ESSAY AND ACCOUNTING TERM PAPER

TOPIC: THE RELEVANCE OF ACCOUNTING INFORMATION TO

INVESTMENT DECISIONS IN NIGERIA
 ABSTRACT

This research paper investigates the relevance of accounting information to investment decisions in Nigeria.
The paper became imperative in the light of some studies that explored the proposition that accounting
information in published financial statements lost its relevance over the period of time, as well as the
instances of presentation of financial information by some corporate bodies as regards their networth and
existence which is a far cry from the true picture of their actual financial position (of not being credit worthy,
for instance). These kinds of happening have provoked thoughts and opinions from the intellectual world
over the role of ethics and reliability of accounting information as a decision background for investment
purposes. It is as a fallout of this background that this research is carried out. The methodology adopted is
descriptive using a qualitative method i.e. purposive sampling method in getting responses to carefully
framed questionnaires on the subject matter. In total, two hundred and fifty (250) respondents were sampled
through purposive sampling method and two hundred (200) questionnaires were collected back, thus
achieving a response rate of eighty percent (80%). Findings from responses received revealed accounting
information as relevant and essential for investment decision-making.

The afore-mentioned measures are anticipated to increase investors’ confidence in accounting numbers and
by extension the economic growth in Nigeria.

It was therefore recommended that there is need for a more ethical re-orientation of members of the industry
in their ethical responsibility to the public and increase in punitive measures as well as solid policy
framework readjustment for the industry.

Accounting Information in published financial statements lost their relevance over the period of time. (Ball
and Brown 1968, Oyerinde D.T., 2009). In United Kingdom, it has found that the financial statement was
considered as the least effective means of communicating information. (Guthrie J., 2007).

There is need to increase the ethical knowledge, discipline and its practice into the
profession of accounting most especially as it concerns the public through consistent and
practical education

There is need for punitive measures where unethical practices such as poor accounting
information or presentation are made to the public.
There is need to give public access to other corporate information in order to minimize
these corporate fraud.

There is need for a stringent policy readjustment to regulating the affairs of these
corporate bodies in accounting presentation.

There is also need for whistle blowing philosophy by the public when these issues are
noticed.
SECTION 1: INTRODUCTION

1.1 BACKGROUND TO THE STUDY.

Listed companies in Nigeria use financial statements as one of the major medium of
communication with their stakeholders. Therefore, stock market regulators and
accounting standards setters are trying to improve the quality of financial statements in
order to increase the transparency level in financial reporting. (Vishnani S., Shah B.K.,
2008). Financial Statements may consist different types of information which can be
named as Financial Information/Accounting Information and Non Financial
Information/Non Accounting Information. Accounting Information are information which
describes an account for a utility. It processes financial transactions to provide external
reporting to outside parties such as to stockholders, investors, creditors, and government
agencies etc. and non accounting information are information which cannot be measured
in monetary terms to make investment decisions by the investors. This type of
investment is called as ethical investment.
Financial information is essential in making sound investment decisions and it will
reduce the informational asymmetry problem between the firm’s managers and the
investors (Hossain, D. M., Khan, A., Yasmin, I. 2004). Though the investors use non
financial information in order to make investment decisions, still conventional investors
give more weight to financial information. Akintoye (2008) discovered that the quality of
accounting information in terms of its accuracy, adequacy, reliability and mode of
disclosure is a major determinant of the level of efficiency of the capital market and other
decision tasks.

Recent happenings in the global world however and various empirical studies explored
that Accounting Information in published financial statements lost their relevance over
the period of time. (Ball and Brown 1968, Oyerinde D.T., 2009). In United Kingdom, it
has found that the financial statement was considered as the least effective means of
communicating information. (Guthrie J., 2007). Having discovered that studies into the
relevance of accounting information are existent in other countries (Ball and brown 1968,
Francis & Scghipper, 1999, Vishnani S., Shah B.K., 2008, and Ronen J.), the gap is still
yet to be filled in Nigeria. Hence, this research work intends to fill this gap by
investigating on The Relevance of accounting information to investments decisions in
Nigeria.

