Discretionary Accrual Earnings Management in a Sub-Saharan African Economy

Bibliographic Data

ID10429929
AuthorsIkechukwu Ndu (0000-0001-9256-2542, University of Southern Maine, Portland, USA, corresponding author), Julian Sims (Birkbeck, University of London, London, UK)
Year2023
Volume52
Issue1
Pages109-134
Publication date2023-12-13
Open AccessYes
TypeARTICLE
VenueThe Review of Black Political Economy (JOURNAL)
Journal identifiersISSN: 0034-6446 • E-ISSN: 1936-4814
PublisherSAGE Publishing (PUBLISHER • US)
DOI10.1177/00346446231217608
OpenAlexW4389702369
LanguageEN
References cited45

This paper investigates the existence of discretionary total accrual earnings management and working capital accrual earnings management in Nigeria which is Sub-Saharan Africa's largest economy. Unlike previous studies that use the Ordinary Least Squares (OLS) technique that does not control for endogeneity that can invalidate results, our empirical methodology implements the maximum likelihood estimation that controls for endogeneity to estimate economically plausible levels of discretionary accrual earnings management. Our results find that discretionary accrual earnings management in Nigeria is characterized by statistically significant, tax-induced income-reducing discretionary accruals. This study contributes to the literature as it is the first emerging market, African and Sub-Saharan African economy study to the best of the researchers’ knowledge that estimates discretionary accrual earnings management for listed non-financial firms using various models based on the maximum likelihood estimation technique to control for endogeneity. The findings inform the political economy of economic development in Sub-Saharan Africa, particularly as it relates to how firms, especially multinationals, are motivated to extract rents from African economies. The results have policy implications for accounting regulatory interventions by policy and standard setting bodies that mitigate and/or eliminate capital flight, tax evasion, aggressive tax avoidance and financial corruption practices in Sub-Saharan African economies

Accrual · Earnings · Earnings Management · Econometrics · Economic rent · Economics · Endogeneity · Market economy · Monetary economics · Accounting · Auditing, Earnings Management, Governance · Corporate Taxation and Avoidance · Financial Reporting and Valuation Research

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