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AN EVALUATION ON THE VALUE RELEVANCE OF CORPORATE DISCLOSURE TO SHAREHOLDER IN NIGERIA

ABSTRACT

 

The main objective of this study was to investigate the value relevance of corporate disclosure to stakeholderss, with a focus on listed banks in Nigeria. The study adopted a descriptive research design. Secondary data obtained from the Nigeria Securities Exchange records comprising of corporate action register and handbook, and daily market statistics, and from annual reports released by the studied banks from year 2010 to year 2015 was mainly used in this study. Content analysis program ATLAS.ti 8, Harvard IV dictionary and Ms Excel 2007 were used for content analysis process in which the corporate disclosure were quantified. Primary data obtained through an opinion survey questionnaire administered on the respondents who were financial analysts at licensed investment banks, stock brokers, fund managers and investment advisers as at 30 April 2016 was used to triangulate the results of secondary data. Data analysis was carried out using SPSS version 20 and Stata 13. Descriptive statistics and inferential statistics were used for analysis. Statistical t-test was used to test the significance of independent variables on dependent variable. The results revealed that risk disclosure, corporate social responsibility disclosure, the chairman’s statement and related party disclosure in annual reports had a positive and significant relationship with the market value of the firms which was measured by the annual average market price per share. Regression analysis result also revealed that there is a significant positive relationship between corporate governance disclosure and average market price per share, for listed banks in Nigeria. This study therefore concluded that corporate disclosure to stakeholderss of listed banks in Nigeria have an impact on investment decisions and therefore they are value relevant. The study recommends both an expanded role of the auditor in reviewing and reporting on corporate disclosure, and more guidelines and regulations in relation to corporate disclosure to ensure that firms put clearer and relevant information into the hand of investors.

 

 

 

 

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background Of The Study

The purpose of accounting is to provide information about the economic aairs of an organization this information may be used in a number of ways: by organization managers to help them plan and control the organization operations; by owners to help them appraise the organization performance and make decision as to determine how much tax the organization must pay; by lenders and others to help them decide how much time and or money to devote to the organization. Given that account reports are prepared in general terms suitable for presentations to the diverse category of users enumerated above, there has been heavy regulation in the direction of the contents, depth and breath of these report. These include the companies and allied matters decree (now Act) hereaer to as (CAMA 1990), Statement of Accounting Standard (SAS), Auditing Standards, ICAN professional ethics and code of conduct e.t.c., all geared towards the preparation of general Statements in greater detail and simplicity for the uses.

1.2 Stament Of Problem

One of major users of the corporate annual report or financial statement is the shareholder. The shareholder equity acquisition in the  company confers on him joint ownership status and thus right to receive her financial statement. The problem however is that shareholder may not be receiving the financial statement within the stipulated time as contained in section 344 of CAMA 1990. It is also evident that some may not be receiving them at all. The following questions arise for which answers will be sought in the course of this study.

1. Are the legal and professional objective for these reports being enjoyed and utilized by the shareholders?
2. Does the disclosures made currently meet the needs of shareholders

1.3 Objective Of The Study

The major objective of this study is to examine value relevance of corporate disclosure. Other specific objectives include;

1. To ascertain whether Nigerian shareholder receive corporate reports as stipulated under section 344. Of CAMA 1990.
2. To evaluate the extent to which Nigeria shareholders use the corporate reports in appraising the overall performance of the companies.
3. To determine whether Nigerian shareholders require more disclosures in some accounting areas.

 

1. 4 Research Hypotheses

The following null hypotheses were tested in order to validate data analysis.

 

• H₀: Risk disclosure in the annual reports of listed banks in Nigeria has no value

relevance.

 

• H₀: Corporate social responsibility disclosure in the annual reports of listed

banks in Nigeria has no value relevance.

 

• H₀: Corporate governance disclosure in the annual reports of listed banks in Nigeria has no value relevance.

 

• H₀: The chairman’s statement in the annual reports of listed banks in Nigeria

has no value relevance.

 

• H₀: Related parties disclosure in the annual reports of listed banks in Nigeria

has no value relevance.

 

1.5      significance of Study/ Justification

According to Penneerselvam (2014), these are aspects on how the study contributes or benefit people or researchers. This study brought in to record the value relevance of corporate disclosure in the annual reports of listed banks in Nigeria which is useful to various stake holders. Firstly, this research provides a guide as to which nonfinancial information is or is not valued by financial advisers and in extension investors. This should help the preparers of accounting information and standards setters to further enhance value relevance of the most widely used non-financial information.

 

Secondly, this work informs disclosure policies developed by regulators such as the Institute of Certified Public Accountants of Nigeria (ICPAK), the Capital Markets Authority (CMA) the Nigeria Securities Exchange (NSE), and the Central Bank of Nigeria (CBK). This is important because relevant regulatory policies have a direct impact on economic development in line with the economic pillar of Nigeria’s vision 2030.

 

Thirdly, this study fills the gap in literature by investigating the value relevance of nonfinancial disclosures in the NSE and other emerging stock markets. The findings, conclusion and recommendations of this study may also be used to test the existing theories under extreme conditions, which are not present in developed economies where most of the prior studies on value relevance of corporate disclosure have been conducted. Fourthly, this study supplies investors with information to help them make good investment decisions. The findings of this study put in their hands helpful leads on the extent to which corporate disclosure affect the prices of share on the NSE. Foreign investors who may want to invest in equity share on the NSE and other exchanges in developing economies are also well guided by the findings of this study as they seek to see where best to put their money.

 

Fifthly, the findings, conclusion and recommendations of this study may enable the standards setters to know the nature of demand placed on corporate disclosure by the investment community, stakeholders and public. In conclusion, a study on value relevance of corporate disclosure is also timely in informing the on going consultation on integrated reporting which is currently being conducted by IIRC.

 

1.6       Scope of the Study

This study focused on the ten banks listed at the NSE over the entire period under study, that is, year 2010 to year 2015. This scope was informed by two facts. Firstly, requirement by the CBN prudential guidelines that banks include corporate disclosure in their annual reports. Secondly, at the date of this study, the data on the average market value of shares before the annual reports of a subsequent period are released was only available for up to the period relating to year 2015 annual reports.