Value Relevance of Financial Accounting Information of Quoted Companies in Nigeria: A Trend Analysis

Abstract

This research paper examines the value relevance of accounting information of quoted companies in Nigeria using a trend analysis. Secondary data were sourced from the Nigerian Stock Exchange Fact Book, Annual Financial Reports of Sixty six (66) quoted companies consisting of financial and non-financial firms in Nigeria and the Nigerian Stock Market annual data. The Ordinary Least Square (OLS) regression method was employed in the analysis. The study reveals that accounting information on quoted companies in Nigeria is value relevant. However, the study reveals further that the value relevance of accounting information does not follow a particular trend within the period under study. While the value relevance was weak in the periods of political crisis caused by military dictatorship (1992-1998) and global economic crisis (2005-2009), it was high in the other periods. Based on the finding that accounting information directly influences the value of securities in the capital market, it is therefore recommended that Accounting Standards should be complied with by Nigerian companies and that more standards that can curtail information overload should be introduced. As a result of the trend experienced between 1992 and 1998, the study also advocates stable political atmosphere in Nigeria.

Keywords: Value Relevance; Accounting Information; Book Value; Cash Flow; Financial Statement