CAPITAL STRUCTURE AND REAL EARNINGS MANAGEMENT OF NIGERIAN LISTED DEPOSIT MONEY BANKS
Keywords:
Capital Structure, Long-Term Debt, Real Earnings Management, Short Term Debt
Abstract
This study examined how a firm's capital structure (CS) affects real earnings management (REM) procedures by examining a sample of twelve (12) Nigerian listed Deposit Money Banks. The abnormal discretionary expenses model was used to measure REM, and the total debt ratio (TDR), short-term debt ratio (STDR), and long-term debt ratio (LTDR) were used to proxy CS, all scaled by the firm's total equity. The data were analyzed using static panel regression with fixed and random effects. Panel regression results showed that whereas STDR had an adverse effect on the dependent variable (REM), TDR and LTDR had a favorable effect on the REM practices across the investigated banks. Hence, it is recommended that authorities ought to keep an eye on Nigerian banks' debt-term arrangements in an effort to reduce the prevalence of REM techniques in these institutions. Nigerian Deposit Money Banks are also to streamline the constraints that may compel them to participate in REM practices and are also urged to reach advantageous terms for their eternal debt or to give priority to short-term debt over long-term debt.
References
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Alareni, B. (2020). The impact of firm-specific characteristics on earnings management: evidence from GCC countries. Int. J. Managerial and Financial Accounting, X(Y), 1-21.
Alzoubi, E. S. (2018). Audit quality, debt financing, and earnings management: Evidence from Jordan. Journal of International Accounting, Auditing and Taxation, 30, 69-84.
Awuye, I. S. (2022). The impact of audit quality on earnings management: Evidence from France. Journal of Accounting and Taxation, 14(1), 52-63. DOI: 10.5897/JAT2021.0514
Chowdhury, S. N., & Eliwa, Y. (2021). The impact of audit quality on real earnings management in the UK context. International Journal of Accounting & Information Management, 29(3), 368-391. DOI 10.1108/IJAIM-10-2020-0156
Daniel, E. K., Ameh, J., & Aza, S. (2018). Effect of Board Size on Real Earnings Management of Financial Institutions in Nigeria. Bingham University Journal of Accounting and Business, 1(1), 1-12.
Debnath, P. & Roy, C. (2017). Do Firm Specific Characteristics Influence Earnings Management? Contemporary Evidence from Indian Economy. Asian Journal of Research in Business Economics and Management, 7(6), 318-336.
Dicksons, R. K. (2021). Antecedents of corporate income smoothing of financially distress likelihood quoted companies in Nigeria. International Journal of Research and Scientific Innovation, VIII(V), 2321-2705.
Edelman, D., & Nicholson, A. (2011). Arthur Anderson Auditors and Enron: what happened to their Texas CPA licenses? Journal of Finance and Accountancy, 8, 1-9.
Egiyi, M. A. (2021). The Impact of leverage on accrual-based earnings management, Annals of Management Sciences, 8(2), 1-8. | https://ams.deqepub.org
Ewert, R. & Wagenhofer, A. (2005). Economic effects of tightening accounting standards to restrict earnings management. The Accounting Review. 80. https://doi.org/10.2308/accr.2005.80.4.1101.
Fung, S. Y. K., & Goodwin, J. (2013). Short-term debt maturity, monitoring and accruals-based earnings management. Journal of Contemporary Accounting & Economics, 9(1), 67–82. https://doi.org/10.1016/j.jcae. 2013.01.002
Gopalan, R & Jayaraman, S. (2012). Private control benefits and earnings management: evidence from insider controlled firms. Journal of Accounting Research 50, 117–157.
Gunny, K. A. (2005). What are the consequences of real earnings management? https://api.semanticscholar.org/CorpusID:42996922
Hassan, S., & Bello, A. (2013). Firm characteristics and financial reporting quality of listed manufacturing firms in Nigeria. International Journal of Accounting, Banking and Management, 1(6), 47-63.
