Accounting Numbers and Stock Prices in the Nigerian Stock Market
2016
This research is motivated to study the extent to which accounting information
summarizes stock prices in Nigerian stock market as an indicator of value relevance. Piece
of accounting data is termed value relevant if it is significantly related to the dependent
variable, which may be expressed by the stock price. The methods used for gauging
information contents of various accounting numbers were Ordinary Least Squared (OLS),
Random Effects Model (REM), and Fixed Effects Model (FEM). The findings show that there
is a significant relationship between accounting information and share prices of companies
listed on the Nigerian Stock Exchange. Dividends are the most widely used accounting
information for investment decisions in Nigeria, followed by earnings and net book value.
The study therefore recommends that the firms should improve the quality of earnings as
manipulated earnings (of which dividends are sub-sets) have large effects on share prices.
The paper also recommends that all companies listed on the Nigerian Stock Exchange
should prepare Simplified Investor’s Summary Accounts (SISA) with emphasis on the most
widely used accounting information along the required mandatory detailed financial
statements to suit Nigerian peculiarities. The study’s findings and recommendations may
be of use to National Standard Setters, preparers of accounting information, Nigerian Stock
Exchange Regulators, investors and other emerging stock market
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