CREATIVE ACCOUNTING AND FIRM’S MARKET VALUE IN NIGERIA

Abstract

The Enron scandal brought to fore the fact that a lot of companies’ earnings are the result of accounting shenanigans. This discovery has not only cast doubt on the integrity of preparers of accounting reports, but has also led to loss of confidence in those who are supposed to check business executives namely; auditors, analysts and government regulators. Viewed from ethical angle, a large number of studies see the act as immoral with only few offering a justification of the behaviour on the basis of agency and positive accounting theories. This paper is motivated largely by the implications of these studies and seeks to find out if this practice obtains in
Nigeria and if such practice enhances firm’s value. Primary data were collected by means of questionnaires and a chi-square test was applied to test the stated hypothesis. It is found that the practice obtains in Nigeria and positively affects firm’s value which can impact on its share price. Suggestions were offered on how the practice could be reduced.