Accounting Information and Value Relevance in an Economy Under Recession: The Nigeria Experience
Keywords:
Environmental Accounting, Value Relevance of Accounting Information, Commercial Bank.
Abstract
This study examined accounting information system and value relevance in accounting in an emerging economy under recession. The objective was to examine the relationship between accounting information and value relevance of commercial banks. Time series data was sourced from the financial statements and annual reports of quoted commercial banks from 2000-2015. Earnings per share and dividend per share was modeled as the function of ordinary share capital, book value of equity, earnings before interest and tax, market value of equity, cash flow and leverage ratio. Multiple regressions were formulated to explore the relationship between the variables. Model I found that all the independent variables have positive relationship with earnings per share while model II found that cash flow and leverage ratio have negative effect on dividend per share. The regression summary prove that model I have an R2 of 72.7% and 62.3%, f-statistics of 7.007 and probability of 0.000162 while model II found an R2 of 75.9% and 66.7%, f-statistics of 8.293, probability of 0.000049. From the above, we conclude that accounting information have significant relationship with value relevance among the commercial banks. The study recommend well formulated policies for the validity of accounting information that can enhance value relevance.
References
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Alford, A.,J., Jone, R., Leftwich, R. and M. Zmijewiski. (1993).The Relative informativeness of Accounting Disclusure in Different Countries. Journal of Accounting Research, 31 (5), 183-223.
Amir, E., Harris, T. S. and Venuti, E. K. (1993). A Comparision of Value Relevance of US versus Non-US GAAP Accounting Measure Using From 20-F Reconciliations. Journal of Accounting Research 31:230-264.
Ayers B. C. (1998). Deferred tax accounting under SFAS No. 109: an empirical investigation of its incremental value-relevance relative to APB No. 11. Accounting Review 25(3): 1-34.
Ayzer, B.F. & Cema, I. (2013). Effects of new financial report standards on value relevance. A study of Turkish stock markets. International Journal of Economics and Finance.5(10)10-13.
Babalyan, L. (2001). Association between accounting earnings and stock returns as measure of value relevance of accounting standard: empirical evidence from Swissmarket. EFA Berlin Meetings, Discussion paper.
Ball R. and Brown P. (1968). An Empirical Examination of Accounting Income Numbers. Journal of Accounting Research, 6:158-178.
Ball, R., & Brown, P. (1968). An empirical examination of accounting income numbers. Journal of Accounting Research, 6(2), 159-178.
Barth M. E., Beaver W. H., and Landsman W. R. (2001). The relevance of the Value Relevance Literature for Financial Accounting Standard Setting: Another View. Journal of Accounting Economics, 31: 77-104.
Barth M. E., Beaver, W. H., and Landsman W. R. (1998). Relative Valuation Roles of Equity Book Value and Net Income as Function of Financial Health. Journal of Accounting Economics, 25(12), 1-34.
Beaver W. H. (1968). The information Content of Annual Earnings Announcements. Journal of Accounting Research, 6(3), 67-92.
Beaver, W. (1998). Financial reporting: An accounting revolution. Third edition. Upper Saddle, NJ: Prentice Hall.Beisland,
Ben, N. & Nachi, W. (2007). Does the Tunisian accounting reform improve the value relevance of financial information? Afro-Asian Journal of Accounting and Finance, 2 (3), 19-34.
Chen J. P.; Chen S. and Su X. (1999). Is Accounting Information Value Relevant in the Emerging Chinese Stock Market? Journal of International Account. Audit and Taxation. 10(5),1-22
Collins, D. W., Maydew, E. L., and Weiss, I. S. (1997). Changes in the Value Relevance of Earnings and Book Values Over the Past Forth Years. Journal of Accounting and Economics, 24(1), 39-68
Dumontier, P. and Raffornier, B. (2002). Accounting and Capital markets: A Survey of the European Evidence. The European Accounting Review, 11(1), 119-151.
Francis, J. & Schipper, K. (1999). Have financial statements lost their relevance. Journal of Accounting Research, 37(2), 319-352.
Francis, J., Schipper, K., & Vincent, L. 2002. Expanded disclosures and increased usefulness of earnings announcements. Accounting Review, 77(3), 515-546.
Gaston, S. C., Fernadez, B. C., Harne J. I., and Gadea, J. A. L. (2003).The Valuation of Earnings Components by the Capital markets: An International Comparison. Documento de Trabajo.
Glezakos, M., Mylonakis, J. & Kafuoros, C. (2012). The impact of accounting information on stock prices: evidence from Athens stock exchange.
Habib, W.M & Elhamawy, S.M. (2009). On the value relevance of finance cash flows and accounting accruals: empirical evidence from Egypt. Ains Shams University Journal of Economic studies. 3(1), 1-22.
Halonen, E., Pavlovia, J. , & Pearson, R. (2013). Value relevance of accounting information and its impact on stock prices: Evidence from Sweden. Department of /economics Stockholm University.
Keener, M.H. (2011). The relative value relevance of earnings and book values across industries. Journal of Finance and Accounting. 3(2), 9-19.
