This study investigates the moderating role of financial reporting quality (FRQ) in the relationship between mergers and acquisitions (M&A) activity and market valuation of listed firms in Nigeria. As much as M&A transactions are typically undertaken with the intention of enhancing firm value, empirical findings in emerging economies like Nigeria have been inconclusive due to weak institutional environments, low transparency, and investor uncertainty. This essay argues that the success of M&A in creating shareholder value not only resides in the transaction itself, but also in the honesty of the financial information relating to it. Dependent on agency theory and signaling theory, this research elaborates FRQ as a strategic instrument capable of reducing information asymmetry, representing managerial skill, and creating investor confidence before and after M&A deals. Within a critical review of prior literature and empirical evidence in the Nigerian context, the study submits a hypothesis that high FRQ firms see improved market valuation outcomes following M&A activity compared to low reporting quality firms. Hypothesized results suggest that independently, M&A activity may have limited or mixed valuation effects; however, together with sound FRQ, it can deliver significantly positive market responses. Conversely, low-FRQ companies may become subject to investor doubts and therefore suffer from muted or adverse valuation impacts. The findings are relevant to corporate managers, investors, and regulators. For managers, it demonstrates the value of accounting transparency as a tool for maximizing M&A benefits. For investors, it highlights the role of accounting quality in investment decision-making in M&A-active firms. For regulators and policymakers, the findings support more aggressive enforcement of financial reporting standards to improve market efficiency. Lastly, the research contributes to the general discussion on corporate governance, market valuation, and disclosure of financial information in developing economies.
Keywords: capital market efficiency, financial reporting quality (FRQ), market valuation, mergers and acquisitions (M&A)