1.2 STATEMENT OF THE PROBLEM

The mobilization and allocation of both domestic and foreign savings are critical in the
national growth process (Aregbeyen, 2011). It is therefore, obvious that the investment
markets have a significant role to play in economic development. Growth occurs when
savings are channeled into productive investments which in turn enhance the capacity of the
economy to produce goods and services which have bearing on standard of living. Alile (2007)
indicates that the capital market which is the main investment market for listed companies
publishing financial or accounting information play a crucial role in stimulating industrial
growth as well as economic growth and development.
This means that a capital market will succeed in facilitating economic growth and
development if it can encourage the flow of savings / investment through the purchase of
securities issued by government or private enterprise and others with the aim of financing
the implementation of capital projects. However, instead of the potential of this industry to be
harnessed we are having a big abuse of financial and accounting information presentation to
the general public. Inaccurate financial and accounting statement disclosures and
falsification is now the other of the day. Traditionally, investors within the public rely on this
accounting and financial information and general information from enquiries as a basis
for their investment decisions but this is not the case any more, with the level of
corruption and incompetence that has bedvilled the sector. This has large implications
for ethical practices within the sector, growth of the sector, investment direction and
growth and development of the country.

1.3 AIMS AND OBJECIVES OF THE STUDY

The aim of the research is to investigate the relevance of accounting information to
investment decisions in Nigeria.

OBJECTIVES
The aim of the research is intended to be achieved through the following objectives:
 Examine the current state of accounting information as an aid to investment
decisions in Nigeria
 Examine if accounting information in Nigeria meet regulatory criteria and
standards.
 Examine the contribution of accounting information to investors decision
among other factors
 Proffer recommendations in helping to solve the inherent problems in
accounting information and presentation in Nigeria

1.4 SIGNIFICANCE OF STUDY

The quality of accounting information in terms of its accuracy, adequacy, reliability and
mode of disclosure is a major determinant of the level of efficiency of the capital market
and other decision tasks. The relevance of accounting information to day-to-day running
of the organization and the general public, especially for investors cannot be over-
emphasized. Investments are normally undertaken under condition of uncertainty.
Hence, one of the incentives required is a mechanism to help reduce the level of
uncertainty to which a potential investor could be exposed (Ariyo, 2007). A careful
execution of this research work which is tended to reveal problematic areas and investors
concern would if implemented well would position the mechanism of accounting and
financial information in performing its primary role vis-à-vis information and reduction of
risk. A good accounting information presentation and mechanism if so achieved
determines the nature and extent of moral hazard to which existing and potential
investors could be exposed, thereby influencing the level of optimality of allocation of
societal resources. The research will also tend to inform and educate the illiterate public
on the dangers involved in decisions based on paper data alone without corroboration
from objective financial experts. Furthermore, the research paper would be advisory to
government and financial regulatory policies in formulating procedures and more
stringent policies in combating these professional gaps within the industry. As well this
research is intended to fuel further researches in this field of study.

1.5 RESEARCH QUESTION

In carrying out this research the following research questions are set:
 Does accounting information in Nigeria follow laid down professional
standards and procedures?
 Is accounting information in Nigeria a true reflection of the financial state of
listed companies?
 Is accounting information significantly reliable for investment purposes?
 Does accounting information affect the rate of investment in Nigeria?
 What is the public perception relating to accounting information and
financial presentation in Nigeria?
1.6 RESEARCH HYPOTHESIS
In this research, three (3) hypotheses were set, namely:
Ho: Accounting information does not significantly represent a true reflection of
financial situation of listed companies in Nigeria
Hi: Accounting information significantly represents a true reflection of financial
situation of listed companies in Nigeria.

Ho: Accounting information in Nigeria is not significantly reliable for investment

purposes in Nigeria.
Hi: Accounting information in Nigeria is significantly reliable for investment
purposes in Nigeria.

Ho: Accounting information does not significantly affect the rate of investments in
Nigeria
Ho: Accounting information significantly affects the rate of investments in Nigeria

