Research Purpose: In light of the pervasive issue of creative accounting among Nigerian firms, this study investigates its impact on shareholders' wealth, despite the silence of accounting regulators on the matter.
Methodology: The study employed a probit regression model to analyze the relationship between creative accounting practices and shareholders' wealth in Nigeria.
Findings: Results indicate a negative relationship between creative accounting and shareholders' wealth. Specifically, a 1% increase in cost of depreciation, research and development, and overstated assets leads to declines in stock prices (9.7%, 8.7%, and 8.2%), earnings per share (7.3%, 5.0%, and 3.4%), and dividend payout (1.5%, 5.7%, and 2.2%), respectively.
Conclusion: The study concludes that creative accounting practices significantly harm shareholders' wealth in Nigeria, highlighting the need for effective measures to curb such practices.
Recommendations: To mitigate the adverse effects of creative accounting, firms should implement robust internal controls to prevent such practices, thereby safeguarding and enhancing shareholders' wealth.
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