CREATIVE ACCOUNTING AND FINANCIAL PERFORMANCE OF MANUFACTURING COMPANIES IN RIVERS STATE

This study examined the effect of creative accounting on financial performance of manufacturing firms in Rivers State. The study was guided by four specific objectives, four research questions and four hypotheses. Income smoothing and aggressive earnings management were used as the dimensions of creative accounting while return on asset and earnings per share were used as the measures of financial performance. The study adopted survey research design. The study made use of primary data while structured questionnaire was the research instrument used in the collection of the data. The study made use of simple random sampling to select the respondents. The respondents consisted of 121 managerial and non-managerial staff of the four selected manufacturing firms in Rivers Stale. The study made use of frequencies, simple percentages and mean scores to analyze the personal data of the respondents and other items in the questionnaire while Spearman Rank Correlation coefficient was used to test the hypotheses formulated at 5% level of significance. The data analysis was facilitated by Statistical Package for Social Sciences (SPSS) version 21. The findings of the study showed that: The study found that there is strong positive and significant relationship between income smoothing and return on asset of manufacturing firms in Rivers State. Also, there is strong positive and significant relationship between income smoothing and earnings per share of manufacturing firms in Rivers State. Additionally, a strong positive and significant relationship exists between aggressive earnings management and return on asset of manufacturing firms in Rivers State. Lastly, the study found that there is a strong positive and significant relationship between aggressive earnings management and earnings per share of manufacturing firms in Rivers State. The study concluded
that financial performance of manufacturing firms in Rivers State is optimized and improved as a result of creative accounting, The study recommended that there is the need to restore integrity and public confidence to accounting operations, the accountants should be strengthened to respond quickly to the egregious abuses and malpractice in the world of business and impose sanctions on offenders.