1.7 SCOPE AND LIMITATIONS OF STUDY

This research work is primarily on accounting information relevant to investors in Nigeria
and this would involve only accounting and financial indexes computed and published to
the public by listed companies alone and does not involve any other type of accounting
information or management accounting information not published or obtained or used
within the organization or not published. Furthermore, this research would as well be a
reflection of the experiences of investors or respondents quite recent to the research
likely a period of 5 years back from now since the research work is a qualitative one.
In terms of limitation, the research work is a qualitative one and thus will be based on
respondents’ judgment which has its weaknesses but effort will be tailored at using
ranked options (ordinal attitudinal scales) in order to capture the scale of their
perceptions. Furthermore, ability to get respondents that are finally literate enough who
is an investor, aware and uses financial information is seen also as very important to the
research. In other to lessen the effect of this limitation, the sampling methodology was
purposive.
The question of motivation to fill a research instrument nowadays by business seem to
them as time wasting, consequently much time wasting was involved in lobbying
respondents into helping in completing the questionnaire. Conclusively, all instruments
were to every extent retrieved back to ensure further work.
1.8 TERMINOLOGIES IN THE RESEARCH
Accounting: The systematic recording, reporting, and analysis of financial transactions
of a business
Financial: related to finance which is the science of the management of money and other
assets
Investment: the purchase of a financial product or other item of value with an
expectation of favorable future returns
Monetary: of or relating to money or to the mechanisms by which it is supplied to and
circulates in the economy
Regulatory: To control or direct according to rule, principle, or law or to adjust to a
particular specification
Standard: A level of quality or attainment, universally or widely accepted, agreed upon,
or established means of determining what something should be
SECTION TWO: LITERATURE REVIEW
2.1 GENERAL REVIEW OF LITERATURE
According to Meyer (2007) accounting plays a significant role within the concept of
generating and communicating wealth of companies. Financial statements remain the
most important source of externally feasible information on companies. In spite of their
widespread use and continuing advance, there is some concern that accounting practice
has not kept faith with ethics and pace with rapid economic and high technology
changes which in invariably affects the value relevance of accounting information.
Before the nature of Accounting can be addressed, this field of study must first be
delineated. This entails an identification of the area of interest and of the borders of the
discipline in relation to neighbouring disciplines or mediating concepts. Thus a
successful definition of Accounting should clearly delineate the boundaries of the
discipline at a point in time, give a precise statement of its essential nature, and be
flexible so that innovation and growth in the discipline can be accommodated.
A number of definitions of Accounting have appeared in the literature, each attempting
to demarcate its field of study. Developing a single definition of Accounting is however
beset with difficulties. The first difficulty stems from the dynamic nature of Accounting.
Glautier and Underdown (1986) point out that the changing environment continually
extends the boundaries of Accounting, which makes defining the scope of the subject
problematical. A second difficulty, which stems from the first, is the question of
boundaries. Accounting can be described as being simultaneously eclectic and pervasive,
consequently definitions of Accounting tend to have fuzzy and changing boundaries
(Glautier and Underdown (1986). A third difficulty stems from the often debated
question of whether Accounting is an art or science. According to the AICPA (1953)
Accounting is an art.
The Committee on Terminology of the AICPA (1953, par.5) defined Accounting as follows:
“Accounting is the art of recording, classifying and summarising in a significant
manner and in terms of money, transactions and events which are, in part at least, of a
financial character and interpreting the results thereof.”
An example of definitions in accounting textbooks is supplied by Kieso and Weygaardt
(1992) who identify the three essential aspects of Accounting as - the identification,
measurement and communication of financial information on economic entities to
interested parties, being the users of financial information. This definition does not take
into consideration the use of such information to users, and limits the information to
financial data. A more comprehensive definition of Accounting is provided by Ansari, Bell,
Klammer & Lawrence (1997) who state that it consists of four key ideas:
• It is by nature a measurement process;
• Its scope includes financial and operational information;
• Its purpose is to assist the organisation in reaching its strategic objectives;
and
• Its attributes are to enhance the understanding of the measured phenomena, and
provide information for decision making, and therefore encourages actions and supports
and creates shared values, beliefs and mind sets.
This definition has a number of strengths. It identifies that accounting information
should include both financial and operational information. It stresses the increasing
importance of supporting strategic decision making in the organisation as a result of a
volatile and competitive business environment. It views Accounting as more than the
technique of processing and measuring data. Behavioural and social responsibility
aspects are recognised in the definition as attributes. This view is, however, restricted as
it defines Accounting from a Management Accounting perspective and overlooks the
financial reporting aspects. Another limitation is that it does not state specifically that in
Accounting change and continuous improvement are measured, although it is implied.
By facilitating change, the implication is that
accounting information should include aspects such as flexibility and companies’ ability
to adapt to change.
The construct of flexibility does not appear in any of the definitions on Accounting,
because the definitions were developed during stable periods. The environment however
has changed – uncertainty has increased and predictability has declined. In view of the
fact that flexibility is a function of uncertainty, greater value will be attached to flexibility
in organisations as uncertainty escalates. It is therefore appropriate to include the
construct of flexibility in the definition especially during periods of uncertainty.

