CORPORATE INVESTORS AND UNCERTAINTY MEASURES OF DEPOSIT MONEY BANKS IN NIGERIA
Abstract
This study wants to identify the forces that drive the stock market by
investigating how corporate investors react to certainty and uncertainty
measures in new financial statement of deposit money banks in Nigeria.
Using Ralph’s sampling method as benchmark; data were randomly
collected from Nine (9) Nigerian banks covering the period of 2006 to
2013. The Dependent variables used in this study was Share prices as
a proxy to measure corporate investors’ reaction. There were two set of
independent variables used in this research; firstly, volatility of Book
value and Earnings as proxy for uncertainty in new financial statements
and secondly, balance sheet and income statements figures of Book
value and Earnings were used as proxy for certainty in new financial
statements. The researcher utilized Olhson model in the analysis of data.
This is because Investment is sacrifice of present for future benefit and
the future is uncertain. The present is relatively well known, whereas the
future is always enigma. Uncertainty exists in financial statements when
measurements were largely based on estimates, judgments, and models
rather than exact depictions. Corporate investors need to understand
those uncertainty and certainty measures and assess their potential
impact on share prices. It was found that there is not significant
relationship between the uncertainty measures in financial statements
and share prices, which implied that corporate investors do not react to
uncertainty measures in financial statements. When uncertainty
measures was removed, we found that there is significant relationship
between certainty measures in financial statements and share prices,
which implied that corporate investors react positively to good news and
otherwise to bad news. The following recommendation were offered;
that corporate investors should take the advantage of certainty measures
in financial statements by identify undervalued stock that deviate from
its actual worth. This will enable them to have above normal returns
compared to investors that use either chartist or random walk theory.
On uncertainty measures, it implied that Nigeria capital market follows
random walk theory. Therefore, corporate investors should not react to
uncertainty measures in financial statements because future share prices
could not be predicted using uncertainty measures. This study was
restricted to evaluating and determining the effect of uncertainty and
certainty measures financial statements on the corporate investors’
decisions in the Nigerian banks.
Keywords
Certainty measures
Uncertainty measures and Investors reaction
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How to Cite
Tahir, M. D. (2014). CORPORATE INVESTORS AND UNCERTAINTY MEASURES OF DEPOSIT MONEY BANKS IN NIGERIA. Nigerian Journal of Accounting Research, 10(2), 147-158.
M. D. Tahir, "CORPORATE INVESTORS AND UNCERTAINTY MEASURES OF DEPOSIT MONEY BANKS IN NIGERIA," Nigerian Journal of Accounting Research, vol. 10, no. 2, pp. 147-158, December 2014.
