Accounting Information and Stock Prices of Quoted Manufacturing Firms: Multi-variant Panel Data Evidence from Nigeria
Keywords:
Accounting Information, Market Value, Quoted Manufacturing Firms, Panel Data, Nigeria.
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.
References
Adaramola, A. O. (2014). The relationship between financial accounting information and market values of quoted firms in Nigeria. Global Journal of contemporary research in accounting, Auditing and Business Ethics, 1 (1), 22-39.
Adaramola, A. O., & Oyerinde, A. A. (2014). The relationship between financial accounting information and market values of quoted firms in Nigeria. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics (GJCRA), 1(1), 22 -30.
Adebimpe, O. U., & Ekwere, R. E. (2015). IFRS adoption and value relevance of financial statements of Nigerian Listed Banks. International Journal of Finance and Accounting, 4(1), 1-7
AL- Shubiri, F. N. (2010). Analysis the determinants of market stock price movements: an empiric al study of Jordanian Commercial Banks. International Journal of Business and Management, 5(10), 137-147.
American Accounting Association (1977).Committee on concepts and standards for external financial reports. Statement on Accounting Theory and Theory Acceptance. American Accounting Association.
Amihud, Y. & Mendelson, H. (1986). Asset pricing and the bid-ask spread. Journal of Financial Economics, 17(2), 223-249.
Babalola. A. Y. (2012). Significance of accounting information on corporate value of firms in Nigeria. Research Journal in Organization Psychology and Education Studies, 1(2), 105-113.
Ball, R. (2001): Infrastructure requirements for an economically efficient system of public financial reporting and disclosure. Bookings- Wharton Papers On Financial Services.
Beaver, W. H. (1968). Market prices, financial ratios and the prediction of failure. Journal of Accounting Research, 179-192.
Beaver, W. H. (1968): The information content of annual earnings announcements. Journal Of Accounting Research( Empirical Research In Accounting: Selected Studies) 67-92.
Bernard, V. L. & Skinner, D. J. (1996). What motivates managers' choice of discretionary accruals? Journal of Accounting and Economics 22 (1/3), 313-325.
Beuselinck, C. (2005). Essays on financial reporting quality, earning management, and corporate disclosure. University of Ghent, Ghent, Belgium.
Black B. (2000): Legal and institutional preconditions for strong stock market. Working paper, John M Olin Program in Law and Economics, Stanford Law School.
Capital Market: A Garch Analysis Approach. International Review of Management And Business Research 2 (1),90-117.
Choi, B., Collins, D. & Johnson, W. (1997). Valuation implications of reliability differences: the case of non-pension postretirement obligations. The Accounting Review, 72, 351–383.
Choi, F. D. S. 1973. Financial disclosure and entry to the European capital market. Journal of Accounting Research (Autumn): 159-175.
Christian, C. (2004). The value-relevance of earnings and operating cash flows during mergers. Managerial Finance, 30 (11): 16-29.
Deegan .C. (2006).Introduction to financial accounting theory. New York: McGraw-Hill.
Deegan, C. (2002). The legitimising effect of social and environmental disclosures : A theoretical foundation. Accounting Auditing & Accountability Journal 15(3):282-311.
Diamond D. W. and Verrecchia R. E. (1987): Constraints on short selling and asset price adjustment to private information. Journal of Financial Economics 18, 272-311.
Diamond, D., & Verrecchia, R. (1991). Disclosure, liquidity, and the cost of capital. The Journal of Finance, 46(4), pp. 1325–1355.
Eleke-Aboagye, P.Q., & Opoku, E. (2013).The effect of earnings announcement on share prices in Ghana: A Study of Ghana Stock Exchange. Research Journalof Finance and Accounting, 4(17), 166 -186.
FASB. (1998). Objectives of financial reporting by business enterprises: statement of financial accounting concepts. No. 1 Stamford, CT: Financial Accounting Standards Board. Review of Accounting Studies, 8 (2-3): 221 – 243.
Freedman, J. (2015).What Are the Basic Accounting Theories? Demand Media.
Germon, H., & Meek, G.K. (2001). Accounting: an international perspective. McGraw Hill: Singapore.
Glezakos, M., Mylonakis, J., & Kafouros, C. (2012). The impact of accounting information on stock prices: evidence from the Athens stock exchange. International Journal of Economics and Finance, 4(2), 56–68.