Although the term flexibility has appeared in the accounting literature if not in the
definitions on Accounting, it is often referred to in a negative context. Flexibility in
Accounting is viewed by some authors in a negative light. Wolk, Francis & Tearney (1984)
for example, define flexibility as the choice between different accounting policies. The aim
of Accounting is to reduce the number of acceptable accounting policies so that a
transaction is treated consistently by different reporting entities. This implies in turn,
that “flexibility” should be eliminated, too. This endless pursuit of consistency and to a
lesser extent comparability, contributes to the inflexibility of Accounting and to the
negative perceptions of flexibility in the accounting community.

From a functionalist perspective, Accounting is viewed not as an end in itself, but rather
as a commodity or language that is useful in decision making. This implies as mentioned
before, that the continued existence of Accounting is dependent on its usefulness to
society, and in a narrower context, its usefulness to the users of accounting information
(see Puxty, 1993). Several of the above definitions are in line with a functionalist
approach in that they emphasise the need to provide information useful in the decision-
making process of users. These users of financial information can be divided into two
main categories, namely internal and external users. Internal users of information
include management and employees who require information for
strategic, operational and administrative decisions. This type of information is
communicated in internal and management reports and is the domain of Management
Accounting. External users include investors, lenders, suppliers,
customers, government and the public who require information for various purposes.
Information to external users is communicated by means of the annual and special
purpose financial reports and is the domain of Financial Accounting.

FINANCIAL ACCOUNTING AND MANAGEMENT ACCOUNTING

The apparently divergent needs of internal and external users of accounting
information have resulted in the development of two subdisciplines within the discipline,
namely Management Accounting and Financial Accounting. Drury (1996) states that
Management Accounting is concerned with the provision of information to people within
the organisation to help them make better decisions, whereas Financial Accounting is
concerned with the provision of information to stakeholders outside the organisation.

The divergent development of Management Accounting and Financial Accounting has

resulted in, effectively, two information systems within organisations. Johnson and
Kaplan (1991) suggest that Management Accounting has developed faster in recent times
than Financial Accounting. They argue that in the past, Financial Accounting was the
foremost factor that inhibited development in Management Accounting. Once the
legislative and standardised approach ascribed to in Financial Accounting was
abandoned, Management Accounting became more flexible and management and
accountants more willing to experiment in meeting the demands of management. As a
result management has come to view financial statements as a costly but necessary
exercise in order to comply with legislation and GAAP. The information contained in the
financial statements is rarely useful to management and often far removed from the
information needed to run the business.
The external users receive information in the financial reports which is not necessarily
relevant for assessing the particular business and the performance of management. Thus
it is not surprising that recommendations of the Jenkins Report (AICPA, 1994a, p.5)
included the following on external business reporting:

• External business reporting must provide more information with forward-

looking perspective, including with regard to management’s plans;
• It should focus more on the factors that create long-term value and on non-
financial measures which indicate how sectors of the business are performing; and
• It must provide greater alignment between the information reported externally and the
information reported to senior management.
The independent development of Financial Accounting and Management Accounting has
widened the gap between information needed by management and the information
reported to other users and is inefficient and costly in a competitive environment. As has
already been mentioned, the effective use of technology can be used to develop one
flexible information system in an enterprise that meets the different needs of both
internal and external users. The Institute of Chartered Accountants of Nigeria (1998)
made proposals on how one accounting information system, by means of a set of
corporate reports coupled with computer technology, could satisfy the needs of both
internal and external users of information. For the purpose of this paper, the assumption
is made that there is only one accounting information system and only one discipline,
namely Accounting, which encompasses the fields of study of Financial Accounting as
well as Management Accounting.

The purpose of accounting information

The product of Accounting is accounting information. Accounting information is used in
deciding between different courses of action and results in informed decision making. It
serves to reduce the uncertainty inherent in the business environment where decisions
are made about the future. It further reduces entropy based on the assumption that
chaos exists where there is no information. Littlejohn (1989) views information as a
measure of uncertainty or entropy in a situation. This implies that the greater the
uncertainty or entropy, the more accounting and other information are required.

