Financial Reporting Quality and Share Values of the Quoted Non-Financial Firms in Nigeria

Abstract

The study examined the level of compliance with financial reporting standards of quoted non-financial firms in Nigeria and investigated the impact of financial reporting quality on share values of the quoted non-financial firms in Nigeria. These were with a view to determining the effect of financial reporting quality on the firms’ value of quoted non-financial firms between 2004 and 2021.The study employed secondary data.  The population of this study was 176 quoted non-financial firms listed on the Nigeria Stock Exchange. Fifty firms were purposively selected based on the availability of complete financial information for the sampled period. Data on cashflow accrual ratio, statements of financial position accrual ratio as proxies of financial reporting quality, firms’ size, auditors’ type, share values, board size, leverage, audit committee size, age and firms’ liquidity were sourced from the audited annual financial report of the firms and factbook of Nigeria Stock Exchange. Data collected were analysed using percentages fixed effect model, random effect model and pooled OLS method.The results showed that the cashflow accrual ratio as a proxy of financial reporting quality has no significant effect on the value of shares but negative relationship with share values confirmed that lower cashflow accrual ratio is an indication of good financial reporting quality.  Also, the result showed that all the independently variables are good predictors of share values with adjusted R-square of 76%.

The study concluded that financial reporting quality has a positive impact on the market value of quoted non-financial firms in Nigeria.

Keywords: Cashflow Accrual Ratio, Financial Reporting Quality, Balance Sheet Accrual Ratio, Share Values

DOI: 10.7176/RJFA/13-14-06

Publication date:August 31^st 2022