Accounting Conservatism and Political Connections: The Nigerian Experience

Abstract

This study conceptually investigates the connectivity between politics and accounting conservatism in Nigeria. To achieve this, extant literatures were reviewed. Political connections were measure directly using firms’ Chief Executive Officer (CEO) or board chairman’s political background and affiliation, while most prior studies measure them indirectly using firms’ donations to political elections or firms’ economic importance to the government. Our direct measure reduces noise in the political connection variable and allows us to more accurately investigate the connectivity of politically connected managers and the observers and application of firms’ accounting conservatism rules. It was discovered that the relationship between political connections and accounting conservatism is insignificant because political connections may impair accounting conservatism on one aspect, but may also strengthen accounting conservatism
on the other hand. From the mixed findings, it was however, concluded with the recommendation that the country (Nigeria) as a whole should make sure that political stewardship accounting system is set up and strictly implemented, so as to guide against mal-administration by the public officers and politicians that are currently affecting every individual/private sector in the country.