CREATIVE ACCOUNTING AND INVESTOR VALUE IN SUB-SAHARAN AFRICAN COMPANIES: THE MODERATING EFFECT OF FINANCIAL REPORTING QUALITY

Abstract

This study investigated the effect of creative accounting via income smoothing on investor value proxied by share price and the moderating effect of financial reporting quality using large panel dataset consisting of 836 fir-year observations belonging to 76 manufacturing firms listed on the Nigerian Exchange Group, Johannesburg Stock Exchange and Nairobi Securities Exchange in the period 2012 to 2022. It obtained data from the annual audited financial statements of the sample as reported in Thomson One Banker. Guided by the results of the Hausman Specification Tests, the study estimated fixed-effect regressions. Findings revealed that income smoothness has no significant effect on the investor value of the listed manufacturing firms in Sub-Saharan African markets. Further findings indicated that financial reporting quality has a significant negative moderating effect on the income smoothing-investor value relationship of the listed manufacturing firms in the Sub-Saharan African markets. The study recommends that investors take into account financial reporting quality in evaluating reported earnings for investment. Further studies should include more countries and proxies of creative accounting, investor value and financial reporting quality.