Title: Creative accounting practice and business performance: evidence from Pakistan

Authors: Ali Malik, Jonathan Liu, Orthodoxia Kyriacou

Addresses: Department of Accounting, Finance and Economics, University of Hertfordshire Business School, Hatifield AL10 9AB, UK. ' Regents College, Inner Circle Regents Park, London NW1 4NS, UK. ' Middlesex University, Middlesex University Business School, The Buroughs, Hendon, London, NW4 4BT, UK

Abstract: This paper explores the issue of creative accounting and evidence of its use in Pakistan. The financial characteristics of Pakistani companies, officially or publically identified for using some form of creative accounting are investigated and explored. Through the use of financial ratios and a control sample of companies identified for not having used creative accounting are analysed and compared. Survey results show statistically significant differences in sample-control comparison of ratios and indicate that there appears to be a convergence of opinions on the use of such practices. Further, the findings provide evidence that financial characteristics, as measured by ratios, could be used as a tool to identify companies that are likely to be involved in creative accounting and therefore form a basis for measuring, controlling and influencing how company performance may be perceived.

Keywords: creative accounting; gearing; performance measurement; ratio analysis; Pakistan; business performance; financial ratios; firm performance.

DOI: 10.1504/IJBPM.2011.039888

International Journal of Business Performance Management, 2011 Vol.12 No.3, pp.228 - 241

Received: 13 Nov 2010
Accepted: 17 Dec 2010

Published online: 21 Oct 2014 *

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