Capital Structure and Revenue Management Practices on Empirical Analysis Methods in Sub-Saharan Africa

Abstract

This study assesses the impact of capital structure (CS) on Earnings Management Practices (EMP) in selected firms in sub-Sahara Africa. 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.