Lev, B. , & Zarowin, P. (1999). The boundaries of financial reporting and how to extend them. Journal of Accounting Research, 37(2),353-385.
Melissa, A.N. (2013). Value relevance of financial statement information: Evidence from listed firms in Kenya. Advances in Management and Applied Economics. 3(1), 115-134.
Mingyi, H. (2000). Accounting Standards and Value Relevance of Financial Statement: An International Analysis. Journal of Accounting Economic 30 (12),401-4 20.
Modigliani, F. and Miller, M. (1959), The Cost of Capital Corporate Finance and the theory of Investment. American economic Review, 48: 261-297.
Ndubizu. G. A. and Sanchez M. (2004).The valuation Properties of Earnings and Book Values Prepared under US GAAP in Chile and IAS in Peru. International Journal of Accounting, 55 (9),235-352.
Ng, A.C., Gul, F.A. , Mensah, Y.M. (2007). Managerial entrenchment and value relevance of earnings during the preand post-Sarbanes Oxley periods.
Ohlson J. A. (1995). Earnings, Book Values and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661-687.
Ohlson J. A. and Penman S. H. (1992). Disaggregated accounting data as explanatory variables for returns. Journal of Accounting, Auditing & Finance7 (4), 553-573.
Olga, F. & Veltri, S. (2012). A critical analysis for the empirical researches on comprehensive income value relevance. European Journal of scientific research 76(4) 587-594.
Ortega, X. (2006). Reinvestigation of value relevance of earnings, book values and cash flow in security prices over time. Journal of finance and Accounting, 2(9),34-47.
Oyerinde, D.T. (2009). Value relevance of accounting information in emerging stock market: The case of Nigeria. Accounting and Finance Research ,4(3), 134-149.
Pope P. E. (1993). Discussion of Value Relevance of US Versus Non –US GAAP Accounting Measures Using Form 20-F Reconciliations. Journal of Accounting Research 31(5), 265-75.
Pope, P. E.; Walker M. and Sentiono B. (1996).International Differences in Value Relevance of Accounting Numbers: Timeliness. Permanence and Conservatism Under US and UK GAAP. Lancaster University, management School. Working Papers.
Ragab, Aiman A. and Omiran Mohammad M. (2006).Acc ounting Information. Value Relevance and Investors? Behaviour in the Egyptian Equity Market. Review of Accounting and Finance 5 (3) 279-297.
Vijitha, P. ,& Imalathasan, B. (2014). Value relevance of published financial statements with special emphasis on impact of cash flow reporting. International Research Journal of Finance and Economics, 17(1), 1450-2887.
Waalandri, E. R. and Rahman, A. R. (2004). A Cross Country Study on the Quality Acceptability and Enforceability of Accounting Standards and the Value Relevance of Accounting Earnings. Journal of Accounting Research, 42(2),304-31.
Alford, A.,J., Jone, R., Leftwich, R. and M. Zmijewiski. (1993).The Relative informativeness of Accounting Disclusure in Different Countries. Journal of Accounting Research, 31 (5), 183-223.
Amir, E., Harris, T. S. and Venuti, E. K. (1993). A Comparision of Value Relevance of US versus Non-US GAAP Accounting Measure Using From 20-F Reconciliations. Journal of Accounting Research 31:230-264.
Ayers B. C. (1998). Deferred tax accounting under SFAS No. 109: an empirical investigation of its incremental value-relevance relative to APB No. 11. Accounting Review 25(3): 1-34.
Ayzer, B.F. & Cema, I. (2013). Effects of new financial report standards on value relevance. A study of Turkish stock markets. International Journal of Economics and Finance.5(10)10-13.
Babalyan, L. (2001). Association between accounting earnings and stock returns as measure of value relevance of accounting standard: empirical evidence from Swissmarket. EFA Berlin Meetings, Discussion paper.
Ball R. and Brown P. (1968). An Empirical Examination of Accounting Income Numbers. Journal of Accounting Research, 6:158-178.
Ball, R., & Brown, P. (1968). An empirical examination of accounting income numbers. Journal of Accounting Research, 6(2), 159-178.
Barth M. E., Beaver W. H., and Landsman W. R. (2001). The relevance of the Value Relevance Literature for Financial Accounting Standard Setting: Another View. Journal of Accounting Economics, 31: 77-104.
Barth M. E., Beaver, W. H., and Landsman W. R. (1998). Relative Valuation Roles of Equity Book Value and Net Income as Function of Financial Health. Journal of Accounting Economics, 25(12), 1-34.
Beaver W. H. (1968). The information Content of Annual Earnings Announcements. Journal of Accounting Research, 6(3), 67-92.
Beaver, W. (1998). Financial reporting: An accounting revolution. Third edition. Upper Saddle, NJ: Prentice Hall.Beisland,
Ben, N. & Nachi, W. (2007). Does the Tunisian accounting reform improve the value relevance of financial information? Afro-Asian Journal of Accounting and Finance, 2 (3), 19-34.
