Creative Accounting and Implication for Dividend Payout of Companies in the Financial Sub-Sector of Nigerian Economy

This study examines the relationship between creative accounting (CA) and reported financial performance of banks and insurance companies in Nigeria, and the extent CA impacts on their dividend payout ratio. Five year financial data from 2004-2008 of twenty banks and insurance companies listed on the Nigerian Stock Exchange (NSE) were extracted using the stratified and simple random sampling techniques. Survey data were obtained from 386 respondents purposively selected from the chosen organizations using researcher-designed questionnaire validated by experts and shown to have a reliability coefficient of 0.876. Correlation and regression statistical techniques were used in analyzing the data. The results show that creative accounting techniques are positively associated with firm financial performance and have significant effect on dividend payout (DPO) with 88 % of the variations in DPO being accounted for by changes in the explanatory variables. The work concludes that the desire to showcase impressive picture of corporate profitability through payment of enhanced dividend often breaches professional ethics in financial reporting The study recommends a more stringent regulatory regime with effective enforcement mechanisms to ensure compliance with accounting and auditing standards