Holinata, W. J., & Yanti, (2020). Factors Affecting Income Smoothing, Proceedings of the 2nd Tarumanagara. International Conference on the Applications of Social Sciences and Humanities. https://doi.org/10.2991/assehr.k.201209.046
http://dx.doi.org/10.5539/ibr.v5n1p216
Huang, H.-L., Liang, L.-W., Chang, H.-Y., & Hsu, H.-Y. (2021). The influence of earnings management and board characteristics on company efficiency. Sustainability, 13, 1-17. https://doi.org/ 10.3390/su132111617
Huang, Z., & Xue, Q. (2016). Re-examination of the effect of ownership structure on financial reporting: Evidence from share pledges in China. China Journal of Accounting Research, 9(2), 137-152. https://doi.org/10.1016/j.cjar.2015.11.001
Ibrahim, I., Adamu, B. S., Uthman, F. Z., Abba, H. I. (2022). Effect of firm attributes on earnings management of deposit money banks in Nigeria. FUOYE journal of Finance and Contemporary Issues, 3(2), 164-182.
Jensen, M.C & Meckling, W.H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3, 305–360.
Jensen, M.C., (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review 76, 323–329.
Kim, Y., & Park, M. S. (2014). Real activities manipulation and auditors' client-retention decisions. The Accounting Review, 89(1), 367-401.
Muhammed , I. K. Abdulyakeen, G. Oyaleke, K. O & Ajide, K.T. (2024). Capital Structure of Listed Manufacturing Firms in Nigeria and Its Impact on Earning Management. EKSU Journal of the Management Scientists, Faculty of Management Sciences, 3(1). https://eksujournal.eksu.edu.ng/ojs/index.php/njbfi/article/view/33/21
Naz, A., & Sheikh, N.A. (2023). Capital structure and earnings management: Evidence from Pakistan. International Journal of Accounting and Information Management, 31(1) 128-147. https://doi.org/10.1108/IJAIM-08-2022-0163
Nwaobia, A.N., Kwarbai, J.D., & Fregene, O.O. (2019). Earnings management and corporate survival of listed manufacturing companies in Nigeria. International Journal of Development and Sustainability, 8(20), 97-115.
Oktasari, D, P. (2020). Effects of capital structure, profitability and firm size towards earning management in manufacturing companies. EPRA International Journal of Research and Development (IJRD). 5(5), 74-83.
Olatunde, O. J., & Subair, R. (2019). Capital Structure and earnings management: A study of selected listed consumer goods firms in Nigeria. International Journal of Scientific & Engineering Research, 10(6), 329-346.
Olotu, E., Salawu, R.O., Adegbie, F.F., & Akinwunmi, A.J (2019). Earnings management and performance of Nigerian quoted manufacturing companies: the Balanced Scorecard Approach. International Journal of Advanced Studies in Business Strategies and Management 7, ( I) 76-98
Paramita, R. W., & Isarofah, D. D. (2016). Income smoothing: Apakah ukuran perusahaan memoderasi? Jurnal Riset dan Aplikasi: Akuntansi dan Manajemen, 2(1), 55–64
Park, S. (2016). The effect of short-term debt on accrual based earnings management and real earnings management. The Journal of Applied Business Research, 32(4), 1287-1300.
Prime Business (2023). Stanbic IBTC in trouble for hoarding export proceeds, misinformation on earnings. Available at https://www.primebusiness.africa/stanbic-ibtc-fined-n159-million for-earnings-misinformation-hoarding-export-proceeds-others/
Quang,V., & Van, H. (2021). Short-term debt and firms' earnings management choices: The case of Vietnam. Journal on Global Socio-Economic Dynamics, 2 (27), 47-57.
Rashid, N., Afthanorhan, A., Yazid, A. S., Johari, R. J., Hamid, N. A., & Rasit, Z. A. (2018). The Causation of the Financial Statement Manipulation Activities. International Journal of Academic Research in Business and Social Sciences, 8(12), 1629–1637.
