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American Finance & Banking Review; Vol. 5, No. 1; 2020 
ISSN 2576-1226    E-ISSN 2576-1234 

Published by Centre for Research on Islamic Banking & Finance and Business, USA 
 

     1 
 

 

Accounting Information and Market Value of Quoted Manufacturing Firms: 
Panel Data Evidence from Nigeria 

 
 

Okoro Innocent 
Department of Accounting 

Faculty of Management Sciences 
University of Port Harcourt, Rivers State, Nigeria 

E-mail: innocentokoro35@yahoo.com 
 

 
E.A.L. Ibanichuka  

Department of Accounting 
Faculty of Management Sciences 

University of Port Harcourt, Rivers State, Nigeria 
 

 
L.C. Micah 

Department of Accounting 
Faculty of Management Sciences 

University of Port Harcourt, Rivers State, Nigeria 
 
Abstract 
This study the relationship between accounting information and the market value of quoted firms in Nigeria. The general 
objective was to examine if accounting information have any effect on market value of quoted firms.  Cross sectional data was 
sourced from financial statement of 23 manufacturing firm from 2008-2017. Market value of the firms was modeled as a 
function of earnings per share, return on equity and dividend per share. Ordinary least square method of cointgration, unit root 
and granger causality test was used to determine the extent to which human resource cost affect quality of financial report. After 
cross examination of the validity of the pooled effect, fixed effect and the random effect, the study accepts the fixed effect 
model.  The study found that the independent variables explained 79 percent variation on the market value of the quoted firms. 
The beta coefficient of the variables indicates return on equity; earnings per share, dividend per share have positive effect on the 
market value of the quoted firms. From the regression summary, the study concludes that there is significant relationship 
between accounting information and market value of the quoted firms. The study recommends that management of the firms 
should formulate dividend policy that enhances the market value of the firms. Corporate strategies should be directed toward 
internal and external factors that affect earnings per share.  
 
Keywords: Accounting Information, Market Value, Quoted Manufacturing Firms, Panel Data, Nigeria .  
 
1. Introduction 
In the absence of adequate financial information, investors would not be in a position to make wise investment decisions, 
because it will be difficult to distinguish between potentially successful and unsuccessful businesses (Sharma, 2014).  Existing 
and potential equity share investors often use accounting information to make investment decisions: they often use corporate 
financial information to review its financial health and operational profitability. This provides information about whether or not 
investing in the equity share of the company is a wise investment decision. The investors’ decisions to buy or not to take stock 
depend upon financial information and the more investors use financial information, it is expected that rational decisions are 
made (Shehzaand & Ismail, 2014).  

The stock market reaction to information disclosure has been tested in many occasions in developed markets such as 
the United State of America and United Kingdom. The evidence reported in these studies is largely consistent with the 
information content hypothesis and efficient market hypothesis, which is that earnings announcements contained value-relevant 
information and that stock markets react quickly and efficiently to this information (Sharma, 2014). The increasing rate of 
corporate scandals such as Eron, Worldcom, Parmalat, Command, flowtax, Oceanic Bank, Intercontinental Bank questions the 



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relevance of financial information, these scandals illustrate clearly that it is not sufficient to rely on documents as contained in 
financial information (Ibanichuka & Alasin, 2018). 

There have been divergences among scholars on factors that determine market value of quoted firms.  The Random 
Walk hypotheses are based on the assumption that investors adjust prices rapidly to reflect on the effect of new information. 
Believing in the efficiency of the market, therefore assert that stock prices are essentially random and there is no chance for 
profitable speculations in the stock market (Gupta & Basa, 2004). Other theories such as Capital Assets Pricing Model (CAPM) 
and Arbitrage pricing methods (APM) attempt to explain internal determinants of asset prices. From the perspective of agency 
theory as presented by Jensen & Macklin (1976), managers could be incapable of maximizing shareholders’ wealth because of 
conflict of interests. Retained earnings can be invested in low risk projects because of manager’s interest which may not affect 
share price as the policy incentive.  

However, the validity of EMH has been questioned as several recent studies have reported evidence of significant 
abnormal returns generated by trading on the basis of public information. For example , Kausar & Taffler (2006) found that 
stocks of UK firms in distress have a publicized going concern audit report which tended to experience significant negative price 
reactions ranging between -24% and -31% . Sponholtz (2005) using the event study method, examined the information content 
of annual earnings announcements in the Danish stock market. Utilizing data from 1999 to 2001, Sponholtz found significant 
abnormal price reactions in the period surrounding the announcement.  

Factors that determine market value has well been documented in literature. The study of Lucky, Akani and 
Anyamaobi (2015) examined internal and external factors that determine equity prices of commercial banks in Nigeria, the 
findings of the study proved that some variables have positive effect while others have negative effect on equity price. Olugbenga 
& Atanda (2014) explored the functional relationship between earnings, book values, dividends, cash flow and equity share 
investment decisions in Nigeria the findings was mixed among the independent variables. Dastgir et al. (2009) investigated the 
association between components of income statement, components of cash flow statement and stock returns. Glezakos et al. 
(2012) examined the impact of earnings and book value in the formulation of stock prices and stock investors decisions. From 
the above problems, divergences and knowledge gaps this study examined the effect of accounting information on the market 
value of quoted Nigeria manufacturing firms. 
 
2. Literature Review 
2.1 Accounting Information 
Accounting information can be seen as the outcome of accounting systems that measure and routinely disclose audited, 
quantitative data concerning the financial position and performance of an enterprise. Audited balance sheets, income statements, 
and cash-flow statements, along with supporting disclosures, form the foundation of the financial accounting reports to investors 
and indeed a wide range of accounting information users. Financial statements have the ability to perform a number of functions. 
They basically provide financial aid to managers in decision making, measurement or evaluation of a firm’s performance, and 
also to portray a firm’s value. Thus, for disclosed financial information to be useful, it must be relevant and faithfully represent 
what it purports to represent. The usefulness of financial information is enhanced if it is comparable, verifiable, timely and 
understandable (Conceptual Framework, 2010).  