Goddy, E.(2010).Suspension of firms: a timely intervention. Market Report. Lagos: This day Newspaper.
Gujarati, N. D. & Dawn, C. P. (2009). Essentials of econometrics. McGraw-Hill/Irwin, New York. Fifth Edition.
Gupta, S.C. (2011). Fundamentals of Statistics. New Delhi, Himalayo Publishing House PVT Ltd.
Healy, P.M. & Williston, J.R. (2005). The challenges facing auditors and analysts in U.S. capital markets. Lecture series of Business Administration Harvard Business School Harvard University. Working Paper.
Healy, P.M., & Palepu, K.G. (2001). Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1/3), pp. 405–440.
Healy,P.M., & Wahlen, J.M. (1999). A review of the earnings management literature and its implication for standard settings. Accounting Horizons, 13, 365-383 126.
Hendriksen, E. (1970). Accounting theory. Illinois: Richard D. Irwin.
Kabajeh, Nu’aimat & Dahmash. (2012). The relationship between the roa, roe and roi ratios with Jordanian insurance public companies market share price. International Journal of Humanities and Social Science, 2(11) 115 – 120.
King, R. D., &Langli, J. C. (1998).Accounting diversity and firm valuation. The International Journal of Accounting, 33, 529–567.
Kiremu, M. K.G., Galo, N., Wagala, A., &Mutegi, J. K. (2013).Stock price and volumes reaction to annual earnings announcement: a case of the Nairobi securities exchange. International Journal of Business, Humanities and Technology, (3(2), 100 -111.
Lang, M. and Lundholm (1993): Cross-sectional determinants of analyst ratings of corporate disclosures. Journal of Accounting Research, 246-271.
Lindblom, C.K. (1994). The implications of organizational legitimacy for corporate social performance and disclosure. Critical Perspectives on Accounting Conference. New York.
Mahmoudi, V., Shirkavand, S., & Salari, M. (2011). How do investors react to the Earnings Announcements. International Research Journal of Finance and Economics, 70, 145-152.
Mahmoudi, V., Shirkavand, S., & Salari, M. (2014). How do investors react to the earnings announcements. International Research Journal of Finance and Economics, 70.
Mgbame, C. O., & Ikhatua, O. J. (2013). Accounting information and stock volatility in the Nigerian capital markets: a GARCH analysis approach. International Review of Management and Business Research, 2.
OECD. (2002). Glossary of key terms in evaluation and results based management. Development Co-operation Directorate, OECD Publications, Paris.
Olawale, L. S. (2014). International financial reporting standard adoption and banks performance in Nigeria. Retrieved from http://ssrn.com/abstract=2513212.
Olawale, S. A. & Olaniyi K. L. (2015). Equity share price determinants: a survey of literature. Arabian Journal of Business and Management Review, 5(3), 38-54.
Olugbenga, A. A., &Atanda, O. A. (2014). The relationship between financial accounting information and market values of quoted firms in Nigeria. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics (GJCRA),1 (1), 22 -39.
Omoye, A. S. & Eriki, P. O. (2014). Corporate governance determinants of earnings management: Evidence from Nigerian quoted companies. Mediterranean Journal of Social Sciences, 5 (23) 553 – 564.
Oshodin, E., &Mgbame, C. O. (2014). The comparative study of value relevance of financial information in the Nigeria banking and petroleum sectors. Journal of Business Studies Quarterly,6(1), 42-54.
Oyerinde, D. T. (2009).Value relevance of accounting information in emerging stock market in Nigeria. Proceedings of the 10th annual international conference. International Academy of African Business and Development (IAABD),Uganda.
Oyerinde, D. T. (2011). Value- relevance of accounting information in the Nigerian Stock Market.The Department Of Accounting ,Covenant University, Ota, Nigeria.
Oyerinde, D. T. (2011).Value- relevance of accounting information in the Nigerian stock market. Ph.D Thesis, Covenant University, Ota, Nigeria.
Oyerinde, D. T. (2012).Value relevance of accounting information in the Nigerian Stock Market. A PhD thesis in the department of accounting, submitted to the School of Postgraduate Studies, Covenant University, Ota, Nigeria.
Ozlen, S. (2014). The effect of company fundamentals on stock values. European Researcher, (71), 3-2.
Pandey, I. M. (2005). Financial management. 10th ed.. New Delhi: Vikas Publishing House PVT Ltd.
