The Relationship between Accounting Information and Stock Market Returns on the Nigerian Stock Exchange (original) (raw)

This paper has investigated the relationship between earnings and changes in earnings to stock returns in the Nigerian stock market from 2007 to 2011. An ex-post facto research design was adopted, and the population of the study was made up of all the 198 companies listed on the Nigerian Stock Exchange as at 2011, using Purposive sampling 40 companies were selected. The data was collected from financial statements of the companies and from the NSE. Regression analysis was used as a tool of analysis, while other tests namely Correlation Analysis, Durbin-Watson Statistics (DW) and Variance Inflationary Factor (VIF) were conducted to validate the result of the study. The results indicated that there is a significant relationship between accounting information and stock prices in the NSE. The conclusion drawn is that there is a significant relationship between earnings and stock returns in the Nigerian stock market, hence earnings are related to both price and return in the Nigerian stock market, while change in earnings is not significantly related to stock return. It is recommended that since stock returns are related to earnings, companies listed on the Nigerian stock market should work towards increasing their earnings at the end of every financial year and current and potential investors should critically examine the earnings figure of companies while making investment decisions in Nigeria. Keywords: Accounting information, Stock returns, Stock Prices, Earnings, Bookvalues, Nigerian Stock market

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