Financial information supplies a key quantitative representation of Individual Corporation that supports a wide range 
of contractual relationships. According to the American Institute of Certified Public Accountants (AICPA. 2005), financial 
statements must properly reflect the organization’s financial and economic reality, so that the users are not induced to take 
decisions on misleading information. Financial information also enhances the information environment of the reporting entity 
and those associated with it. The quality of financial disclosure can impact on firms’ cash flows directly, in addition to 
influencing the cost of capital at which the cash flows are discounted. Financial information, such as that conveyed in publicly 
disclosed accounting reports, is also critical to the analysis of temporal liquidity positions of equity markets.  

Financial information is information which describes an account for a utility. It processes financial transactions to 
provide external reporting to outside parties such as to stockholders, investors, creditors, and government agencies etc. For 
financial reporting to be effective, accounting information should be completed as relevant and reliable (Hendricks, 1976). The 
primary purpose of the financial statements is to provide information about a company in order to make better decisions 
particularly the investors (Germon & Meek, 2001).  
 
2.2 The Concept of Market Value   
Market value is the cost of purchasing a security on an exchange. It is affected by a number of factors including volatility in the 
market, current economic conditions, and popularity of the company. According to Ronen and Yaari (2008), the invention of 
double entry book keeping in the 14th century led to company’s valuation which is based upon ratios such as price per unit of 
earnings (from income statement), price per unit of net worth (from balance sheet) and price per unit of cash flow (cash flow 
statement). The next advance was to price individual price shares rather than the whole company. A price per dividend was the 



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next advancement. Analysts find it appropriate to use discounted cash flow that is based on time value of money to estimate the 
intrinsic value of share rather than price per dividend of share prices.  

Market value is based on supply and demand. It is used to refer to as a company’s market capitalization value. It is 
calculated by multiplying the number of shares issued by the price of the company's share. A company's share price is determined 
by daily trading between buyers and sellers on the relevant stock exchange. Market prices are easy to determine for assets as  the 
constituent values, such as stock and futures prices, are readily available. A valuation would have to be prepared using different 
methods (Ngerebo-a, 2007). 

Market value is the value of an asset/security as determined by the forces of demand for and supply of the assets. It is 
the perceived or observed value of an asset on the market. It is also known as current value. It is in fact the mutually accepted 
worth (cost or price depending on the individual) of the asset after negotiation. Most assets that have market values have their 
values determined by specialized markets such as the stock exchange. The acceptance of any asset depends on the perception of 
the potential investor after comparing the market value to the intrinsic value. An asset is undervalued or under-price or favorably 
priced if the market value of the asset is less than the intrinsic value. If the intrinsic value of the asset is less the market value, 
then the asset is overvalued, over-priced or favorably priced. Where the latter occurs, the investor would ordinarily be acquiring 
an asset at more expensive value than he would ordinarily have paid. An investor would acquire an overpriced asset if he expects 
the asset to record a bullish price movement such that if the anticipated price movement crystallizes, the investor can make 
capital gain. 

 
2.3 Earnings per Share 
Earnings per share are considered the most frequently used accounting information in value relevance studies used to examine its 
significant relationship with share.  Most of the studies  on  value relevance of earnings per share and  share price results reported 
to be significant and positive related with share price, this supported by the results found by Pathirawasam (2010) in Sri-Lanka 
observed earnings per share to have positive value relevance on the market share price of 129 companies selected from 6 major 
sectors listed at Colombo stock exchange and other study done by different researchers including (Tharmila, 2013; Vijitha, & 
Namalathan (2014) in Sri-Lanka, by Ragab (2006) in Egyptian market, Miah(2012) in Bangladesh, (Thompson & Adah , 
2012; Olugbenga & Oyerinde, 2014) in Nigeria and Shamki & Rahman (2012) in Jordan reported the same results.  The most 
important component of financial reports is the income statement (Kallunki, 1996) as it indicates the result of operation of the 
period.  

Empirical findings by Ball and Brown (1968) indicated that fifty percent of all available information is embedded in 
the income statement. Value relevance of earnings is ascertained by regressing stock returns on accounting earnings (Ball and 
Brown, 1968) or the abnormal stock return on expected  earnings (Beacver, 1968). While regression of share price on earnings 
measures the sensitivity of share price to earnings, the other measures the relations of unexpected portion of share price change 
and earnings (Edwards & Bell, 1961). 

Change in the value relevance of earnings has been investigated by several studies. Collins, Maydew & Weisis (1997) 
employed a cross sectional regression over a period of 40 years, found that the incremental value relevance of earnings declined 
over the time period 1953-1993. They adduce the declined in value relevance of earnings to the shift in value relevance to book 
value from earning to increasing average size of the firm. Lev Zarowin (1999) support the finding of declining value relevance of 
earnings. Cheng et al. (1996) found that both earnings and earnings change are value relevant. They employed both levels and 
changes to examine the effect of earnings performance on the information content of cash flows. They argue that markets look 
to cash flow as alternative sources of information where earnings number proves insufficient. Lipe (1990) concluded that poor 
retained earnings association is due to lack of earnings persistence. They conclude that current earnings innovations contain 
information about the future as well as current equity benefits. The lack of timeliness for accounting numbers may also explain 
the low earning return association. Timeliness is the extent to which current earnings incorporate current period economic 
income (Ball et al., 2000). Timeliness earnings may be affected by demands of accounting standard of objective and verifiability. 
These demands reduce the timeliness of earnings and thus reduce the association between earnings and stock returns. Their 
results show that stocks are not sensitive to earnings innovations. Easton & Harrist (1991) argue that extent research lacked a 
long term perspective, that poor earnings -return association may due to use of short-term data. They content that poor 
timeliness of earnings may occur in short rum, but over the long term the correlations between earnings and return increases, if 
long term data is employed. They show that expanding the return interval and earnings aggregated over long time intervals. 
There are increases in the return-earnings association. They provide confirmation of correlation between earning and return 
increase using long term accounting data. 

