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THE EFFECT OF BOOK VALUE PER SHARE, DIVIDEND PER SHARE AND EARNING PER SHARE ON STOCK VOLATILITY

  • Type:Project
  • Chapters:5
  • Pages:120
  • Methodology:ANOVA
  • Reference:YES
  • Format:Microsoft Word
(Accounting Project Topics & Materials)
THE EFFECT OF BOOK VALUE PER SHARE, DIVIDEND PER SHARE AND EARNING PER SHARE ON STOCK VOLATILITY
CHAPTER ONE

INTRODUCTION
1.1    Background to the Study
Value relevance of accounting information has been a primary paradigm in financial accounting research. Research on value relevance of accounting information, its historical development and its comparison among different countries has increased since the 1990s. There has been concerns as to whether financial statements are losing their value relevance due to the shift from an industrialized economy to a high-tech, service oriented economy(Dontoh., Radhakrishman., & Ronen, 2012),and as to whether cross-country differences in disclosure and measurement practices cause differences in the quality of accounting information.
However, value relevant, harmonious accounting standards alone are not sufficient to improve the financial reporting environment. Accounting standards should be of good quality, and be acceptable and enforceable. Value relevance is one of the basic attributes of accounting quality (Francis, LaFond, Olsson &Schipper 2004; &Beisland, 2009). The value relevance was weak in the periods of political crisis caused by military dictatorship (1992-1998) and global economic crisis (2005-2009), it was high in the other periods. Value relevance is defined as the ability of accounting numbers contained in the financial statements to explain the stock market measures (Beisland, 2009). Value relevance is being defined as the ability of information disclosed by financial statements to capture and summarize firm value.
Accounting information is any data or information obtains from the accounting system of a firm whether contained in a financial statement, a special report, or verbal statement (William, 1968). However, for the purpose of this research, accounting information refers to written information contained in a complete or partial financial report –balance sheet or profit and loss account or fund flow statement. Accounting information must possess two qualitative features: relevance and reliability; to be acceptable and useful to investors. Thus, accounting information, derivable from the financial statements, will not be useful if either of the two prominent characteristics totally fades out. Barth, Beaver, and Landsman. (2001) stated that studying the relevance and reliability of accounting information separately is difficult because these criteria are conflicting parameters and the amount of them are not determined in theoretical concepts of financial reporting. Studies on value relevance of accounting information are motivated by the fact that listed companies use financial statements as one of the major media of communication with their equity shareholders and public at large (Vishnani,&Shah, 2008).  
For instance, in Nigeria, Companies and Allied Matters Act (CAMA), (1990) and the subsequent amendments require. The Directors of all companies listed on the Nigerian Stock Exchange to prepare and publish annually the financial statements. Beyond this, the Nigerian Stock Exchange mandates all companies listed on first tier market to submit quarterly, semi-annual and annual statements of their accounts to the Stock Exchange. Companies on second tier market are to submit their statements of accounts annually to Stock Exchange (Osaze, 2007). This study investigates whether these various items of financial statements are value relevant in the Nigerian Stock Exchange or not.  
1.2        Statement of the Problem
According to the previous studies many researchers used relationship between Market price per share as the dependent variable and a set of independent variables. Ball and Brown in 1968, highlighted the relationship between stock prices and the accounting information disclosed in the financial statements. Ball, and Brown. (1968) explained that the value of a firm can be expressed as a linear function of book value, earnings and other relevant information.There has also been considerable volatility (and uncertainty) in the past few years in mature and emerging financial markets worldwide (Alexander, 1999). It is also well established in the accounting literature that stock price volatility tends to increase around accounting information events (beaver, 1968).The value and the quality of accounting information are determined by how well it meets the needs of users (Khanagha, 2011).Negah, (2008) asserts that studies on the value relevance of accounting numbers in emerging markets are limited. He further claims that the scanty literature replicates works done in mature markets and that closer examination of these works reveals that they face both epistemological and empirical challenges.
Furthermore, all the previous studies relate to a certain time frame and given the dynamic nature of accounting, there is therefore a continued need to fill the gaps of what is known about the effect of accounting information on stock volatility.
1.3    Research Questions
1.     What is the relationship between book value per share and stock volatility in the Nigerian Stock Market?