Remenaric, B., Kenfelja, I. & Mijoc, I. (2018). Creative accounting: motives, techniques and possibilities of prevention, Ekonomski Vjesnik, Econviews, 193-199.
Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370. https://doi.org/10. 1016/j.jacceco.2006.01.002
Saad, N. M. (2010). Corporate governance compliance and the effects to capital structure in Malaysia, International Journal of Economics and Finance,2(1). https://doi.org/10.5539/ijef.v2n1p105
Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 91-102.
Tarighi, H., Zeynab N. H., Mohammad, R. A., Grzegorz, Z., & Darya, H. (2022). How do financial distress risk and related party transactions affect financial reporting quality? Empirical Evidence from Iran. Risks 10, 46-50.
Thoharo, A., Priyadi, M. P., & Wahidahwati, W. (2021). The management’s motive of income smoothing and its implications to the market reaction. Jurnal Dinamika Akuntansi, 13(1), 72-92. https://doi.org/10.15294/jda.v13i1.26890
Tolulope, I., Uwuigbe, U., Uwuigbe, O.R., Emmanuel, O., Oriabie, S., & Asiriuwa, O (2018). The effect of corporate governance attributes on earnings management: A Study of Listed Companies in Nigeria. Academy of Strategic Management Journal 17(6), 1-11
Tulcanaza-Prieto, A. B., Lee, Y., & Koo, J. (2020). Effect of leverage on real earnings management: Evidence from Korea. Sustainability, 12, 1-20.
Varian, F., Amer Azlan, A. J., Mohd, K., & Zatul Karamah, A. B. U. (2015). Capital structure and corporate performance: Panel Evidence from Oil and Gas Companies in Malaysia. International Journal of Business Management and Economic Research. 6. 371-379.
Wangui, N, & Simiyu, E. (2018). “Earnings Management and Financial Performance of Listed Non-Financial Firms in Nairobi County, Kenya”. Research Journal of Finance and Accounting, 9(23), 24-38.
Abed, S., Al-Attar, A., & Suwaidan, M. (2011). Corporate governance and earnings management: Jordanian Evidence, International Business Research. 5(1),
Adepimbe U, Itoro I & Daniel E. (2018). Earning management and financial performance of deposit money banks in Nigeria. Research Journal of Finance and Accounting, 9(22), 94- 100.
Alareeni, B. (2020). The impact of firm-specific characteristics on earnings management: evidence from GCC countries. Int. J. Managerial and Financial Accounting, X (Y), 1-21.
Alareni, B. (2020). The impact of firm-specific characteristics on earnings management: evidence from GCC countries. Int. J. Managerial and Financial Accounting, X(Y), 1-21.
Alzoubi, E. S. (2018). Audit quality, debt financing, and earnings management: Evidence from Jordan. Journal of International Accounting, Auditing and Taxation, 30, 69-84.
Awuye, I. S. (2022). The impact of audit quality on earnings management: Evidence from France. Journal of Accounting and Taxation, 14(1), 52-63. DOI: 10.5897/JAT2021.0514
Chowdhury, S. N., & Eliwa, Y. (2021). The impact of audit quality on real earnings management in the UK context. International Journal of Accounting & Information Management, 29(3), 368-391. DOI 10.1108/IJAIM-10-2020-0156
Daniel, E. K., Ameh, J., & Aza, S. (2018). Effect of Board Size on Real Earnings Management of Financial Institutions in Nigeria. Bingham University Journal of Accounting and Business, 1(1), 1-12.
Debnath, P. & Roy, C. (2017). Do Firm Specific Characteristics Influence Earnings Management? Contemporary Evidence from Indian Economy. Asian Journal of Research in Business Economics and Management, 7(6), 318-336.
Dicksons, R. K. (2021). Antecedents of corporate income smoothing of financially distress likelihood quoted companies in Nigeria. International Journal of Research and Scientific Innovation, VIII(V), 2321-2705.
