting. 11 (4), 124-133. doi: 10.11648/j.jfa.20231104.17.
36. Oseni, E., Idowu, A. F. & Shittu, S. A. (2022). Effect of Working Capital on Earnings Management Practices in Sub-Sahara African Countries. European Journal of Business Management, 14 (18), 71-79. ISSN 2222-1905. (Paper), 2222-1905 (Online) DOI: 10.7176/EJBM/14-18-08.
37. Owusu, A., Zalata, A. M., Omoteso, K., & Elamer, A. A. (2020). Is There a Trade‑Off Between Accrual‑Based and Real Earnings Management Activities in the Presence of Male Auditors? Journal of Business Ethics, 18 (11), 386-395.
38. Paolo, S. & Laura, M. (2017): Firm- and Country-Level Attributes as Determinants of Earnings Management: an Analysis for Latin American Firms, Emerging Markets Finance and Trade, DOI: 10.1080/1540496X.2017.1410127 1-43.
39. Rajeevan, S. & Ajward, R. (2020). Board characteristics and earnings management in Sri Lanka. Journal of Asian Business and Economic Studies, 27 (1), 2-18.
40. Ross, S., (1977). The determination of capital structure: the incentive signaling approach. Bell Journal of Economics, 3 (2) 40-49.
41. Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42 (3): 335-370.
42. Saline, O. (2020). Ownership Structure and Earnings Managemet. Evidence from Listed non-financial companies in Kenya. Unpublished MSc. Thesis, School of Business, University of Nairobi.
43. Shittu, S. A. & Amao, B. W. (2022). Firm Attributes and Real Earnings Management in Nigeria. Fuoye Journal of Accounting and Management 5 (1) 165-179.; ISSN 2805-3672 (Print), 2814-1717 (Online).
44. Shittu, S. A., Badmus, A., and Onifade, H. O. (2022a). Effect of Tax Management on Real Earnings Management in Nigeria. Management Sciences Review (MSR), Journal of the faculty of Management Sciences. University of Benin, Benin City, Nigeria, 13(2), 210-223
45. Shittu, S. A., Onifade, H. O., Aminu, S. O. and Ajibola, K. T. (2023). Real Earnings Management and Firm Value, Nigeria. 8th Academic Conference on Accounting and Finance (ACAF) of The Institute of Chartered Accountants of Nigeria (ICAN). Feb. 14 & 15, 2023
46. Shittu, S. A., Oyedeji, R. O. and Onifade, H. O. (2022). Ownership Structure and Earnings Management among Non-Financial Listed Firms in Nigeria. JABU International Journal of Social and Management Sciences. 8(2), 221-231 ISSN: 2141-4025
47. Shittu, S. A., Taleat, B. A., Owojori, O. C and Aminu, S. O (2023). Small and Medium Scale Businesses Performance in the New Normal (Post-COVID): Evidence from Oyo State. FUOYE Journal of Public Administration and Management Vol. 1 (1), pg. 58-70.
48. Sivanandan, P. & AbdulWahab, N. S. (2020). Mediating Effects of Remuneration on Earnings Management and Firm Equity Value. Asian Journal of Accounting and Governance. 14 (1), 1-16.
49. Spence, M., (1973). Job market signaling. Quarterly Journal of Economics, 87 (3): 355-374.
50. Sun, Y., Wang, W., Wang, X. F., & Zhang, W., (2013). Shareholder activism and earnings management incentives: an empirical examination of shareholder proposals in the united states. Journal of International Management and Accounting, 24 (3), 154-162.
51. Swai, J., (2016), “The Impact of Corporate Governance and Firm-Specific Characteristics on Earnings Management: Evidence from East Africa”, Research Journal of Finance and Accounting, 7 (8), 139-156.
52. Ugrin, J. C., Mason, T. W. & Emuley, A. (2017), Culture's consequence: The relationship between income-increasing earnings management and IAS/IFRS adoption across cultures. Advancing in Accouting. 2 (5); 1-12.
53. Wallace, D. N., & Pornsit, J. (2004). Earnings management following duality creating successions: Ethno statistics, impression management. Retrieved, from a Social Science Research Network.
54. Waweru, N., & Riro, G., (2013), “Corporate Governance, Firm Characteristics and Earnings Management in an Emerging Economy”, Jamar, 1 (2), 43-64.