2.    What is the relationship between dividend per share and stock volatility in the Nigerian Stock Market?
3.    What is the relationship between earnings per share and stock volatility in the Nigerian Stock Market?
1.4        Objectives of the Study
The objectives of the study are:
1.    To determine the relationship between book value per share and stock volatility in the Nigerian Stock Market.
2.    To examine the relationship between dividend per share and stock volatility in the Nigerian Stock Market.
3.    To ascertain the relationship between earnings per share and stock volatility in the Nigerian Stock Market.
1.5        ResearchHypotheses
The following hypotheses have been specified for the purpose of the study
H01:     There is no significant relationship between book value per share and stock volatility in Nigeria.
Ho2:     There is no significant relationship between dividend per share and stock volatility in Nigeria.
Ho3:    There is no significant relationship between earnings per share and stock volatility in Nigeria.
1.6     Scope of the Study
This study provides insight into value relevance of accounting information in the Nigerian stock market and it covers a period of 5years from 2011 to 2015. Data were collected through secondary sources.
1.7Significance of the Study
Nigeria is the most populous country in Africa with a population of 146.3 million (Ibidapo-Obe, 2009), and its stock exchange. Nigerian Stock Exchange (NSE)) is the third largest in the continent with market capitalization of US $82 billion at end of 2007(Kumo, 2008).The relevance of any study stem from its importance to respective users or the beneficiaries of such research works. Government at all levels will find this work very interesting as it reveals the extent and the environment which is conducive enough that will propel investment climate.
Policy makers in the banking industry will benefit immensely from the study as it redirects and refocuses their attention to the significance of financial information in the financial service industry. To shareholders, this study will reposition the confidence of all the parties in the banking industry and the potential investors as regards their investment decisions in the banking industry. The study is hoped to add to the existing literature and knowledge in promoting investment decisions in Nigeria. The research work will also be a guide to students wishing to make further research in the field.
1.8    Limitation to the Study
This research was hindered due to the following factors
1.    Financial constraint: finance is the key to the success of everything research work and the said finance was readily unavailable as at the time of carrying out this research.
2.    Time constraint: The time stipulated for the submission of this work was obviously too short and as such was unable to cover all the companies registered under the Nigeria stock market.
1.9        Definition of Terms
1.    Value relevance: Value relevance is being defined as the ability of information disclosed by financial statements to capture and summarize firm value.
2.    Earnings per share: Earnings per share (EPS) is the portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company's profitability.
3.    Book Value per share: The book value per share formula is used to calculate the per share value of a company based on its equity available to common shareholders. Also known as net asset value per share.
4.    Accounting information: An accounting information system (AIS) is a system of collecting, storing and processing financial and accounting data that are used by decision makers.
5.    Dividends: This is cash dividends. Money paid to stockholders, normally out of the company's current earnings or accumulated profits.
6.            Financial Statements: Statement of the accounting policies; the balance sheet as at the last day of the year; a profit and loss account or, in the case of a company not trading for profit, an income and expenditure account for the year; notes on the accounts;  the auditors reports; the directors’ report; a statement of the source and application of fund; a value added statement the year; a five – year financial summary; and in the case of a holding company, the group financial for statements as stipulated in CAMA, 1990
7.    Market value: This is the current price at which securities are bought and sold in the market. It is the price the market assigns to the company’s share.
8.    Stock Exchange: Stocks are listed and traded on stock exchange which is an entity a corporation or mutual organization that specializes in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together.
9.    Market: This refers to entire market of equity for trading in the shares and derivatives of the various companies.

THE EFFECT OF BOOK VALUE PER SHARE, DIVIDEND PER SHARE AND EARNING PER SHARE ON STOCK VOLATILITY

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Details

Type Project
Department Accounting
Project ID ACC1649
Price ₦3,000 ($9)
Chapters 5 Chapters
No of Pages 120 Pages
Methodology ANOVA
Reference YES
Format Microsoft Word

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    Details

    Type Project
    Department Accounting
    Project ID ACC1649
    Price ₦3,000 ($9)
    Chapters 5 Chapters
    No of Pages 120 Pages
    Methodology ANOVA
    Reference YES
    Format Microsoft Word

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