Chen J. P.; Chen S. and Su X. (1999). Is Accounting Information Value Relevant in the Emerging Chinese Stock Market? Journal of International Account. Audit and Taxation. 10(5),1-22
Collins, D. W., Maydew, E. L., and Weiss, I. S. (1997). Changes in the Value Relevance of Earnings and Book Values Over the Past Forth Years. Journal of Accounting and Economics, 24(1), 39-68
Dumontier, P. and Raffornier, B. (2002). Accounting and Capital markets: A Survey of the European Evidence. The European Accounting Review, 11(1), 119-151.
Francis, J. & Schipper, K. (1999). Have financial statements lost their relevance. Journal of Accounting Research, 37(2), 319-352.
Francis, J., Schipper, K., & Vincent, L. 2002. Expanded disclosures and increased usefulness of earnings announcements. Accounting Review, 77(3), 515-546.
Gaston, S. C., Fernadez, B. C., Harne J. I., and Gadea, J. A. L. (2003).The Valuation of Earnings Components by the Capital markets: An International Comparison. Documento de Trabajo.
Glezakos, M., Mylonakis, J. & Kafuoros, C. (2012). The impact of accounting information on stock prices: evidence from Athens stock exchange.
Habib, W.M & Elhamawy, S.M. (2009). On the value relevance of finance cash flows and accounting accruals: empirical evidence from Egypt. Ains Shams University Journal of Economic studies. 3(1), 1-22.
Halonen, E., Pavlovia, J. , & Pearson, R. (2013). Value relevance of accounting information and its impact on stock prices: Evidence from Sweden. Department of /economics Stockholm University.
Keener, M.H. (2011). The relative value relevance of earnings and book values across industries. Journal of Finance and Accounting. 3(2), 9-19.
Lev, B. , & Zarowin, P. (1999). The boundaries of financial reporting and how to extend them. Journal of Accounting Research, 37(2),353-385.
Melissa, A.N. (2013). Value relevance of financial statement information: Evidence from listed firms in Kenya. Advances in Management and Applied Economics. 3(1), 115-134.
Mingyi, H. (2000). Accounting Standards and Value Relevance of Financial Statement: An International Analysis. Journal of Accounting Economic 30 (12),401-4 20.
Modigliani, F. and Miller, M. (1959), The Cost of Capital Corporate Finance and the theory of Investment. American economic Review, 48: 261-297.
Ndubizu. G. A. and Sanchez M. (2004).The valuation Properties of Earnings and Book Values Prepared under US GAAP in Chile and IAS in Peru. International Journal of Accounting, 55 (9),235-352.
Ng, A.C., Gul, F.A. , Mensah, Y.M. (2007). Managerial entrenchment and value relevance of earnings during the preand post-Sarbanes Oxley periods.
Ohlson J. A. (1995). Earnings, Book Values and Dividends in Equity Valuation. Contemporary Accounting Research, 11(2), 661-687.
Ohlson J. A. and Penman S. H. (1992). Disaggregated accounting data as explanatory variables for returns. Journal of Accounting, Auditing & Finance7 (4), 553-573.
Olga, F. & Veltri, S. (2012). A critical analysis for the empirical researches on comprehensive income value relevance. European Journal of scientific research 76(4) 587-594.
Ortega, X. (2006). Reinvestigation of value relevance of earnings, book values and cash flow in security prices over time. Journal of finance and Accounting, 2(9),34-47.
Oyerinde, D.T. (2009). Value relevance of accounting information in emerging stock market: The case of Nigeria. Accounting and Finance Research ,4(3), 134-149.
Pope P. E. (1993). Discussion of Value Relevance of US Versus Non –US GAAP Accounting Measures Using Form 20-F Reconciliations. Journal of Accounting Research 31(5), 265-75.
Pope, P. E.; Walker M. and Sentiono B. (1996).International Differences in Value Relevance of Accounting Numbers: Timeliness. Permanence and Conservatism Under US and UK GAAP. Lancaster University, management School. Working Papers.
Ragab, Aiman A. and Omiran Mohammad M. (2006).Acc ounting Information. Value Relevance and Investors? Behaviour in the Egyptian Equity Market. Review of Accounting and Finance 5 (3) 279-297.
Vijitha, P. ,& Imalathasan, B. (2014). Value relevance of published financial statements with special emphasis on impact of cash flow reporting. International Research Journal of Finance and Economics, 17(1), 1450-2887.
Waalandri, E. R. and Rahman, A. R. (2004). A Cross Country Study on the Quality Acceptability and Enforceability of Accounting Standards and the Value Relevance of Accounting Earnings. Journal of Accounting Research, 42(2),304-31.
Published
2018-04-04
How to Cite
Ogbonna, G. N., & Captain Briggs, A. (2018). Accounting Information and Value Relevance in an Economy Under Recession: The Nigeria Experience. International Journal of Accounting & Finance Review, 2(1), 68-80. https://doi.org/10.46281/ijafr.v2i1.23
Section
Research Paper/Theoretical Paper/Review Paper/Short Communication Paper
Copyright (c) 2018 G. N. Ogbonna, Alasin Captain Briggs
This work is licensed under a Creative Commons Attribution 4.0 International License.