Perera, R.A.A.S. & Thrikawala, S.S. (2010). An Empirical Study of the Relevance of Accounting Information on Investor’s Decisions. In: Proceedings of the 1st International Conference on Business and Information, University of Kelaniya.
Piot ,C. & Janin ,R. (2007) . External auditors, audit committees, and earnings management in France. European Accounting Review, 16(2), 429.
Quintus, V. (2007).The conceptual framework, accounting principles and what we believe is true. Accountancy SA; Accounting & Tax Periodicals, 30-33.
Shehzad, K., & Ismail, A. (2014). Value relevance of Accounting Information and its Impact on Stock Prices: Case Study of Listed Banks at Karachi Stock Exchange. Journal of Economic Info, 3(1), 40-48, 2014
Shleifer, A. & Vishny, R.W. (1997). A survey of corporate governance. The Journal Of Finance, LII, (2), 737–783.
Stulz, R.M. (2005). The Limits of Financial Globalization. NBER Working Papers 11070, National Bureau of Economic Research, Inc.
Tsalavoutas, I., Andre, P., Evans, L. (2012). The transition of international financial reporting standards and the value relevance of financial statements in Greece. The BritishAccounting Review, 44, 262-277.
Uthman, A. B., & Abdul-Baki, Z. (2014). The value relevance of accounting information in Nigeria. Journal of Accounting and Management (JAM), 4(1), 43-58.
Uwuigbe,U., Olusegun,O.,& Godswill,A. (2012). An Assessment of the Determinants of Share Price in Nigeria. ACTA Universities Danubius; 8 (6), 56-78.
Vijitha, P., & Nimalathasan, B. (2014). Value relevance of accounting information and share price: A study of listed manufacturing companies in Sri Lanka.Merit Research Journal of Business and Management 2(1) 001-006.
Wang, J., Fu, G., & Luo, C. (2013). Accounting information and stock price reaction of listed companies—empirical evidence from 60 listed companies in Shanghai Stock Exchange. Journal of Business & Management, 2(2), 11-21.
Watts, R.L. & Zimmerman, J.L. (1986). Positive accounting theory. Englewood Cliffs, N.J.: Prentice- Hall
Adaramola, A. O., & Oyerinde, A. A. (2014). The relationship between financial accounting information and market values of quoted firms in Nigeria. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics (GJCRA), 1(1), 22 -30.
Adebimpe, O. U., & Ekwere, R. E. (2015). IFRS adoption and value relevance of financial statements of Nigerian Listed Banks. International Journal of Finance and Accounting, 4(1), 1-7
AL- Shubiri, F. N. (2010). Analysis the determinants of market stock price movements: an empiric al study of Jordanian Commercial Banks. International Journal of Business and Management, 5(10), 137-147.
American Accounting Association (1977).Committee on concepts and standards for external financial reports. Statement on Accounting Theory and Theory Acceptance. American Accounting Association.
Amihud, Y. & Mendelson, H. (1986). Asset pricing and the bid-ask spread. Journal of Financial Economics, 17(2), 223-249.
Babalola. A. Y. (2012). Significance of accounting information on corporate value of firms in Nigeria. Research Journal in Organization Psychology and Education Studies, 1(2), 105-113.
Ball, R. (2001): Infrastructure requirements for an economically efficient system of public financial reporting and disclosure. Bookings- Wharton Papers On Financial Services.
Beaver, W. H. (1968). Market prices, financial ratios and the prediction of failure. Journal of Accounting Research, 179-192.
Beaver, W. H. (1968): The information content of annual earnings announcements. Journal Of Accounting Research( Empirical Research In Accounting: Selected Studies) 67-92.
Bernard, V. L. & Skinner, D. J. (1996). What motivates managers' choice of discretionary accruals? Journal of Accounting and Economics 22 (1/3), 313-325.
Beuselinck, C. (2005). Essays on financial reporting quality, earning management, and corporate disclosure. University of Ghent, Ghent, Belgium.
Black B. (2000): Legal and institutional preconditions for strong stock market. Working paper, John M Olin Program in Law and Economics, Stanford Law School.
Capital Market: A Garch Analysis Approach. International Review of Management And Business Research 2 (1),90-117.
Choi, B., Collins, D. & Johnson, W. (1997). Valuation implications of reliability differences: the case of non-pension postretirement obligations. The Accounting Review, 72, 351–383.
