The reliability of financial reporting and its impact on company valuation

Subject. This article focuses on the impact of the quality and accuracy of information disclosed in financial reporting on the formation of a public company's market value. Objectives. The article aims to justify the necessity to ensure the reliability of a company’s financial statements. This is essential for an objective assessment of the company’s value and maintaining its market attractiveness in conditions of uncertainty. Methods. For the study, I used the general scientific and specialized methods, including the method of retrospective analysis, as well as methods of ratio analysis and data synthesis. Real examples of intentional financial statement misrepresentation aimed at increasing stock market value formed the empirical basis of the study. Results. The article analyzes key metrics used to evaluate a business, which are based on financial statements and possess a certain degree of subjectivity in their calculation. It demonstrates methods of deliberately distorting key reporting metrics, in particular those used to calculate net assets and profit. The article also demonstrates the importance of assessing the quality of earnings in the context of business valuation and proposes an approach to identifying signs of earnings manipulation based on value creation metrics. Conclusions. Information interventions are an effective tool that has a significant impact on a company's market capitalization. Despite the presence of a positive audit opinion, the accuracy of the financial statements may be in doubt. Methods of creative accounting and the problem of agency relationships allow managers pursuing their own interests to manipulate reporting data, while the instability of the macroeconomic environment, in turn, exacerbates such risks. Nevertheless, applying a comprehensive approach to identifying the risks of intentional misstatement of reports can contribute to the timely detection of wrongful actions by management that pose a threat to the company's bankruptcy.