DETERMINANTS OF EQUITY SHARE PRICE: EVIDENCE FROM THE NIGERIAN BANKING INDUSTRY (2000 – 2014)
Faculty: Management Sciences
Akan, D. C.
Nzewi, U. C.
This study sets out to assess share price determinants, namely: Earnings per Share, Net Asset Value per Share, Price Earnings Ratio, Interest Rate, Exchange Rate and Inflation Rate, in order to determine their level of effect on the share price in the Nigerian banking industry. Ex post Facto research design was adopted. Data on Earnings per Share, Net asset Value per Share and Price Earnings Ratio were collected from the financial reports of the sampled banks and the Factbook of the Nigerian Stock Exchange while data on Inflation, Exchange Rate and Interest Rate were collected from the Bulletin of the Central Bank of Nigeria. The Augmented Dickey Fuller was used to test the time series data for stationarity. The coefficients of the multiple regressions were used to determine the significance of the relationship between the independent and the dependent variables. Variance inflation factors were employed to test for multicollinearity and heteroskedasticity test was carried out for a result free of heteroskedasticity.The result revealed that Earnings per Share is positively but insignificantly related to MPS;NAVPS and Price-Earnings Ratio are significantly and negativelyrelated to share price; Inflation has a negative and significant relationshipwith share price; Interest Rate has an insignificant but negative influence on MPS while Exchange rate was significantly butnegatively related to share price. The study therefore recommended among others that, the listed Banks in Nigeria should endeavour to improve on their Earnings per share as it will increase their share price though not significantly. Inflation has a negative and significant relationship with the share prices of the listed Banks in Nigeria; Government should therefore endeavour to make policies that will reduce inflation to a bearable minimum. This is important because, the wellbeing of the stock market is an indication that the economy has not depressed.
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