The role of the accountant in producing accounting information is to observe, screen and
recognise events and transactions, to measure and process them and to compile
corporate reports with accounting information that are communicated to users. These
are then interpreted, decoded and used by management and other user groups. The
main requirement for such corporate reports is that they should be useful to users. The
provision of information that is useful to the decision-making process is currently
recognised as the main purpose of accounting information. This holds for theoretical
frameworks on financial reporting as well as accounting literature. Gray (1994, p.9)
confirms that accounting literature is currently dominated by the notion of decision
usefulness. This implies that corporate reporting should continuously meet the changing
needs of all users of accounting information.

The robustness and meaning of “decision usefulness” as the main objective of

accounting information has, however, been criticised in the literature (Williams, 1987;
Pallot, 1991). Gray (1994) calls decision usefulness a flaccid term without any element of
degree. Although accounting information may be used, it does not necessarily imply that
it is decision useful. In fact, very little concern seems to be given to defining what exactly
decision usefulness is supposed to connote (Williams, 1987, p.179).

In Canada, the Stamp Report (CICA, 1980) on corporate reporting identified four major
objectives of financial reporting:
• To provide useful information to all the potential users of such information in a form
and time frame that is relevant to their needs;
• To provide information to minimise uncertainty about the validity of information and to
enable the user to make his or her own assessment of risks associated with the
enterprise;
• To develop standards governing financial reporting which allow ample scope for
innovation and evolution as improvements become feasible; and
• To be directed towards the needs of users who are capable of comprehending a
complete set of financial statements.

The theme of decision usefulness as the main purpose of accounting information is also
apparent in Management Accounting. Drury (1996) suggests that management requires
information that will assist them in their decision-making and control activities and
Ansari et al . (1997) identify as an attribute of Accounting the provision of information
for decision making. Decision usefulness as the main objective of Accounting information
cannot remain static, however, but will evolve and change over time. It will be influenced
by political, social, economic and technological changes in the environment. Changes in
the environment may influence not only the nature and objectives of accounting
information, but also the needs of its users. This requires the accounting information
system to be flexible so that it can adapt to the changing demands of its users.
Accordingly, standards governing financial reporting should furthermore also be flexible.
A flexible information system and flexible reporting standards will not inhibit innovation,
experimentation and evolution in adapting to the changing demands of users, but rather
promote it.

2.2 THEORECTICAL FRAMEWORK

Accounting plays a significant role within the concept of generating and communicating
wealth of the companies. Financial statements still remain the most important source of
externally feasible information on companies. Regardless of their extensive use and
enduring advance, there is some concern that accounting theory and practice have not
kept pace with rapid economic changes and high technology changes. (Meyer C., 2007)
This situation affects the relevance of accounting information. Number of previous
studies explored that accounting information decreased their, relevance over the period
of time. (Francis J., and Schipper K., 1999) In the same time a number of researchers
claim that accounting information has not lost its relevance. (Oyerinde D.T.,2009, Vieru,
Perttunen and Schadewitz, 2005, Collins, Maydew and Weiss, 1997: cited by Oyerinde
D.T.,2009)
For financial reporting to be effective, accounting information to be relevant, complete
and reliable. (Hendricks, 1976) The primary purpose of the financial statements is to
provide information about a company in order to make better decisions for users
particularly the investors.( Germon and Meek 2001). It should also increase the
knowledge of the users and give a decision maker the capacity to predict future actions.
Therefore, relevance accounting information can be described as an essential pre
requisite for stock market growth. ( Oyerinde D.T., 2009)
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). Ohlson in 1995
explained that the value of a firm can be expressed as a linear function of book value,
earnings and other relevant information. The Ohlson model stands among the most
important developments in capital market research. (Dung N.V., 2010) Francis and
Schipper in 1999 had different approaches in this regard. The predictive view of value
relevance ( the accounting numbers are relevant if it can be used to predict future
earnings, dividends or future cash flows),the information view of value relevance(the
value relevance is measured in terms of market reactions to new information),
fundamental analysis view of value relevance( the accounting information is relevance in
valuation if portfolios formed on the basis of accounting information are associated with
abnormal returns) and the measurement view of value relevance( the financial
statementis measured by its ability to capture or summaries information that affects
equity value.
(Francis J., and Schipper K., 1999). Oyerinde D.T in 2009 explained the correlation
between accounting information such as Earning Per Share (EPS), Return On Equity
(ROE) , Earning Yield (EY)and Market Price per Share.(MPS)

