Value relevance of financial statements and share price: a study of listed banks in Nigeria

Olubukola Ranti Uwuigbe,Olufemi Adebayo Oladipo,Uwalomwa Uwuigbe,Ebeguki Edith Igbinoba,Jimoh Jafaru

doi:10.21511/bbs.11(4-1).2016.04

Olubukola Ranti Uwuigbe, Olufemi Adebayo Oladipo + Show 3 more

Open Access

https://doi.org/10.21511/bbs.11(4-1).2016.04

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Abstract

This paper examined the effects of value relevance of financial statements on firms share price in Nigeria. In achieving the objectives of this research, the fact book from the Nigerian Stock Exchange Market and the audited financial statement of listed banks spanning the period 2010-2014 were used. Also, a total of 15 listed banks in the Nigerian stock exchange market were selected and analyzed for the study using the purposive sampling method. However, in analyzing the research hypotheses, the study adopted the use of both descriptive statistics and the use of Fixed Effects Panel data method of data analysis technique. Findings from the study showed that a significant positive relationship existed between earnings per share (EPS) and Last day share price (LDSP). The study recommends the need for banks in the country to improve on the quality of earnings reported, since it has a stronger ability to explaining share prices of firm. Keywords: value relevance, financial statements, Nigerian, earnings per share, last day share, price, book value per share, accounting information. JEL Classification: M41, G21

Highlights

Organizations are basically responsible for the preparations of their financial statements and, need to ensure that the statements represent the actual financial status or position of their firm
H2: Book value per share has no significant impact on stock prices of firms listed on the Nigerian Stock Exchange
Findings from the second hypothesis suggest that there is a significant negative relationship between book value per share (BVPS) and last day share price (LDSP) of firms listed on the Nigerian Stock Exchange

Summary

Introduction

Organizations are basically responsible for the preparations of their financial statements and, need to ensure that the statements represent the actual financial status or position of their firm. The main objective of accounting information is to help investors in making informed investment decision-making more effective and efficient. Financial statement fundamentally summarizes business transactions and other events, as they relate to the performance of organisations. Value relevance here is measured by its ability to summarize accounting information (Francis & Schipper, 1999). For financial reports to be relevant, the information content must be relevant in investment decision-making. From an investor’s perspective, only information that contributes to the investment decisions of an investor is important (Omokhudu & Ibadin, 2015)

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Conclusion