Does Book Values and Earnings Affect Equity Values of Corporate Entities in Nigeria?

Abstract

Purpose of the article: In this study, we appraised the effect which book values and earnings would have on equity values of quoted corporate entities in Nigeria. In view of this, we obtained secondary data from the published reports of 105 firms selected for this study. The study period was 10 years (2005–2014). Methodology/methods: The regression technique was employed to scrutinize the data sourced from sampled entities’ annual accounts. Additionally, the Breusch-Pagan/ Cook-Weisberg Test was employed along with the VIF Test to verify whether the sourced data were normally distributed or whether there was the presence or otherwise of multicollinearity amid the explanatory (independent) variables. Scientific aim: This study aims to empirically establish with available statistics, the extent in which variations in equity values of quoted corporate entities in Nigeria could be accounted for by changes in book values and earnings. Findings: Results from our analysis revealed inter alia, that book value per share and earnings jointly had significant and positive effect on equity values of Nigerian quoted firms. Conclusion: Since earnings was significant in attempting to ascertain equity values of Nigerian firms, it was thus recommend that regulatory bodies like the Financial Reporting Council of Nigeria among others should develop enforceable strategies and sanctions that would discourage and eliminate all forms of earnings manipulation that may distort the information reported in the financial statements of quoted corporate entities in Nigeria.