SOURCE:

Faculty: Management Sciences
Department: Accountancy

CONTRIBUTORS:

Jeroh, E.
Osisioma, B. C.

ABSTRACT:

This research work aimed at ascertaining the value relevance of financial accounting information on equity valuation of quoted firms in Nigeria. In order to achieve the objective of this study, research questions and hypotheses were formulated. Data on value of equity and financial accounting variables used in this study were obtained from the annual reports and accounts of quoted firms in Nigeria, and the statistical bulletin of the Securities and Exchange Commission for a period of ten (10) years spanning from 2005 – 2014. By adopting the quasi experimental design, the data obtained for this study were presented and analysed by means of the correlation and regression techniques in addition to the Chow test where applicable, via the Statistical Package for Social Sciences (SPSS 20.0). Findings from this study indicated that the combination of financial accounting variables was value relevant in the area of equity valuation of firms in Nigeria. We also found that the value relevance of earnings when taken as a single variable was greater than that of book value and other financial accounting variables reported by quoted firms in Nigeria. In addition, we found that external factors like the global financial crisis and the adoption of the International Financial Reporting Standards (IFRS) in Nigeria had significant effect on the value relevance of earnings and other accounting variables in the area of equity valuation of Nigerian Firms. Interestingly, empirical evidence from this study also indicated among others that a statistical difference in the value relevance of accounting information was evident across the various industrial sectors/categories in Nigeria. On the basis of the above findings, we recommended that the information environment in Nigeria should be developed such that people can have free access, not just to information, but to complete information about reporting entities quoted on the floor of the Nigerian Stock Exchange. Also, concerted efforts must be made by management and all stakeholders to see that the necessary modalities are in place to guarantee the full implementation of the requirements and updates/revisions of IFRS. In this regard, all forms of earnings manipulation that may distort the information content of financial statements should be eliminated. In addition, regulatory bodies in Nigeria should partner with professionals and academics in accounting to develop quantitative indices that would be useful in measuring factors like the global financial crisis and IFRS adoption in the country.