RELATIONSHIP BETWEEN ACCOUNTING INFORMATION AND EQUITY SHARE INVESTMENT: EVIDENCE FROM LISTED COMPANIES

Abstract

This study examined empirically the relationship between accounting information and equity share investment in listed Nigerian companies. The study used earnings per share, net book value per share, return on equity, and cash flow from operation per share as proxies for accounting information. The main objective of this study is to establish the effect of financial accounting information on the equity share investment in companies listed on the Nigerian Stock Exchange Market. Specifically, the study establish the effect of earnings per share, book value per share, return on equity and cash flow from operation per share on the equity share investment. The study adopted descriptive and explanatory research designs. Simple and multiple linear regression analysis methods, using panel data Model, were employed to determine the relationship between the dependent variable and the explanatory variables. Both primary and secondary data were used to carry out the study. The primary data were collected through questionnaires administered on the respondents. Secondary data was collected for all variables for a period of ten years (2005 to 2014) and was obtained from the Nigerian Stock Exchange fact book, Published annual financial reports of listed companies in Nigeria and the Nigerian Stock Market annual reports. Correlation and regression methods were used to carry out the inferential analysis. Statistical t-test and F- test were used to test the significance of explanatory variables on dependent variable. Data analysis was carried out using R Software Version 15. The results of the study revealed that there is a significant relationship between accounting information and equity share investment in companies listed on the Nigerian Stock Exchange. All accounting information variables considered in this study significantly influenced equity share investment. Earnings per share have the highest correlation coefficient with equity share xvii investment, followed by net book value per share, return on equity and then cash flow from operation per share. The study recommends that all listed companies in Nigeria should prepare and disclose accounting information indices that are relevant for equity share investment decisions makings alongside with the mandatory financial statements to meet the needs of equity share investors. Furthermore, accounting regulatory bodies and government should impose strict compliance with accounting standard guidelines on listed companies in their preparation and presentation of financial statements. Sanctions should be imposed on the managers who failed to adhere to the accounting standard guidelines in the preparation and presentation of their company‟s financial statements.