ABSTRACT
The study investigates the impact of creative accounting on shareholders' wealth, specifically focusing on earnings per share (EPS), investment decisions, and shareholders' price of selected commercial banks in Nigeria. Creative accounting practices, often used to manipulate financial statements, have significant implications for the financial health and transparency of firms. This research aims to elucidate the extent to which these practices affect the financial performance and decision-making processes of shareholders in the Nigerian banking sector.
The study's population comprises listed deposit banks operating within Edo State, Nigeria, as of the year 2023. A sample of five banks—First Bank of Nigeria Holdings Plc, United Bank for Africa Plc, Guaranty Trust Holding Bank, Access Bank Plc, and Zenith Bank Plc—was selected due to their market presence and significance within the Nigerian banking sector. The data collection process involved obtaining secondary data from the audited annual financial statements of these banks, covering a period of five years (2019-2023). This approach ensures the use of historical and documented facts on earnings management for effective evaluations.
To achieve its objectives, the study employs both correlation and regression analyses, alongside ANOVA tests, to examine the relationships between creative accounting (the dependent variable) and the independent variables—EPS, investment decisions, and shareholders' price. Data were normalized and subjected to rigorous statistical testing to ensure validity and reliability.
The findings reveal a complex relationship between creative accounting and the financial metrics of the banks. Initial correlation analysis suggests that while there are both positive and negative associations, the significance of these relationships varies. For instance, creative accounting shows a negative correlation with EPS and a positive correlation with shareholders' price and investment decisions. Regression analysis further supports these findings, indicating that creative accounting significantly impacts shareholders' price and investment decisions, but its effect on EPS is less pronounced.
Additionally, ANOVA results complement the regression analysis by confirming the significant impact of creative accounting on the studied financial metrics. These findings suggest that creative accounting practices, while potentially beneficial in the short term, may have adverse long-term effects on shareholders' wealth. The study's implications underscore the need for stricter regulatory frameworks and enhanced transparency in financial reporting within the Nigerian banking sector.
This research contributes to the existing body of knowledge by providing empirical evidence on the effects of creative accounting in a developing economy context, offering valuable insights for policymakers, regulators, and investors in Nigeria.