Beaver, McAnnally & Stinson (1997) offer different explanation of misspecification of statistical model as responsible 
for the poor earning return relationship. They argue that price earnings relation is a system of simultaneous equation, thus the 
explanatory variable (earnings) and the dependent variable (share price) act as if both are endogenously determined as they are 
affected by information which is difficult to specify. They provide evidence that changes in both variables are endogenous 

http://www.investopedia.com/university/economics/economics3.asp
http://www.investopedia.com/terms/m/marketcapitalization.asp


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implying that the short coming of single equation bias can be mitigated via joint estimation. Liu & Thomas (2000) support the 
thesis of misspecification of model as accounting for low Earnings Response Coefficient (ERC). 
  Using a model in which additional regressors were included in the model in order to reflect information contained in 
forecast revisions and discount rate change occurring during the year. Compared to simple regression model this significantly 
increases the ERC. Earnings are made up of two components a cash flow component regarded as an objective part of earnings 
and accruals which is more inclined to subjective judgment and thus easily manipulated. Earnings management refers to the 
reasonable and legal management decision making and reporting intended to achieve stable and predictable financial results. 
Marqardt & Wicdman (2004) investigate the how earnings management impact upon value relevance. Using a sample of firms 
for which there is a priori expectation of earnings management they examine how earnings management impairs the value 
relevance of accounting information. In situations where managers participate in secondary issues of share, there often exist 
incentives and opportunities to manage earnings. Discretionary accruals are significantly positive in the years of secondary stock 
offering in firms where managers sell their shares in secondary offering (Marquardt & Wiedman, 2004). They also provide 
evidence that discretionary accruals are more positive in the year of secondary offering for firms whose manager participates in 
secondary offering than firms in which managers do not.  

There is significant decrease in estimated coefficient of net income and decrease in R2 during year of secondary 
offering of share for those firm participating managers (Marquardt & Wiedman, 2004). In situations where the incentives for 
earnings management is greater, earnings announcement are less informative to investors according to Christensen, Hoyt and 
Patterson (1999).Studies of value of earnings across countries show interesting results. Ball et al. (1994) examine the value 
relevance of earnings in seven countries. They show that accounting earnings indicate significantly greater timeliness in common-
law countries relative to code-law countries, this they attribute to income conservatism.  

Ali & Lee-Sheok (2000) examine the relationship between country specific characteristics and measures of value 
relevance. Their study show that value relevance is higher in countries exhibiting features of the British-American model in which 
tax rules impact on accounting measurements, relative to countries exhibiting features of continental accounting model. They 
also find that countries that spend more on external auditing services have higher value relevance. The higher use of accrual 
accounting as opposed to cash flow accounting results in lower value relevance in countries with weak shareholder protections 
(Mingyi, 2000) but for countries with strong shareholder protection there is no significant negative relationship between the use 
of accrual accounting and value relevance of accounting information.  
 
2.4 Book value per share 
Value relevance of accounting information before and after the reforms of International reporting standard(IFRS) examine by 
Karğ ın, S (2013) and reported improvement in the value relevance of book value during the post-IFRS period (2005-
2011).The results found to be consistent compared to the study done by Bilgic & Ibis (2013). Bilgic and Ibis used a sample of 
113 companies listed in Istanbul stock exchange reported value relevance of book value increase after the adoption of new 
accounting standards. But Khanaga (2011) reported value relevance of book value per share declined by using portfolio and 
regression approach after the forms in accounting standards in Bahrain and United Arab of Emirates. 

On the other hand value relevance of accounting information reported to be weak during the period of global 
economic crisis (2005-2009) and during political crisis caused by military dictatorship (1992-1998) in Nigeria by Olugbenga & 
Oyerinde (2014).But during stock market crisis in Nigeria Thompson & Adah (2012) reported book value per share to have 
positive and significant relation with share price of cement manufacturing companies listed at Nigeria stock exchange. On the 
other hand during post-recession period book value per share reported to have positive relationship and insignificant impact on 
the stock prices of BSE 200 companies. 

 
2.5 Theoretical Review  
The theoretical approach to the relationship between financial accounting information and equity share investment can be 
discussed in terms of, accounting theories and theory of equity share investment. There are many financial accounting theories. 
Theories of financial accounting consider such things as people’s behavior or people’s needs as regards financial accounting 
information, or the reasons why people within organizations might elect to supply particular information to particular 
stakeholder groups (Deegan, 2006). This study looks at Efficient-market hypothesis (EMH), information perspective theory, 
accounting theory, decision usefulness theory of accounting information and signaling theory of accounting information among 
others theories. 
 
2.6 Efficient Market Hypothesis 
Efficient-market hypothesis (EMH) asserts that financial market is informationally efficient. There are three major forms of the 
hypothesis: "weak" semi-strong", and "strong". Weak EMH claims that prices on traded assets (for example, stock bonds, or 
property) already reflect all past publicly available information. Semi-strong EMH states that prices reflect all publicly available 



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information and that prices instantly change to reflect new public information. Strong EMH additionally claims that prices 
instantly reflect even hidden or "insider" information. Efficient market theory implies that market will react quickly to new 
information (Goddy, 2010). Thus, it is important to know when the accounting report first became publicly known. The 
accounting report is informative only if it provides data not previously known by the market. 
 
2.7 Information Perspective 
Informational perspective measures the usefulness of accounting information to individual users without much emphasis on the 
precise structure of the relationship between accounting data and firm value (Bernard, 1995).  Most of the studies on 
information perspective assume that information content or usefulness can be determined by observing stock market reactions to 
specific accounting information items (Ball & Brown, 1968; Benston, 1967; Anderson, 1975). These studies further assert that 
the degree of usefulness can be measured by the extent of volume or price change following release of the information. 