According to Keynes (1936) investment is often equated with real investment that adds to
existing stock of capital. Ariyo (2007) further stressed the classification of investment into
two groups-financial and Non-financial. The former refers to interest bearing or dividend
yielding assets such as stocks, bends, shares and other forms of securities, traded in the
stock market. The latter group refers to what is generally described as real investments
usually in physical forms e.g. buildings, equipment and machinery.
Developments within the industrial world have, overtime made accounting information
arguably the most important decision making tool relied upon by investors. In view of the
following, Porter (1980) opines that accounting records provide evidence that elaborates
cost accounting records maintained to support management’s estimation of product
costs during a given period. Tyson (1992)
argues that cost accounting systems, in conjunction with a managerial component,
supported a broad scope of decisions in the textile and manufacturing industries.
Fleishman and Tyson (1998) identify managerial decision-making and control as the
primary use of accounting information during the industrial revolution in the US and
UK. Thus accounting is concerned with the provision of financial and other relevant
information for making informed decisions about allocation and management of
resources and for appraising corporate performance.
At this juncture, it is essential to review the concept “forecasting” as it is an
empowerment tool for decision makers. It is an exercise designed to enhance the quality
and appropriateness of decision making and to foster purposeful and realistic planning.
Forecasting involves the use of cognitive and mathematical models (Ariyo and Tomassini
1985).
2.3 CONCEPTUAL MODEL
The theory of rational expectation propounded by Mush (1961) serves as a basis for
earnings forecasting. It presumes that economic agents optimize available information
efficiently when forming expectations about the future values of economic variables, such
as prices and income/earning.
However, empirical evidence has shown that financial analysts’ earning forecasts are not
always consistent with rational expectation theory. Basu and Markov (2003) argue that
financial analysts do not efficiently use information in prior earnings levels (extreme),
earnings changes, forecast revisions, forecast errors and stock returns. Furthermore, a
lot of empirical studies have been carried out on the accuracy of financial analysts’
forecasts or predictions of corporate earnings, equity returns and even stock market
rational expectations. Prayag and Van Rensburg (2004) note that most research work on
the accuracy of security analysts earnings forecasts have produced conflicting findings.
This was in consonance with the findings reported by Elton and Cruber (1972) in respect
of analysts earnings for a large pension fund, an investment advisory service. Brown and
Rozeff (1978) evaluated two sets of quarterly earnings forecasts for 50 firms over the
period 1971 to 1975. Some theories have been propounded to enhance the
understanding of the characteristics of investment behaviour and performance. Briefly,
one of these theories which emphasizes the influence of financial factors is in two
dimensions – the first if the theory of profit developed by Sharpiro (1978). This theory
takes profit (especially undistributed refrained earnings) as a source of internal funds for
financing investment. It defines investment as a function of profits, which depends on
level of corporate income or earnings.
Another variant of the ongoing discussion is the cashflow theory of investment
propounded by Duesenberry (1958) which integrates the profit theory with that of
acceleration theory of investment. It stressed that the aggregate cashflow is the main
determinant of investment. He regards investment as a function of national income (Y)
capital stock (K) profit (P) and capital consumption allowances.
These are independent variables and can be expressed as:
I = f(Yt-1, Kt-1, P,R)
where t refers to the current period and (t-1) to the previous period.
P = aY – bK
where a and b are coefficients. Putting lag into consideration it becomes,
Pt = aYt-1 – bKt-1
where p refers to current profits, capital consumption allowances are expressed as:
Rt = K (Kt-1)
In another vein, Keynes (1936) concerns internal rate of returns as a better guide to
informed decisions, than the interest rate. Elaborating further, Keyres (1936) notes that
MEI (Marginal efficiency of investment) can be equated with the rate of discount at which
the present value of the stream of returns expected from the capital assess over its
lifespan is just equal to the supply price of that capital.