Choi, F. D. S. 1973. Financial disclosure and entry to the European capital market. Journal of Accounting Research (Autumn): 159-175.
Christian, C. (2004). The value-relevance of earnings and operating cash flows during mergers. Managerial Finance, 30 (11): 16-29.
Deegan .C. (2006).Introduction to financial accounting theory. New York: McGraw-Hill.
Deegan, C. (2002). The legitimising effect of social and environmental disclosures : A theoretical foundation. Accounting Auditing & Accountability Journal 15(3):282-311.
Diamond D. W. and Verrecchia R. E. (1987): Constraints on short selling and asset price adjustment to private information. Journal of Financial Economics 18, 272-311.
Diamond, D., & Verrecchia, R. (1991). Disclosure, liquidity, and the cost of capital. The Journal of Finance, 46(4), pp. 1325–1355.
Eleke-Aboagye, P.Q., & Opoku, E. (2013).The effect of earnings announcement on share prices in Ghana: A Study of Ghana Stock Exchange. Research Journalof Finance and Accounting, 4(17), 166 -186.
FASB. (1998). Objectives of financial reporting by business enterprises: statement of financial accounting concepts. No. 1 Stamford, CT: Financial Accounting Standards Board. Review of Accounting Studies, 8 (2-3): 221 – 243.
Freedman, J. (2015).What Are the Basic Accounting Theories? Demand Media.
Germon, H., & Meek, G.K. (2001). Accounting: an international perspective. McGraw Hill: Singapore.
Glezakos, M., Mylonakis, J., & Kafouros, C. (2012). The impact of accounting information on stock prices: evidence from the Athens stock exchange. International Journal of Economics and Finance, 4(2), 56–68.
Goddy, E.(2010).Suspension of firms: a timely intervention. Market Report. Lagos: This day Newspaper.
Gujarati, N. D. & Dawn, C. P. (2009). Essentials of econometrics. McGraw-Hill/Irwin, New York. Fifth Edition.
Gupta, S.C. (2011). Fundamentals of Statistics. New Delhi, Himalayo Publishing House PVT Ltd.
Healy, P.M. & Williston, J.R. (2005). The challenges facing auditors and analysts in U.S. capital markets. Lecture series of Business Administration Harvard Business School Harvard University. Working Paper.
Healy, P.M., & Palepu, K.G. (2001). Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. Journal of Accounting and Economics, 31(1/3), pp. 405–440.
Healy,P.M., & Wahlen, J.M. (1999). A review of the earnings management literature and its implication for standard settings. Accounting Horizons, 13, 365-383 126.
Hendriksen, E. (1970). Accounting theory. Illinois: Richard D. Irwin.
Kabajeh, Nu’aimat & Dahmash. (2012). The relationship between the roa, roe and roi ratios with Jordanian insurance public companies market share price. International Journal of Humanities and Social Science, 2(11) 115 – 120.
King, R. D., &Langli, J. C. (1998).Accounting diversity and firm valuation. The International Journal of Accounting, 33, 529–567.
Kiremu, M. K.G., Galo, N., Wagala, A., &Mutegi, J. K. (2013).Stock price and volumes reaction to annual earnings announcement: a case of the Nairobi securities exchange. International Journal of Business, Humanities and Technology, (3(2), 100 -111.
Lang, M. and Lundholm (1993): Cross-sectional determinants of analyst ratings of corporate disclosures. Journal of Accounting Research, 246-271.
Lindblom, C.K. (1994). The implications of organizational legitimacy for corporate social performance and disclosure. Critical Perspectives on Accounting Conference. New York.
Mahmoudi, V., Shirkavand, S., & Salari, M. (2011). How do investors react to the Earnings Announcements. International Research Journal of Finance and Economics, 70, 145-152.
Mahmoudi, V., Shirkavand, S., & Salari, M. (2014). How do investors react to the earnings announcements. International Research Journal of Finance and Economics, 70.
Mgbame, C. O., & Ikhatua, O. J. (2013). Accounting information and stock volatility in the Nigerian capital markets: a GARCH analysis approach. International Review of Management and Business Research, 2.
OECD. (2002). Glossary of key terms in evaluation and results based management. Development Co-operation Directorate, OECD Publications, Paris.
Olawale, L. S. (2014). International financial reporting standard adoption and banks performance in Nigeria. Retrieved from http://ssrn.com/abstract=2513212.