Until the last few years, the information perspective has dominated financial accounting theory and practice. The 
information perspective relies on a single-person decision theory, where it is the responsibility of an investor to predict future 
firm performance and make investment decisions. It also depends on efficient securities market theory, where the market can 
interpret information from any source (Beaver, 1973). In this theory, it is Accountant’s role to supply useful financial statement 
information to assist investors. Ball & Brown (1968) study is the first to document statistically a share price response to reported 
net income and their methodology is still employed today. The emphasis of information perspective is on contemporary 
associations between accounting earnings (or book value) and market returns or prices. In particular, it investigates capital 
market reactions to public disclosures such as earnings announcements, other firm-specific news and economy-wide 
macroeconomic news. This is synonymous with information content school.   

 
2.8 Accounting Theory 
Accounting theory is defined as the basic assumptions, definitions, principles, and concepts that underlie accounting rule made 
by a legislative body and it also includes the reporting of accounting and financial information (Deegan, 2006). The basic 
theories of accounting are held together by the conceptual framework of accounting. The conceptual framework establishes 
objectives of financial reporting by businesses. By understanding how some basic accounting theories fit into the conceptual 
framework, one can determine the theoretical underpinnings of financial accounting rules and principles (Freedman, 2015).  

Financial Accounting Standards Board (FASB, 1976) defines accounting theory as a coherent system of interrelated 
objectives and fundamentals that can lead to consistent standards. Watts & Zimmerman (1986) posit that accounting theory 
seeks to explain and predict accounting practice. Hendriksen (1982) describes an accounting theory as logical reasoning in the 
form of abroad set of principles that (1) provide a general frame of reference by which accounting practice can be evaluated and 
(2) guide the development of new practices and procedures. According to him, an accounting theory should provide a general 
frame of reference against which sound accounting practices can be evaluated. A theory encompasses a set of statements or 
propositions connected by rules of logic or inferential reasoning. The statements must include testable hypotheses or premises 
and a conclusion, although one or more of the premises may be based on explicit value judgments. The primary test of a theory, 
however, is its ability to explain or predict (Quintus, 2007). 

 
2.9 Empirical Review  
Ibanichuka & Alasin (2018) examined audit reports and value relevance of accounting information in Nigeria quoted 
commercial banks. Data was sourced from financial statement of Commercial Banks. Two multiple regressions were formulated 
to investigate the effect of audit reports and audit characteristics on stock prices of the commercial banks. The data analysis 
technique employed is the multiple regression model based on Statistical Package for Social Sciences version (22.0). The Durbin 
Watson statistics show the presence of multiple serial autocorrelation. The result shows collinearity that corresponds with the 
Eigen value condition index and variance constants are less than the required number, while the variance inflation factors indicate 
the absence of auto-correlation. The  result from model I found that all the audit report variables have positive impact on value 
relevance while model  II found that audit compensation, audit familiarity and corporate governance have positive effect and 
audit independence, joint audit and audit size have negative effect on stock prices. The study concludes that the independent 
variables have significant relationship value relevance of accounting information of Nigeria quoted commercial banks.  

Hung et al. (2018) examined the impact of accounting information on financial statements to the stock price of 
energy enterprises listed on Vietnam’s stock market. By using the OLS regression model and quintile regression model, the 
author studies the influence of factors such as return on assets (ROA) capital structure (LV), enterprise size (size), current ratio 
(CR), and accounts receivable turnover (turnover) to stock prices. Data from this study were collected from 44 energy 
enterprises during 2006-2016. The results show that Roa, enterprise size (size), current ratio (CR), and accounts receivable 
turnover (turnover) are positively correlated with the stock price, with an explanation level of 48.47%. Capital structure (LV) 



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does not affect stock prices. Based on the research results, the authors propose some recommendations for investors and 
enterprises and suggest other research directions as well as adding new factors to the stock price. 

Abayadeera (2010) tested for the value relevance of financial and non-financial information in high-tech industries in 
Australia with a sample size of 91 companies running through various sectors of the Australian economy. His studies showed 
that value relevance declined in earnings but increase in book value and the book value is the most significant factor and earnings 
are the least significant factor in deciding equity share investment in high-tech industries in Australia. 
  King & Langli (1998) examined accounting diversity and firm valuation carried out a study on the relationship 
between financial accounting information (book value of the equity and the earnings per share) and the stock prices of listed 
companies in three European countries, Germany, Norway and the United Kingdom. The results of their study revealed that 
both the book value and the earnings per share have significant relation with the stock price and hence equity investment 
decision. Investigating the difference between the inspected countries they found that book value was more relevant in Germany 
and Norway, whereas earnings per share were the more relevant factor in the United Kingdom. 

Omoye & Eriki. (2014) examined the effect of corporate governance mechanism on earnings management of 130 
listed companies in Nigeria over the period 2005-2010. The study revealed that companies in Nigeria prefer to use high 
earnings management practices. The study also showed that board independence has significant positive influence on the 
probability of companies that adopt high earnings management.  

Muhammed (2014) investigated the relationship between some sets of corporate governance mechanisms and 
unethical accounting practice of 25 listed manufacturing firms in Nigeria. The study found that board composition, institutional 
shareholding, managerial shareholding and audit committee significant negative relationship with earnings quality. Augustine 
(2014) examined the effect of audit quality on market value per share (MPS) of companies in Nigeria. Panel data were extracted 
from the annual reports of 57 companies quoted on the Nigerian Stock Exchange (NSE) from 2006 to 2011. Audit quality was 
estimated using audit firm size, audit fees, Auditor tenure and audit client importance. The results of the multiple regression 
showed that audit quality has significant influence on the MPS of quoted companies in Nigeria.  

Adaramola (2014) examined the value relevance of accounting information in the Nigerian stock market. The study 
used secondary data extracted from the annual accounts of 57 firms from 1991 to 2010. The Generalized Least Squared (GLS) 
regression method was employed and the result showed a significant relationship between accounting information and share 
prices of companies in Nigeria. 