Finally, a brief review of Q theory of investment is provided, developed and widely applied
by various scholars, including Keynes (1936). Brain hard and Tobin (1968, 1977),
Hayoshi (1982). A distinguishing feature of the theory is that it shifts attention from bond
and money markets towards equity markets, explaining investment behaviour in real
assets. It is recalled that conventional theory relies on interest rates for explaining
investment behaviour as follows:
I = (r,m)
Where I = Investment, r is real interest rate, and m is marginal efficiency of capital. In
contrast, the Q theory explains investment behaviour as:
I – I (q)
For which Iq > 0 and I (I) = dk while
q = Pc/Pk and (2.7)
Pc = PeE/Pk (2.8)
Where Pc is the shadow equity market price of a unit of capital k, Pk is the current cost
of k, Pe is the market price of one unit of equity share. E is the number of equity issued
and fully paid for, d is the rate of depreciation.
This can be further simplified in the derivation of q by substituting equation (2-7) into
(2.6) such that:
q = PeK/PKK
further rearranged thus;
K = PeE
qPk
Hence, if q, Pk are held constant, or the rate of increase in Pk is less than the rate of
increase in Pe, then an increase in PeE leads to an increase in stock of (that is, additional
investment in capital, k.
Some implications of this review could be summarized as follows. First the ultimate aim
of any investment is profitability. Hence, must of the theories of investment reviewed
herewith anchor their arguments on issues relating to the relationship between returns
on an investment and the applicable “cost” of such investment. All the relevant
information identified by these theories is essentially accounting based, and should be
disclosed as much as possible in proposals to potential investors. The first set was
derived from the application of Box-Jenkins (1970) models to each firm’s previous
earnings forecasts of security analysts as reported in the Value Line Investment Survey
(VLIS).
Gwoly and Lakonishok (1984) observe that financial analysts earnings forecasts do
incorporate the past history of realizations and predictions in an unbiased manner and
as such, can be classified as being rational.
O’Brien (1988) compared the accuracy of three composite analysts’ EPS forecasts: the
mean, the median and the most current forecast. The result shows that the most current
forecast available was the most accurate among the three forecasts. Another study by
HSU (2001) measured the earnings surprises of international firms in 40 countries from
the Asia/Pacific and Europe regions. He found out that financial analysts were not
accurate in forecasting, and that they tend to overestimate the firm’s future earnings.
Black and Carnes (2002) studied the determinants of accuracy of analysts’ earnings
forecasts in the larger economics of the Asian/Pacific region (Ariyo, 2007).
Literature seems to have provided certain research evidence in support of the
overestimation bias in analysts’ performance forecasts. Debondt and Taler (1985) and
Capstaff et al (1995) report that analysts exhibited optimistic overreaction in the forecast
of corporate performance of selected corporate firms in the continental Europe, United
Kingdom (UK) and the United States of America (USA).
From the foregoing we discover that forecasts based on economy wide and firm specific
fundamentals are more reliable than those based on accounting information derived from
previous annual reports of a firm (Ariyo, 2007). Given the review above, Perdicoulis
(2001) states that forecasts should be subjected to credibility and resemblance tests
before they can be accepted or relied upon as a guide to investment decisions.
SECTION 3: METHODOLOGY
This section presents the methods and procedures for this study. The chapter will be
discussed under the following sub-headings:
1. Research design

2. Population

3. Sample and sampling technique

4. Research instruments

5. Pilot study

6. Validity and reliability of instrument

7. Method of data collection

8. Method of data analysis

3.1 Research Design

The descriptive research design will be adopted for this research study. Gay (1976)

asserted that the design is appropriate for collection of data from members of a

community or target population with respect to one or more variables. Osuala (2000)

observed that the design permits the description of situations as they exist at a particular

point in time.

3.2 Population

The population for this study will comprise all individuals within the Lagos metropolis

found to have the requisite education and investment knowledge and made interactions

with Lagos State.

3.3 Sample and Sampling Technique

The sample will comprise of 250 participants selected using purposive sampling method

from the residents of Lagos metropolis. Since purposive sampling method is intended

efforts will be made to sample the relevant individuals with required educational

background and various dealings with the Nigerian Stock exchange.

3.4 COLLECTION OF DATA

The source of data of this study is through the primary source which involves a

field survey of the involved respondents within Lagos metropolis obtained through

purposive sampling method.

After ascertain the readiness of the respondents, a questionnaire was issued and

this totaled 250 and retrieval was right there and then. This is to allow questions to

be asked in areas that looked confusing. Collected questionnaires are checked for

missing items and inappropriate responses. The responses were coded appropriately

in coding sheets before analysis.

Secondary data will also be used where applicable. This will be sourced from textbooks,

internet, journals, magazines and past researches as deem fit.

