CREATIVE ACCOUNTING PRACTICES AND FINANCIAL PERFORMANCE OF LISTED MANUFACTURING COMPANIES IN NIGERIA
Abstract
This study examined the relationship between creative accounting practices and reported financial performance of listed manufacturing companies in Nigeria, and the extent creative accounting practices proxied by related party transactions (RPT), impacts on financial performance measured with return on assets ‘ROA,) and return on equity (ROE,). Five year financial data from 2018 to 2022 often companies listed on the Nigerian Stock Exchange group (NSE) were extracted using the stratified and simple random sampling techniques. The study used secondary sources of data extracted from the published financial statements and accounts of the sampled companies. Data analysis techniques used in this study included descriptive statistics, the ordinary least square (OLS,) regression techniques using the Statistical Package for the Social Sciences (SPSS) version 22.0 statistical software. The results obtained revealed that RPT has positive and significant relationship with ROA. In relation to ROE, the results revealed that RPT has a negative and significant impact on ROE. The coefficient of determination as revealed from the combined impact of the independent variable shows that 99.9% of the variation in the dependent variables is explained by the independent variables while the remaining 0.1% is attributable to other factors. The exposition from the data analysis clearly points to the fact that listed manufacturing companies in Nigeria use creative accounting practices to manipulate earnings or profits in order to achieve management desire to present impressive financial performance of the entity. The work concluded that the desire to showcase impressive picture of corporate financial performance often breaches professional ethics in financial reporting The study recommends a more stringent regulatory regime with effective enforcement mechanisms to ensure compliance with International Financial Reporting Standard and Auditing standards in order to reduce creative accounting practices. The introduction of punitive measures could also assist in curbing the act of creative accounting amongst Nigerian companies.
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