Ajide et al. (2014) examined the effect of earnings management on dividend policy in Nigeria for the period 2012. 
The findings showed that earnings management has negative relationship with dividend policy of a firm and it is not significant 
in the determination of dividend payout of every firm. Alexandra (2015) investigated the level of income smoothing and its 
impact on the in formativeness of earnings in United Kingdom, France and the Netherlands. The results showed that companies 
in United Kingdom show less smooth earnings compared to companies in France and the Netherlands. 

Junjie Gang & Chao (2013) empirically analyzed the relationship between accounting information and stock price 
with a few accounting information indexes. The results, based on 60 listed companies in Shanghai Stock Exchange for 2011, 
reveal: (1) positive relationship exists between accounting information and stock price, but the significant degree varies; (2) 
earnings per share and return on equity have the most significant correlation. 

Ngoc et al. (2017) analyzed the relationship between accounting information in the financial statements and the stock 
returns of listed firms in Vietnam Stock Market. Using OLS, FEM, REM, GLS, and GMM regression models, the study 
examines the relationship of earnings, volatility in the rate of return, size, levering ratios and growth rates to the stock returns of 
274 firms in the period from 2012 to 2016. Findings from the study show that the rate of return, the change in the rate of 
return, gearing ratio and growth rate are positively correlated to the stock returns, while the size of firm by assets is negatively 
related to stock returns. Based on the research’s results, the authors also provide some recommendations for investors, firm 
management and policy makers.   

Mgbame & Ohiorenuan (2013) ascertained if accounting information contributes to stock volatility in the Nigerian 
Capital Market. Specifically, the study examines if Book value per share, Dividend per share and Earnings per share have a sign 
effect on stock volatility in Nigeria. To capture stock returns volatility clustering, leptokurtosis and leverage effects on the share 
price series, the GARCH models were used. Specifically, the GARCK (1, 1), TGARCH (1, 1) and EGARCH (1, 1) were 
utilized. Using the simple random sampling technique, a sample size of 10 quoted companies was selected using the simple 
random sampling technique for the period 2000-2010 and this gives a total of 100 company years/data points. Secondary data 
retrieved from the financial statements of the sampled companies were employed for the study. E-views 7.0 was utilized for data 
estimation. Findings reveal that there are enough evidences to reject the assumptions of conditional normality in stock prices 
data series and accept the existence of stock volatility in Nigerian stock market. In addition, an evaluation of the three models 
shows that BVS as a determinant of stock volatility appeared to be significant in the TGARCH (1, 1) and EGARCH (1,1). 
Also EPS appeared to be significant in the TGARCH (1,1) and EGARCH-1( 1,1) while DPS as a determinant of stock 
volatility appeared to be significant in GARCH (1,1). TGARCH (1,1) and EGARCH (1,1) respectively.  



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Gornik-Tomaszewski, & Jermakowicz (2001) investigated the relationship between the book value per share, earnings 
per share, and stock prices of 77 stock exchange companies of Poland between 1996-1998. The results of their study showed 
that both book value per share and earnings per share have significant and strong relation with stock prices. Furthermore, they 
stated that the explanatory book value is stronger than that of earnings per share.  

Kobana et al. (2000) tested the relative importance of the financial statement variables in explaining equity valuation in 
Canada. The results of their study reveal that the most important financial statement variables in terms of equity valuation in 
Canada are book value and earnings related variables.  

 
3. Methodology 
This study used correlation and ex-post facto research design to examine the effect of accounting information on market value of 
quoted in Nigeria. The population of this study consists of all the listed manufacturing firms on the Nigerian Stock Exchange 
and have complete financial records on their websites or Nigerian Stock Exchange for the period of 2008– 2017. The data was 
obtained from the annual reports and accounts of manufacturing firms.  
Model Specification  
In order to achieve the objectives of this study and test of the hypotheses, a functional relationship in form of multiple linear 
regression model consisting of dependent and independent variables will be formulated. The regression models are presented as 
follows;  
Pooled regression specification 

itititit BVPSROEEPSMV   3210

     1   
Fixed Effect Model Specification 

MV = α0 + α1EPS + α2ROE + α3BVPS + ∑ =9i 1αiidumε1it                            2 
Random effect model specification  

MV = α0 + α1EPS + α2ROE + α3BVPS + μi + ε1it                                      3  
Where:  
MV = Market value of Nigeria quoted manufacturing firms. 

0
 = Regression intercept 

EPS = Earnings per share 
ROE = Returns on equity 
BVPS = Book value per share 


 = Error term 

 
A-Priori Expectation of the Result 
 
The explanatory variables are expected to have positive and direct effects on the dependent variables. That is a unit increase in 

any of the variables is expected to increase market value. This can be express mathematically as  1, 2,  3,> 0. 
 
3.1 Technique for Data Analysis  
In order to determine the best choice of analysis technique, the study run three types of regression; Ordinary Least Square 
(OLS), Fixed Effect and Random Effect regression. All these method have various assumptions and conditions that must be 
fulfilled in order to achieve efficient estimates. However, the best techniques will be decided by the Hausman Specification test 
(either fixed effect or random effect regression) and Lagrangian Multpiplier Test (either random effect or OLS). The random 
effect has the advantage of accounting for the panel effect in the data as opposed to OLS, which pools the data and treats it as if 
it were obtained from a single entity. In order to achieve reliability of the result, robustness tests like Multicolinearity test, 
Hausman test, Lagrangian multiplier test for random effect and Heteroscedasticity test will be conducted (Gujirati, 2003).  
T-test The t-test was used to test the hypothesis that a particular coefficient is significantly different from zero or whether the 
estimated coefficient value occurred by chance in equation (2). The tests were performed at both 95% and 99% levels of 
confidence.  

