Asset Structure and Growth Opportunities: Empirical Analysis on Earnings Management Practices in Sub-Saharan Africa

Abstract

This study assesses the influence of asset structure and growth opportunities on Earnings
Management Practices (EMP) amongst firms in sub-Saharan Africa. Both real and accrual
EMP were considered. Two hundred and seventy-nine (279) firms were purposively selected
across six (6) sub-Saharan African countries for a period of eleven years, from 2010 to 2020,
giving a total of 3,069 observations. Data gathered from the financial statements of chosen
firms were analyzed using a panel least squares regression model. The findings reveal that
asset structure and growth opportunities have a positive and significant effect on accrual and
real EMP. Similarly, leverage and firm size have a positive and significant effect on real EMP.
However, leverage has a negative and significant impacton accrual EMP while firm size has a
positive and significant impact on accrual EMP. Also, firm age has no significant influence on
both accrual and real EMP. The study concludes that asset structure and growth opportunities
positively and significantly influence accrual and real EMP amongst firms in sub-Saharan
Africa. Hence, the study recommends that firms in sub-Saharan Africa should refrain from
using a larger percentage of their non-current assets as collateral to obtain debt to avoid
perpetrating EMP.