Abstract
Creative accounting involves the manipulation of company’s records toward a predetermined target. Financial information manipulation is usually aimed at misleading the users of financial reporting through the provision of information that affects their decision making. This study evaluated the effects of creative accounting on investment decision in selected listed manufacturing firms in Nigeria’s real sector for the period of 2007 to 2017. The study was empirically carried out by extracting related data from CBN statistical bulletin and NDIC annual reports for the period on which regression analysis was used. The result revealed a positive but insignificant effect of creative accounting on investment decisions in listed manufacturing firms in Nigeria’s real sector as it reflects in the adjusted R2 of 0.742983 or 74.30%. The study therefore concluded and recommended that proper corporate governance should be applied to ensure that creative accounting is used for stakeholder’s benefits. Key words: Creative accounting, investment decision, stakeholders’ interest.
Highlights
Today’s financial accounting reports focus on providing relevant, reliable and timely financial information to stakeholders who use it to make critical financial decisions (Obara and Nangih, 2017)
This study examined the effect of creative accounting on investment decision in listed manufacturing firms in Nigeria
It was discovered that creative accounting has a positive but insignificant effect on investment decision in listed manufacturing firms in Nigeria
Summary
Today’s financial accounting reports focus on providing relevant, reliable and timely financial information to stakeholders who use it to make critical financial decisions (Obara and Nangih, 2017). Current accounting practice allows a degree of choice of policies and professional judgement in determining the methods of measurement, criteria for recognition and even the definition of the accounting entity. The exercise of this choice can involve a deliberate non-disclosure of information and manipulation of accounting figures, thereby making the business appear to be more profitable and financially stronger than it is supposed to be. Nangih (2017) argued that financial statements are signposts which direct users on the path of decision making Such important reports upon which financial decision are based are expected to be reliable, understandable, comparable, transparent and free of bias
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