F-test The F-statistic is important to test the hypothesis that the whole relationship provided by the equation (2) is 
significantly different from zero, i.e. whether the independent variables’ characteristics scores explain the variation in growth 
indicators for each of the individual firms. The test will be performed at both 95% and 99% levels of confidence.  



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R2 - Change The R-squared (R2 ) value ranging from ‘0’ to ‘1’ or the ‘corrected R-squared’ (R2 ) which is adjusted for degrees 
of freedom indicates the explanatory power (goodness of fit) of the model. 
 
4. Analysis and Discussion of Findings 
Table 1. Test of Fixed and Random Effect Models 
 

Redundant Fixed Effects Tests   

Effects Test Statistic   d.f.  Prob.  

Cross-section F 1.529179 (22,192) 0.0681 

Cross-section Chi-square 35.681335 22 0.0328 

Correlated Random Effects - Hausman Test  

Test Summary Chi-Sq. Statistic Chi-Sq. d.f. Prob.  

Cross-section random 7.415428 6 0.0341 

Source:  Computed from E-View windows 9.0 
In testing the validity of the models, the fixed effects on the cross section Redundant Fixed Effect- Likelihood Ratio, 

the P- value is 0.000 indicating that the effects are significant. Select the random effect and perform the Correlated Random 
Effects- Hausman test, testing the random effects model against the fixed effects model. The null hypothesis in that case is that 
both tests are consistent estimators and the random effects model is efficient. Under the alternative hypothesis, only the fixed 
effect is consistent. Since the p- value is 0.000, the null hypothesis is rejected and, therefore, the fixed effects model is to be 
preferred. 

 
Table 2. Presentation of Formulated Pooled Effect Model Results 
 

Variable Coefficient Std. Error t-Statistic Prob.   

ROE 0.032480 0.033095 0.981413 0.3275 

EPS 0.250062 0.123951 2.017426 0.0449 

DPS 0.005642 0.006452 0.874426 0.3829 

C 9.953181 1.835172 5.423568 0.0000 

R-squared 0.049825     Mean dependent var 14.93914 

Adjusted R-squared 0.023185     S.D. dependent var 2.146708 

S.E. of regression 2.121677     Akaike info criterion 4.373452 

Sum squared resid 963.3238     Schwarz criterion 4.481087 

Log likelihood -476.2665     Hannan-Quinn criter. 4.416913 

F-statistic 1.870285     Durbin-Watson stat 1.662720 

Prob(F-statistic) 0.087183    

Source:  Computed from E-View windows 9.0 
 

The estimated pooled regression model found that the predictor variables in the model can explain 4 percent variation 
on the market value of the 23 selected manufacturing firms. The f- statistics and probability confirms that the model is 
statistically not significant and cannot predict the variation on the market value of the selected quoted firms. The Durbin 
Watson statistics proved that there is no presence of serial autocorrelation among the variables. Beta coefficient of the variables 
indicates that, return on equity, earnings per share and  dividend per share have positive effect on market value of the quoted 
manufacturing firms  while book value per share have negative effect on market value of the firms.  The insignificant effect of 
the models and the results of the Hausman test enable us to analyze the fixed effect model in the tables below. 
 
Table 3. Presentation of Formulated Fixed Effect Model Results 
 

Variable Coefficient Std. Error t-Statistic Prob.   

ROE 0.860146 1.044343 1.356385 0.0366 

EPS 0.028731 0.160273 0.179262 0.8579 

DPS 0.914421 0.008112 1.777683 0.0070 

C 12.36263 2.094911 5.901265 0.0000 

 Effects Specification   



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Cross-section fixed (dummy variables)  

R-squared 0.791491     Mean dependent var 14.93914 

Adjusted R-squared 0.573583     S.D. dependent var 2.146708 

S.E. of regression 2.066219     Akaike info criterion 4.411093 

Sum squared resid 819.6977     Schwarz criterion 4.857006 

Log likelihood -458.4258     Hannan-Quinn criter. 4.591145 

F-statistic 1.624076     Durbin-Watson stat 1.905250 

Prob(F-statistic) 0.000169    

Source:  Computed from E-View windows 9.0 
 

The estimated fixed regression model found that the predictor variables in the model can explain 79 percent variation 
on the market value of the 23 selected manufacturing firms. The f- statistics and probability confirms that the model is 
statistically significant and can predict the variation on the market value of the selected quoted firms. The Durbin Watson 
statistics proved that there is no presence of serial autocorrelation among the variables. Beta coefficient of the variables indicates 
that, return on equity; earnings per share and dividend per share have negative effect on market value of the firms. From the 
Hausman test the fixed effect model results is most appropriate for the study. However, the study analyzes the random effect in 
the table below to validate the findings of the study. 

 
Table 4. Presentation of Formulated Random Effect Model Results 
 

Variable Coefficient Std. Error t-Statistic Prob.   

ROE 0.037520 0.034969 1.072944 0.0445 

EPS 0.203111 0.130057 1.561714 0.0198 

DPS 0.007445 0.006745 1.103839 0.0709 

C 10.52168 1.866897 5.635922 0.0000 

 Effects Specification   

   S.D.   Rho   

Cross-section random 0.472147 0.0496 

Idiosyncratic random 2.066219 0.9504 

 Weighted Statistics   

R-squared 0.441900     Mean dependent var 12.18603 

Adjusted R-squared 0.315038     S.D. dependent var 2.096432 

S.E. of regression 2.072931     Sum squared resid 919.5673 

F-statistic 1.559801     Durbin-Watson stat 1.726119 

Prob(F-statistic) 0.040262    

 Unweighted Statistics   

R-squared 0.448637     Mean dependent var 14.93914 

Sum squared resid 964.5282     Durbin-Watson stat 1.658316 

Source:  Computed from E-View windows 9.0 
 
The estimated random regression model found that the predictor variables in the model can explain 44 percent 

variation on the market value of the 23 selected manufacturing firms. The f- statistics and probability confirms that the model is 
statistically significant and can predict the variation on the market value of the selected quoted firms. The Durbin Watson 
statistics proved that there is no presence of serial autocorrelation among the variables. Beta coefficient of the variables indicates 
that, return on equity, earnings per share and dividend per share. The result above enables to test cross-sectional comparism of 
random and fixed effect in the table below: 

 
   Table 5.Cross-Section Effect Test Comparism 

Variable Fixed   Random  Var. Diff Prob. Decision  

ROE 0.060146 0.037520 0.000743 0.4066 Accept H0 

EPS 0.028731 0.203111 0.008773 0.0626 Accept H0 

DPS 0.014421 0.007445 0.000020 0.1217 Accept H0 

Source:  Computed from E-View windows 9.0 



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The table above reveals the variance difference among the variables, as shown above that the variables are all statistically not 
significant which implies that there is a significant difference between fixed and random effect among the variables. 
 

