DOES EARNING PER SHARE DETERMINE MARKET PRICE OF ORDINARY SHARES? EVIDENCE FROM NIGERIA BANKING SECTOR (2000 – 2013). (Published)
The study aims at examining the magnitude and nature of the relationship between earnings per share and market price of ordinary shares in Nigeria banking industry from 2004 to 2013. In addition, it aims at ascertaining the impact of earnings per share on prices of ordinary shares in Nigerian banking industry. Ordinary least squares method in the form of multiple regression was applied in the analysis. Stationarity test was conducted using the Augmented Dickey- Fuller (ADF) and Phillip Perrons (PP) tests. The result reveals that earnings per share significantly and positively influence the market price of ordinary shares; with a strong and positive association too. Earnings per share also granger causes market price of ordinary shares and these characteristics are sustainable in the long run in Nigerian banking sector. The implication of the findings is that an increase in earnings has the tendency of increasing significantly the market price of shares and earnings per share is one of the key factors responsible for fluctuations in market price of ordinary shares in Nigerian banking sector. Therefore, it is pertinent for banks targeting the enhancement of their equity price to adopt workable strategies towards attracting more deposit, increasing their lending, reducing their expenditure profile and opening up other investment avenues to improve upon their earnings.
Keywords: Banks’, Earnings, Granger, Nigeria, Regression, Shares
CAPITAL MARKET AND INDUSTRIAL SECTOR DEVELOPMENT IN NIGERIA- AN EMPIRICAL INVESTIGATION (Published)
This study examined the relationship between capital market and industrial sector development in Nigeria, utilizing annual time series data covering the period from 1980 to 2012. The study adopted both descriptive and analytical methodology in its investigation. The descriptive methods were used to analyze trend performances of the variables captured in the study. The analytical methodology employed modern econometric techniques such as the unit root test, co-integration test, granger causality test and the error correction mechanism (ECM) in the estimation of the relevant relationships. The results of the co-integration test showed that there existed a long run equilibrium relationship among the variables. The results of the granger causality test as presented showed that there is a bi-directional relationship between industrial output and market capitalization and between industrial output and number of deals, but a unidirectional causality relationship running from industrial sector development to value of transaction. The results of the short run dynamics revealed that capital market has positive and significant impact on industrial output in Nigeria via market capitalization and number of deals. On the other hand, value of transaction has negative and significant impact on industrial output in Nigeria during the evaluation period. The results also showed that real gross domestic product has a positive and significant impact on industrial output in Nigeria, while exchange rate and gross domestic investment have negative and significant relationship with industrial output in Nigeria. The study therefore recommended that the government should implement appropriate reform policies aimed at ensuring efficiency in the workings of the stock market in Nigeria. Also, there is need to reduce the cost of raising capital by firms on the stock as high cost and other bureaucratic delays could limited the use of capital market as veritable source of raising funds for investment.
Keywords: Capital market, Industrial Development, Nigeria
FINANCIAL LITERACY EDUCATION: KEY TO POVERTY ALLEVIATION AND NATIONAL DEVELOPMENT IN NIGERIA (Published)
Ensuring that all societies’ young people become financially capable is now widely seen as a necessary key pillar in helping Governments build economic stability in the future. The ability to read, analyze, manage, and communicate about the personal financial conditions that affect material wellbeing is of utmost importance. Being able to manage money, keep track of personal finances, plan ahead, choose financial products and stay informed about financial matters enable the avoidance of financial disaster. This research constitutes an essential component of the theory of the strategy of financial literacy framework which articulates a strategic direction for the delivery of financial education in Nigeria. Financial literacy education is very important because the journey to obtain independence and achieve financial success cannot just be prioritized by having good educational experiences, a sound résumé and a career with a nice salary. Rather, the financial freedom road requires development of good financial habits, practice and discipline. This work adopts a secondary data approach which critically examines Nigeria’s financial literacy education framework, the significance of financial literacy education, steps for best practices in financial education and awareness, and the challenges to building sustainable financial literacy education systems. It finds that promoting financial literacy among Nigerians provides them with the essential knowledge and financial responsibility to make decisions that will better their lives and ultimately grow the economy. This is because as financial markets become increasingly sophisticated and as households assume more of the responsibility and risk for financial decisions, financial education is increasingly necessary for individuals, not only to ensure their own financial well-being but also to ensure the smooth functioning of financial markets and the economy. The paper therefore strongly recommends, amongst others, the involvement of all tiers of government as well as key institutions and the private sector in the design and implementation of financial literacy programmes across all segments and sectors of the economy.
Keywords: Economic Development, Education, Financial freedom, Financial literacy, Nigeria
Reliance on Published Financial Statements and Investment Decision Making in the Nigeria Banking Sector (Published)
Financial Reporting Standards and Practices have in the recent past come under great criticisms, demanding that accountants take further steps in ensuring that the true and fair view of the actual worth of business are also incorporated in the financial statements published by them. This was triggered off by an unpresedented line up of corporate failures like that of Enron Corporation, World.com and others coupled with the emergence of the global economic crisis. In Nigeria also, corporate failures and distresses have been witnessed in the banking sector. Evidence was the huge collapse of the Cooperative and Commerce Bank (CCB), Orient Bank of Nigeria, African Continental Bank (ACB) all due to massive accounting related frauds. This problem resulted in the establishment of Asset Management Company of Nigeria (AMCON) to prevent corporate failures particularly in the Nigeria banking sector by acquiring and financially distress companies. This paper is a critical investigation on the degree of reliance of the published financial statements by corporate investors. The study employed survey research design by which data were generated by means of questionnaire administered on one hundred and fifty corporate investors and senior management officials of the selected banks. The descriptive statistics and percentage analysis were used for the data analysis and the hypotheses were tested using t-test statistic. The statistical package for social sciences (SPSS) software version 17.0 was employed in the analysis of data and test of hypotheses. The results reveal that one of the primary responsibility of management to the investors is to give a standardized financial statement evaluated and authenticated by a qualified auditor or financial experts (tcal (16.59) > tcritical (2.353). p < 0.05). It also showed investors do understand the financial statement well before investment decision (tcal (17.306) > tcritical (2.353). p < 0.05). The results of the analysis also indicated that investors depend heavily on the credibility of auditors/financial expert approval of financial statement in making investment decisions (tcal (4.592) > tcritical (2.353). p < 0.05) and as such published financial statement is very important in the investors’ decision making (tcal 74.500 > tcritical 6.314; p < 0.05). It hereby recommended that adequate care and due diligence should be maintained in preparing financial statements to avoid faulty investment decisions which could lead to loss of funds and possible litigations
Keywords: Banking Sector, Decision Making, Financial Statements, Investments, Nigeria