THE USEFULNESS OF FINANCIAL STATEMENTS IN ASSESSING THE PERFORMANCE OF COMPANIES AS A GUIDE TO INVESTMENT DECISION IN NIGERIA
Fatimoh Zara Aruna, Idris Hauwa Jibrin and Hamza Umar Muhammad
Volume 13 Issue 2
Abstract
This study examines the usefulness of financial statements in assessing the performance of listed deposit money banks and guiding investment decisions in Nigeria. The study employed secondary data obtained from the audited annual reports of ten purposively selected banks covering the period from 2015 to 2024. Descriptive statistics, correlation analysis, and panel regression techniques were used to evaluate the relationship between key financial indicators and firm value, measured as market price per share. The independent variables included Earnings per Share and Abnormal Earnings, while Firm Size and Leverage. The empirical results revealed that both EPS and ABN exhibited positive but statistically insignificant effects at the 5% level, suggesting that their incremental value relevance is weaker compared to book value, possibly due to volatility and high interdependence. The overall regression model was statistically significant, with an R-squared of 0.341, demonstrating that financial statement information collectively explains a considerable proportion of variations in share price among listed banks. The study concludes that financial statements are decision-useful for investment appraisal in Nigeria, but investors rely more heavily on balance sheet indicators particularly book value than on earnings measures. Bank managers enhance transparency around equity positions, and that regulators strengthen disclosure requirements to improve the credibility and usefulness of reported financial information. [ Keywords Earnings per Share, Abnormal Earnings, Book value
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