Value Relevance of Accounting Information in the Nigerian Banking Sector

This paper aims at determining the value relevance of accounting information in the Nigerian banking sector. Value relevance implies ability of the financial information contained in the financial statements to explain the stock market measures. This study aims at explaining likely impact of financial reporting by listed banks on the Nigerian Stock Exchange and the market prices of their shares. Our study reveals that value relevance of published financial statements, per se, is negligible. In fact, ratios based on the financial statement such as the earning per share show insignificant association with stock market prices. But the book value per share has a positive and significant impact on the market share price. Despite the widespread use and continuing advancement in the financial reporting practices of earnings as reflecting value changes, there is some concerns about it not carrying enough value in the eyes of the shareholders or investors. The result of our investigation found that although earnings per share is positively related to market price per share, it does not have a significant impact on market price of the shares. It is recommended that the regulatory authorities must continue to ensure that banks comply with the codes of corporate governance and the relevant accounting standards in preparing their financial statements. Besides, strict compliance with accounting standards coupled with legal sanctions will bring more value relevance to financial statements of banks and accounting information in the Nigerian banking sectors.