Abstract
This study the relationship between accounting information and the market value of quoted firms in Nigeria. The general objective was to examine if accounting information have any effect on market value of quoted firms. Cross sectional data was sourced from financial statement of 23 manufacturing firm from 2008-2017. Market value of the firms was modeled as a function of earnings per share, return on equity and dividend per share. Ordinary least square method of cointgration, unit root and granger causality test was used to determine the extent to which human resource cost affect quality of financial report. After cross examination of the validity of the pooled effect, fixed effect and the random effect, the study accepts the fixed effect model. The study found that the independent variables explained 79 percent variation on the market value of the quoted firms. The beta coefficient of the variables indicates return on equity; earnings per share, dividend per share have positive effect on the market value of the quoted firms. From the regression summary, the study concludes that there is significant relationship between accounting information and market value of the quoted firms. The study recommends that management of the firms should formulate dividend policy that enhances the market value of the firms. Corporate strategies should be directed toward internal and external factors that affect earnings per share.
Highlights
In the absence of adequate financial information, investors would not be in a position to make wise investment decisions, because it will be difficult to distinguish between potentially successful and unsuccessful businesses (Sharma, 2014)
Most of the studies on value relevance of earnings per share and share price results reported to be significant and positive related with share price, this supported by the results found by Pathirawasam (2010) in Sri-Lanka observed earnings per share to have positive value relevance on the market share price of 129 companies selected from 6 major sectors listed at Colombo stock exchange and other study done by different researchers including (Tharmila, 2013; Vijitha, & Namalathan (2014) in Sri-Lanka, by Ragab (2006) in Egyptian market, Miah(2012) in Bangladesh, (Thompson & Adah, 2012; Olugbenga & Oyerinde, 2014) in Nigeria and Shamki & Rahman (2012) in Jordan reported the same results
Discussion of Findings This study examined the effect of accounting information on the market value of quoted manufacturing firms in Nigeria
Summary
In the absence of adequate financial information, investors would not be in a position to make wise investment decisions, because it will be difficult to distinguish between potentially successful and unsuccessful businesses (Sharma, 2014). Existing and potential equity share investors often use accounting information to make investment decisions: they often use corporate financial information to review its financial health and operational profitability. This provides information about whether or not investing in the equity share of the company is a wise investment decision. The investors’ decisions to buy or not to take stock depend upon financial information and the more investors use financial information, it is expected that rational decisions are made (Shehzaand & Ismail, 2014). The increasing rate of corporate scandals such as Eron, Worldcom, Parmalat, Command, flowtax, Oceanic Bank, Intercontinental Bank questions the www.cribfb.com/journal/index.php/amfbr
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