  Table 6. Presentation of Granger Causality Test Results  
 

 Null Hypothesis: Obs F-Statistic Prob.  

 ROE does not Granger Cause MV  164  0.43071 0.6508 

 MV does not Granger Cause ROE  0.43285 0.6494 

 EPS does not Granger Cause MV  170  0.27609 0.7591 

 MV does not Granger Cause EPS  0.03196 0.9685 

 DPS does not Granger Cause MV  169  0.07117 0.9313 

 MV does not Granger Cause DPS  0.25032 0.7788 

Source:  Computed from E-View windows 9.0 
The causality test shows that there is no causal relationship among the variables, we accept null hypotheses. 
 

    Table 7.Presentation of Panel Cointegration Test 
 

Series: MV ROE EPS DPS DER ATO BVPS    

     Alternative hypothesis: common AR coefs. (within-dimension) 

    Weighted  

  Statistic Prob. Statistic Prob. 

Panel v-Statistic -2.429724  0.9924 -2.299783  0.9893 

Panel rho-Statistic  4.640154  1.0000  4.548191  1.0000 

Panel PP-Statistic -3.186873  0.0007 -3.047196  0.0012 

Panel ADF-Statistic  NA  NA  NA  NA 

Alternative hypothesis: individual AR coefs. (between-dimension) 

  Statistic Prob.  

Group rho-Statistic  6.156503  1.0000  

Group PP-Statistic -9.556352  0.0000  

Group ADF-Statistic  NA  NA  

Source:  Computed from E-View windows 9.0 
 

The results of the cointegration test proved that  the variables are cointegrated as the probability coefficient of the 
variables are less than 0.05, we accept the alternate hypotheses that there is the presence of long run relationship between the 
dependent and the independent variables. The presence of long run relationship enables us to test for unit root; the table below 
has the details.  

Table 8. Tests of Stationarity 
 

Series:  MV    

Method Statistic Prob.** sections Obs 

Null: Unit root (assumes common unit root process)  

Levin, Lin & Chu t* -9.25205  0.0000  23  170 

Im, Pesaran and Shin W-stat  -3.15566  0.0008  23  170 

ADF - Fisher Chi-square  86.3823  0.0003  23  170 

PP - Fisher Chi-square  145.244  0.0000  23  197 

Series:  ROE    

Levin, Lin & Chu t* -2.84596  0.0022  23  178 

Im, Pesaran and Shin W-stat  -0.81603  0.2072  23  178 

ADF - Fisher Chi-square  62.6200  0.0519  23  178 

PP - Fisher Chi-square  75.8650  0.0036  23  203 

Series:  EPS    

Levin, Lin & Chu t* -8.07569  0.0000  23  184 



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Im, Pesaran and Shin W-stat  -2.06545  0.0194  23  184 

ADF - Fisher Chi-square  65.5150  0.0308  23  184 

PP - Fisher Chi-square  99.3254  0.0000  23  207 

Series:  DPS    

Levin, Lin & Chu t* -5.32150  0.0000            23 183 

Im, Pesaran and Shin W-stat  -1.16206    0.1226            23  183 

ADF - Fisher Chi-square  68.5921  0.0170            23  183 

PP - Fisher Chi-square  98.0568  0.0000            23  206 

Source:  Computed from E-View windows 9.0 
 

The table above presents the summary results of the ADF and PP panel unit root tests. The results show that the null 
hypotheses of a unit root test for first difference series for all the variables can be rejected at all the critical values indicating that 
the level series which is largely time-dependent and non-stationary can be made stationary at the first difference and maximum 
lag of one. Thus, the reduced form model follows an integrating order of 1(1) process and is therefore a stationary process. It 
also reveals that the test of stationarity in the residuals from the level series regression is significant at all lags. Furthermore, this 
indicates that the regression is no more spurious but real. That is to say, all the variables are individually stationary and stable. At 
this level, all the t-statistic became significant at 5 percent. 
 
        Table 9. Phillips-Peron Results (Non-Parametric) 
 