Olawale, S. A. & Olaniyi K. L. (2015). Equity share price determinants: a survey of literature. Arabian Journal of Business and Management Review, 5(3), 38-54.
Olugbenga, A. A., &Atanda, O. A. (2014). The relationship between financial accounting information and market values of quoted firms in Nigeria. Global Journal of Contemporary Research in Accounting, Auditing and Business Ethics (GJCRA),1 (1), 22 -39.
Omoye, A. S. & Eriki, P. O. (2014). Corporate governance determinants of earnings management: Evidence from Nigerian quoted companies. Mediterranean Journal of Social Sciences, 5 (23) 553 – 564.
Oshodin, E., &Mgbame, C. O. (2014). The comparative study of value relevance of financial information in the Nigeria banking and petroleum sectors. Journal of Business Studies Quarterly,6(1), 42-54.
Oyerinde, D. T. (2009).Value relevance of accounting information in emerging stock market in Nigeria. Proceedings of the 10th annual international conference. International Academy of African Business and Development (IAABD),Uganda.
Oyerinde, D. T. (2011). Value- relevance of accounting information in the Nigerian Stock Market.The Department Of Accounting ,Covenant University, Ota, Nigeria.
Oyerinde, D. T. (2011).Value- relevance of accounting information in the Nigerian stock market. Ph.D Thesis, Covenant University, Ota, Nigeria.
Oyerinde, D. T. (2012).Value relevance of accounting information in the Nigerian Stock Market. A PhD thesis in the department of accounting, submitted to the School of Postgraduate Studies, Covenant University, Ota, Nigeria.
Ozlen, S. (2014). The effect of company fundamentals on stock values. European Researcher, (71), 3-2.
Pandey, I. M. (2005). Financial management. 10th ed.. New Delhi: Vikas Publishing House PVT Ltd.
Perera, R.A.A.S. & Thrikawala, S.S. (2010). An Empirical Study of the Relevance of Accounting Information on Investor’s Decisions. In: Proceedings of the 1st International Conference on Business and Information, University of Kelaniya.
Piot ,C. & Janin ,R. (2007) . External auditors, audit committees, and earnings management in France. European Accounting Review, 16(2), 429.
Quintus, V. (2007).The conceptual framework, accounting principles and what we believe is true. Accountancy SA; Accounting & Tax Periodicals, 30-33.
Shehzad, K., & Ismail, A. (2014). Value relevance of Accounting Information and its Impact on Stock Prices: Case Study of Listed Banks at Karachi Stock Exchange. Journal of Economic Info, 3(1), 40-48, 2014
Shleifer, A. & Vishny, R.W. (1997). A survey of corporate governance. The Journal Of Finance, LII, (2), 737–783.
Stulz, R.M. (2005). The Limits of Financial Globalization. NBER Working Papers 11070, National Bureau of Economic Research, Inc.
Tsalavoutas, I., Andre, P., Evans, L. (2012). The transition of international financial reporting standards and the value relevance of financial statements in Greece. The BritishAccounting Review, 44, 262-277.
Uthman, A. B., & Abdul-Baki, Z. (2014). The value relevance of accounting information in Nigeria. Journal of Accounting and Management (JAM), 4(1), 43-58.
Uwuigbe,U., Olusegun,O.,& Godswill,A. (2012). An Assessment of the Determinants of Share Price in Nigeria. ACTA Universities Danubius; 8 (6), 56-78.
Vijitha, P., & Nimalathasan, B. (2014). Value relevance of accounting information and share price: A study of listed manufacturing companies in Sri Lanka.Merit Research Journal of Business and Management 2(1) 001-006.
Wang, J., Fu, G., & Luo, C. (2013). Accounting information and stock price reaction of listed companies—empirical evidence from 60 listed companies in Shanghai Stock Exchange. Journal of Business & Management, 2(2), 11-21.
Watts, R.L. & Zimmerman, J.L. (1986). Positive accounting theory. Englewood Cliffs, N.J.: Prentice- Hall
Published
2020-03-07
How to Cite
Innocent, O., Ibanichuka, E., & Micah, L. (2020). Accounting Information and Stock Prices of Quoted Manufacturing Firms: Multi-variant Panel Data Evidence from Nigeria. Asian Finance & Banking Review, 4(1), 1-16. https://doi.org/10.46281/asfbr.v4i1.505
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2020 Okoro Innocent; E.A.L. Ibanichuka; L.C. Micah
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