Edelman, D., & Nicholson, A. (2011). Arthur Anderson Auditors and Enron: what happened to their Texas CPA licenses? Journal of Finance and Accountancy, 8, 1-9.
Egiyi, M. A. (2021). The Impact of leverage on accrual-based earnings management, Annals of Management Sciences, 8(2), 1-8. | https://ams.deqepub.org
Ewert, R. & Wagenhofer, A. (2005). Economic effects of tightening accounting standards to restrict earnings management. The Accounting Review. 80. https://doi.org/10.2308/accr.2005.80.4.1101.
Fung, S. Y. K., & Goodwin, J. (2013). Short-term debt maturity, monitoring and accruals-based earnings management. Journal of Contemporary Accounting & Economics, 9(1), 67–82. https://doi.org/10.1016/j.jcae. 2013.01.002
Gopalan, R & Jayaraman, S. (2012). Private control benefits and earnings management: evidence from insider controlled firms. Journal of Accounting Research 50, 117–157.
Gunny, K. A. (2005). What are the consequences of real earnings management? https://api.semanticscholar.org/CorpusID:42996922
Hassan, S., & Bello, A. (2013). Firm characteristics and financial reporting quality of listed manufacturing firms in Nigeria. International Journal of Accounting, Banking and Management, 1(6), 47-63.
Holinata, W. J., & Yanti, (2020). Factors Affecting Income Smoothing, Proceedings of the 2nd Tarumanagara. International Conference on the Applications of Social Sciences and Humanities. https://doi.org/10.2991/assehr.k.201209.046
http://dx.doi.org/10.5539/ibr.v5n1p216
Huang, H.-L., Liang, L.-W., Chang, H.-Y., & Hsu, H.-Y. (2021). The influence of earnings management and board characteristics on company efficiency. Sustainability, 13, 1-17. https://doi.org/ 10.3390/su132111617
Huang, Z., & Xue, Q. (2016). Re-examination of the effect of ownership structure on financial reporting: Evidence from share pledges in China. China Journal of Accounting Research, 9(2), 137-152. https://doi.org/10.1016/j.cjar.2015.11.001
Ibrahim, I., Adamu, B. S., Uthman, F. Z., Abba, H. I. (2022). Effect of firm attributes on earnings management of deposit money banks in Nigeria. FUOYE journal of Finance and Contemporary Issues, 3(2), 164-182.
Jensen, M.C & Meckling, W.H. (1976). Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3, 305–360.
Jensen, M.C., (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review 76, 323–329.
Kim, Y., & Park, M. S. (2014). Real activities manipulation and auditors' client-retention decisions. The Accounting Review, 89(1), 367-401.
Muhammed , I. K. Abdulyakeen, G. Oyaleke, K. O & Ajide, K.T. (2024). Capital Structure of Listed Manufacturing Firms in Nigeria and Its Impact on Earning Management. EKSU Journal of the Management Scientists, Faculty of Management Sciences, 3(1). https://eksujournal.eksu.edu.ng/ojs/index.php/njbfi/article/view/33/21
Naz, A., & Sheikh, N.A. (2023). Capital structure and earnings management: Evidence from Pakistan. International Journal of Accounting and Information Management, 31(1) 128-147. https://doi.org/10.1108/IJAIM-08-2022-0163
Nwaobia, A.N., Kwarbai, J.D., & Fregene, O.O. (2019). Earnings management and corporate survival of listed manufacturing companies in Nigeria. International Journal of Development and Sustainability, 8(20), 97-115.
Oktasari, D, P. (2020). Effects of capital structure, profitability and firm size towards earning management in manufacturing companies. EPRA International Journal of Research and Development (IJRD). 5(5), 74-83.
Olatunde, O. J., & Subair, R. (2019). Capital Structure and earnings management: A study of selected listed consumer goods firms in Nigeria. International Journal of Scientific & Engineering Research, 10(6), 329-346.
