Accounting Information and Stock Prices of Quoted Manufacturing Firms: Multi-variant Panel Data Evidence from Nigeria

E.A.L Ibanichuka,L.C Micah,Okoro Innocent

doi:10.46281/asfbr.v4i1.505

Abstract

This study the relationship between accounting information and the stock prices 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. Stock price of the firms was modeled as a function of assets turnover rate, book value per share and debt equity ratio. 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 78 percent variation on the market value of the quoted firms. The beta coefficient of the variables indicates debt equity ratio and assets turnover rate have positive effect on the stock prices of the quoted firms while book value per share have negative effect on the stock prices of the manufacturing firms. From the regression summary, the study concludes that there is significant relationship between accounting information and prices of the quoted firms. The study recommends that management of the manufacturing firms should formulate policies that will increase book value per share and internal and external factors that affect negatively the book value per share of the firms should be discouraged.

Highlights

Prior to the deregulation of stock market in Nigeria, stock prices of newly issued and existing stocks were regulated by the regulatory agent of the market, the Nigerian Securities and Exchange Commission, without reference to internal factors such as financial information that can affect stock prices of listed firms
The effect of stock volatility arising from the role of accounting information disclosure in mitigating uncertainty, accounting disclosures may reduce the magnitude of the impact of news about a firm’s performance, which would reduce stock price volatility (Lang and Lundholm 1993; Bushee and Noe 2000)
The findings reveal that adoption of International Financial Reporting Standard (IFRS) made earnings reported by Nigerian Commercial banks to become more informative to equity investors in determining the value of banks and that equity value and earnings of banks are relatively value relevant to share prices

Summary

Introduction

Prior to the deregulation of stock market in Nigeria, stock prices of newly issued and existing stocks were regulated by the regulatory agent of the market, the Nigerian Securities and Exchange Commission, without reference to internal factors such as financial information that can affect stock prices of listed firms. Stock prices in the Nigerian stock Exchange moves up and down in response to news and information expected about the particular stock in the market. The news and information cause buyers and sellers of common stocks to take buying and selling decisions which generate market activities that affect market value (Aflbi and Dada, 2014). Stock price constitute the value of a firm (Pandey, 2005). The market microstructure theory suggest that by increasing the amount of public information, disclosure is likely to reduce information asymmetries in the market that result in pronounced price changes in response to changes in demand for the stock (Diamond and Verrecchia 1991)

Objectives

Methods

Findings

Discussion

Conclusion