Cross ID AR(1) Variance HAC   Bandwidth Obs 

Aluminium Extrusion -0.161 0.646540 0.619755 2.00 9 

Austin Laz and Company -0.843 0.083477 0.064919 1.00 9 

Paints and Coatings 0.013 2.090620 1.597237 3.00 9 

Berger Paints  Dropped from Test  

Beta Glass  Dropped from Test  

Cadbury Nigeria -0.475 0.300930 0.049049 8.00 9 

Cement Co. of North  Dropped from Test  

Champion Brew. Plc -0.229 0.968705 0.574934 6.00 9 

Premier Paints Plc  Dropped from Test  

Dangote Cement Plc -0.447 0.455981 0.210542 4.00 9 

Dangote Flour Mills Plc 0.260 0.517686 0.507708 1.00 9 

DN Tyre & Rubber Plc -0.249 1.806874 1.806874 0.00 9 

Evans Medical Plc  Dropped from Test  

Flour Mills Nig. Plc  Dropped from Test  

P Z Cussons Nigeria Plc -0.618 0.295691 0.223230 2.00 9 

Vitafoam Nig Plc -0.101 0.232916 0.216321 4.00 9 

Glaxo Smithkline Consumer 
Nig. Plc 

-0.442 0.099122 0.048300 8.00 9 

Honeywell Flour Mill Plc -0.738 0.480678 0.169825 5.00 9 

Lafarge Africa Plc  Dropped from Test  

Nestle Nigeria Plc  Dropped from Test  

May & Baker Nigeria Plc 0.054 1.171200 0.428968 8.00 9 

Flour Mills Plc. -0.432 0.064481 0.064481 0.00 9 

Nascon Allied Industries -0.396 0.259262 0.251736 1.00 9 

Source:  Computed from E-View windows 9.0 
 

The result of the power for all the test procedure when the underlying time series model is stationary AR, all the 
procedures produced a reasonably high power over all the sample sizes and order considered except at order 2 where ADF 
(Augmented Dickey Fuller) and KPSS produced extremely low power compared to PP. Under this condition, Philip-Peron (PP) 
has the highest power over all the sample sizes and AR orders considered. The table   presents similar analysis on stationary MA, 
the power of the tests are extremely high over all the sample sizes and orders considered. Similar conclusion as in AR was also 



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observed here. Table 3 presents the power of the mixed model (Stationary ARMA), all the test procedures produced high power 
over all the sample sizes at order 1 but ADF and KPSS produced low power over all the sample size at order 2 & 3. 
 
5. Discussion of Findings  
This study examined the effect of accounting information on the market value of quoted manufacturing firms in Nigeria.  
Findings revealed that there is positive and significant relationship between earnings per share and the market value of the quoted 
manufacturing firms over the periods covered in this study. This implies that variation in earnings per share of the firms 
significantly relates to market value of the firms.  The coefficient of the variables proved that a unit increase on the variables will 
lead to 2 percent increase on the market value. This finding confirms the a-priori expectation of the study and validates the 
fundamentalists’ theory on the effect of information on the stocks prices of quoted firms. The findings of this study confirm  the 
findings of Lucky et al on prudential determinants of stock prices of quoted commercial banks in Nigeria. it is also in line with  
the findings of  Ibanichuka & Alasin (2018) that all the audit report variables have positive impact on value relevance while 
model  found that audit compensation, audit familiarity and corporate governance have positive effect and audit independence, 
joint audit and audit size have negative effect on stock prices but contrary to the  findings of Abayadeera (2010) that value 
relevance declined in earnings but increase in book value and the book value is the most significant factor and earnings are the 
least significant factor in deciding equity share investment in high-tech industries in Australia. 

Findings revealed that there is positive and significant relationship between return on equity and the market value of 
the quoted manufacturing firms over the periods covered in this study. This implies that variation in return on equity of the 
firms significantly relates to market value of the firms.  The coefficient of the variables proved that a unit increase on the 
variables will lead to 8 percent increase on the market value. This finding confirms the a-priori expectation of the study and 
validates the fundamentalists’ theory on the effect of information on the stocks prices of quoted firms. The findings of this  
study confirm the findings of King & Langli (1998) that both the book value and the earnings per share have significant relation 
with the stock price and hence equity investment decision, the findings of Omoye & Eriki (2014) balance sheet information has 
significant positive influence on the probability of companies that adopt high earnings management but contrary to the findings 
of  Muhammed (2014) that board composition, institutional shareholding, managerial shareholding and audit committee 
significant negative relationship with earnings quality. 

Findings revealed that there is negative but not significant relationship between book value per share and the market 
value of the quoted manufacturing firms over the periods covered in this study. This implies that variation in book value per 
share of the firms does not significantly relate to market value of the firms.  The coefficient of the variables proved that a unit 
increase on the variables will lead to 0.3 percent decrease on the market value. This finding contradicts the a-priori expectation 
of the study and validates the fundamentalists’ theory on the effect of information on the stocks prices of quoted firms. The 
findings of this study contradict the findings of King & Langli (1998) that both the book value and the earnings per share have 
significant relation with the stock price and hence equity investment decision, the findings of Omoye & Eriki, (2014) balance 
sheet information has significant positive influence on the probability of companies that adopt high earnings management but 
confirm  to the findings of  Muhammed (2014) that board composition, institutional shareholding, managerial shareholding and 
audit committee significant negative relationship with earnings quality. 
 
6. Conclusion and Recommendations 
6.1 Conclusion  
The results of study through secondary data analysis revealed that accounting information and market value are correlated and 
there is a strong and significant relationship between accounting information disclosed in firms’ financial statements and ma rket 
value. Accounting information significantly influenced market value decisions in the listed companies in Nigeria. This finding 
was substantiated by the R2 of   79 percent variation explained by the accounting information variables modeled in the study. 
The results of the investigation revealed that there is a strong relationship between accounting information and market value of 
the quoted firms  

All accounting information variables considered in this study significantly influenced market value of the quoted firms. 
Further, results of study indicated that dividend per share is the strongest determinant of market value investment followed by 
return on equity and earnings per share significantly affect market value of the quoted firms. From the above, this study conclude 
that accounting information have significant effect on the market value of quoted firms in Nigeria. 
 
6.2 Recommendations 

 Base on the positive effect of return on equity on the market value, the study recommend that management of the 
manufacturing firms should formulate policies that will increase profitability and internal and external factors that 
affect negatively the profitability of the firms should be discouraged. 



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 Quoted firms should disclose their financial information at every accounting period. This is expected to provide 
clearer information about the operating and financial performances of companies to equity investors.  

 Accounting regulatory bodies in Nigeria and preparers of accounting reports should make efforts toward improving 
the quality of published financial reports because the reports are widely used by investors in Nigeria and foreign 
investors for investment decision.  

 Base on the negative effect of book value per share on the market value, the study recommend that management of the 
manufacturing firms should formulate policies that will increase book value per share and internal and external factors 
that affect negatively the book value per share of the firms should be discouraged. 
 

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