Effect of Capital Structure on Real and Accrual-Based Earnings Management in Sub-Sahara Africa


  • Adekunle Rahman Onaolapo Onaolapo Department of Accounting, Ladoke Akintola University of Technology
  • Saheed Akande Shittu Shittu Department of Accounting, Ladoke Akintola University of Technology, Ogbomosho




Capital structure, real earnings management, accrual-based earnings management, sub-Sahara Africa


The study examines the effect of Capital Structure (CS) on real and accrual-based earnings management among listed firms in Sub-Sahara Africa (SSA). Real Earnings Management (REM) and Discretional Accruals (DA) were proxies by Rowchowdhury (2006) and Khothari et al. (2005) models respectively. Secondary data used were obtained from annual reports of 276 non-financial listed firms from six countries for eleven years (2010 to 2020). A Generalized Method of Moments (GMM) estimator was used to analyze the data collected. The findings show that CS among firms in Kenya, Tanzania and Nigeria have positive and significant effects on REM while the negative and significant influence of CS among firms in Zimbabwe, South Africa and Ghana was observed on REM. Also, CS among firms in Kenya, Zimbabwe and Nigeria have negative and significant effects on DA. However, CS among firms in South Africa and Ghana have a positive influence on DA. The study concludes that firms in SSA substitute REM and DA forms of earnings management. Hence, the study recommends that capital providers in the sampled countries should maintain sufficient attention to both REM and DA for sustainable leveraging, and management of opportunistic selections of accounting choices, but increase the use of REM.


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Effect of Capital Structure on Real and Accrual-Based Earnings Management in Sub-Sahara Africa . (2022). Indian-Pacific Journal of Accounting and Finance, 6(2), 15-27. https://doi.org/10.52962/ipjaf.2022.6.2.140

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