Firm Characteristics and Earnings Management Practices (EMP): Comparative Analysis in Sub-Saharan Africa

Abstract

The study examines the influence of firms’ characteristics on accrual and real Earnings
Management Practices (EMP). Firm characteristics include Asset Structure (AS), Capital Structure
(CS), Dividend Payout Ratio (DPR), Firm Profitability (FP), Free Cash Flow (FCF), and Working
Capital (WC). EMP was proxied by Discretionary Accrual (DA) and Real Earnings Management
(REM). Two hundred and seventy-nine (279) non-financial listed firms with the data required for
the study from 2010 to 2020 were selected from six (6) countries in sub-Saharan Africa. The study
found that AS has a negative and significant influence on DA in Kenya and Tanzania. DPR
positively and significantly influence DA in Zimbabwe and WC on DA in South Africa. Also, CS
has a positive and significant impact on DA in Nigeria and DPR and CS on DA in Ghana. Also,
AS and CS have a positive and significant impact on REM in Ghana. However, AS, FCF, DPR,
FP, and WC have a negative and significant effect on REM in Nigeria. The study concludes that
DA and REM significantly influence firm characteristics in sub-Saharan Africa. This study fills
exiting gaps on EMP in Sub-Saharan Africa by considering the effect of firms’ characteristics on
both DA and REM. The study expands knowledge on the importance of firm characteristics on
EMP in sub-Saharan Africa regions where the majority of countries are developing nations and
REM has not received adequate attention