Olotu, E., Salawu, R.O., Adegbie, F.F., & Akinwunmi, A.J (2019). Earnings management and performance of Nigerian quoted manufacturing companies: the Balanced Scorecard Approach. International Journal of Advanced Studies in Business Strategies and Management 7, ( I) 76-98
Paramita, R. W., & Isarofah, D. D. (2016). Income smoothing: Apakah ukuran perusahaan memoderasi? Jurnal Riset dan Aplikasi: Akuntansi dan Manajemen, 2(1), 55–64
Park, S. (2016). The effect of short-term debt on accrual based earnings management and real earnings management. The Journal of Applied Business Research, 32(4), 1287-1300.
Prime Business (2023). Stanbic IBTC in trouble for hoarding export proceeds, misinformation on earnings. Available at https://www.primebusiness.africa/stanbic-ibtc-fined-n159-million for-earnings-misinformation-hoarding-export-proceeds-others/
Quang,V., & Van, H. (2021). Short-term debt and firms' earnings management choices: The case of Vietnam. Journal on Global Socio-Economic Dynamics, 2 (27), 47-57.
Rashid, N., Afthanorhan, A., Yazid, A. S., Johari, R. J., Hamid, N. A., & Rasit, Z. A. (2018). The Causation of the Financial Statement Manipulation Activities. International Journal of Academic Research in Business and Social Sciences, 8(12), 1629–1637.
Remenaric, B., Kenfelja, I. & Mijoc, I. (2018). Creative accounting: motives, techniques and possibilities of prevention, Ekonomski Vjesnik, Econviews, 193-199.
Roychowdhury, S. (2006). Earnings management through real activities manipulation. Journal of Accounting and Economics, 42(3), 335–370. https://doi.org/10. 1016/j.jacceco.2006.01.002
Saad, N. M. (2010). Corporate governance compliance and the effects to capital structure in Malaysia, International Journal of Economics and Finance,2(1). https://doi.org/10.5539/ijef.v2n1p105
Schipper, K. (1989). Commentary on earnings management. Accounting Horizons, 91-102.
Tarighi, H., Zeynab N. H., Mohammad, R. A., Grzegorz, Z., & Darya, H. (2022). How do financial distress risk and related party transactions affect financial reporting quality? Empirical Evidence from Iran. Risks 10, 46-50.
Thoharo, A., Priyadi, M. P., & Wahidahwati, W. (2021). The management’s motive of income smoothing and its implications to the market reaction. Jurnal Dinamika Akuntansi, 13(1), 72-92. https://doi.org/10.15294/jda.v13i1.26890
Tolulope, I., Uwuigbe, U., Uwuigbe, O.R., Emmanuel, O., Oriabie, S., & Asiriuwa, O (2018). The effect of corporate governance attributes on earnings management: A Study of Listed Companies in Nigeria. Academy of Strategic Management Journal 17(6), 1-11
Tulcanaza-Prieto, A. B., Lee, Y., & Koo, J. (2020). Effect of leverage on real earnings management: Evidence from Korea. Sustainability, 12, 1-20.
Varian, F., Amer Azlan, A. J., Mohd, K., & Zatul Karamah, A. B. U. (2015). Capital structure and corporate performance: Panel Evidence from Oil and Gas Companies in Malaysia. International Journal of Business Management and Economic Research. 6. 371-379.
Wangui, N, & Simiyu, E. (2018). “Earnings Management and Financial Performance of Listed Non-Financial Firms in Nairobi County, Kenya”. Research Journal of Finance and Accounting, 9(23), 24-38.
Published
2025-07-09
How to Cite
AJIDE, K. T., MUHAMMED, I. K., ABDULYAKEEN, G., & AUDU, N. B. (2025). CAPITAL STRUCTURE AND REAL EARNINGS MANAGEMENT OF NIGERIAN LISTED DEPOSIT MONEY BANKS. Global Journal of Accounting, 11(2), 1-10. Retrieved from https://gja.unilag.edu.ng/article/view/2652
Section
Articles
