EKSU Journal of the Management Scientists

Capital Structure of Listed Manufacturing Firms in Nigeria and Its Impact on Earning Management

Abstract

An organization's decision about how to finance its operations is one of its most crucial decisions. Consequently, management tries to design the company's capital structure in a way that satisfies stakeholder expectations. Determining if capital structure (CS) of Nigerian listed manufacturing companies has an impact on earnings management (EM) was the primary objective of the research. Purposive sampling was used to choose a sample of forty publicly traded manufacturing firms at the Nigerian Exchange Group (NGX). Thirteen years of data collection from the sample's participating firms took place between 2010 and the end of 2022. The findings indicated that the accrual earning management (AEM) using the EM proxy was adversely affected by the CS (short-term debt ratio, debt/equity ratio, and equity ratio). Also, it was revealed that the EM of Nigerian-listed manufacturing companies are benefited by the long-term debt ratio. It was therefore suggested that company management should avoid EM practices so that firms can have a favorable standing in the minds of current and prospective investors. In addition, the Nigerian Exchange Group should strengthen oversight of the accounting records presented by companies to minimize earnings management practices.