Big Bath Charges and Shareholders' Wealth in Nigeria

Abstract

Big bath accounting is an earnings management technique whereby a one-time charge is taken against income in order to reduce assets to lower expenses in the future. This type of voodoo accounting technique is used by companies to deceive shareholders' in reporting an unrealistic financial report. This study examined the effect of big bath accounting on shareholders' wealth in Nigeria. Survey research design was adopted. Primary data was used in obtaining information through a well-structured questionnaire that was administered to the supervisory department of the National Deposit Insurance Corporation and Central Bank (NDIC) of Nigeria (CBN). The result showed that big bath charges had a negative significant effect of shareholders' wealth in Nigeria. This means that the more organizations apply big bath charges into their system, it will later on affect negatively the shareholders' wealth. The study recommended that other analytical model can be employed in detecting earnings manipulations in the account and also the recommendations made by the supervisory departments of regulatory bodies like NDIC and CBN to companies should be adopted by this organizations in order to protect the interest of the shareholders.