3.5 RESEARCH INSTRUMENTS, STATISTICAL TOOLS AND ANALYTICAL

PROCEDURE

The research instrument will comprise of a self developed, structured, and validated

questionnaire of five point Likert attitudinal scale of (1) Strongly Agree, (2) Agree and (3)

Undecided, (4) Disagree and (5) Strongly Disagree. The instrument consist of two
sections; Section A measuring respondents social-economic characteristics and section

B measuring the relevant questions (items) designed for the research. There were

administered and retrieved back.

STATISTICAL TOOLS AND ANALYTICAL PROCEDURE

The analysis of data involved the use of descriptive analytical techniques i.e Frequency

distributions and percentages, measures of central tendency, mean particularly will

also be used. Results would be fully interpreted.

Inferential statistics was also used in the tests of hypothesis carried out using Chi-

Square tests at 0.05 level of significance. This was carried out using the Statistical

Package for Social Scientist (SPSS Version 17)

The test statistics for chi-square is given by.

X2 =  (oi-ei)2

ei

Where X2 = Chi-Square Value

oi = Observed Frequency

ei = Expected Frequency

 = Summation symbol

Hypothesis decision rule was based on returned p-value < 0.05, null hypothesis was
rejected and alternative hypothesis accepted and vice versa.
SECTION 4: PRESENTATION AND ANALYSIS OF DATA
4.0 INTRODUCTION
This section presents the analysis of data and its interpretation. The aim of the research
is to study “the relevance of accounting information to investment decision s in Nigeria”.
A total of 250 questionnaires were administered to different respondents scattered
through Lagos metropolis using the purposive sampling techniques. A total of two
hundred (200) were returned, thus a response rate of 80.0% was achieved.
The chapter is sectional, comprising sections A, B and C. Frequency distribution tables
using simple percentages were used in sections A and B. Section A contains responses
from respondents relating to their socio-economic characteristics while Section B
presents respondents opinions and perceptions on the relevance of accounting
information to investment decisions in Nigeria . The last section (C) tests the stated
hypothesis and establishes the relationship between these variables. Three (3) tests of
hypothesis were conducted using Chi-Square analysis carried out at a 0.05 levels of
significance. The analysis was carried out with the use of the SPSS program version 17.

4.1 SECTION A: FREQUENCY DISTRIBUTION TABLES

Table 1: Showing employee (respondents) socio-economic characteristics

Frequency Percentage (%)

Sex of Respondents Male 143 71.50%
Female 57 28.50%
Total 200 100.00%
Age of Respondents Below 30 years 20 10.00%
Between 30 and 40 years 106 53.00%
40 years and above 74 37.00%
Total 200 100.00%
Educational qualification of Respondents First School leaving Certificate 43 21.50%
WAEC ‘O’ Level Certificate 38 19.00%
OND / Diploma 54 27.00%
B.Sc / HND 61 30.50%
Others 4 2.00%
 Total 200 100.00%
Marital Status Single 103 51.76%
Married 96 48.24%
Total 199 100.00%
Organizational Status of Respondents Top management 12 6.00%
Middle management 85 42.50%
First-line management 103 51.50%
Total 200 100.00%
Religion of Respondents Christian 75 37.50%
Islam 96 48.00%
Others 29 14.50%
Total 200 100.00%
Income Level of Respondents Below 15,000 68 37.57%
Between 15,000 - 50,000 71 39.23%
50,000 and above 42 21.32%
Total 181 100.00%

Source: Survey Research, 2012

The demographic statistics of respondents profiled in Table 1 above shows a cross

section of the sex, age, educational qualification, and number of years in organization,

position in organization, company’s business type and department of respondents

interviewed in this study.

By the sex characteristics, One hundred and forty three (143) or 71.5% of the total

respondents were males while fifty-seven (57) or 28.5% of the respondents were females.

A profile of the age characteristics shows that respondents below 30 years age are twenty

(20) and constitute 10.0% of total respondents. Within the 30 – 40 years age category are

One hundred and six (106) respondents or 53.0% of total respondents. Seventy-four (74)

or 37.0% of respondents are seen to be in the above 40 years age category.

Considering the educational qualifications of the respondents, the B.Sc degree holders

are the majority with sixty-one (61) and constitute 30.5% of total respondents. This was

followed by respondents with Ordinary National Diploma (OND) qualifications which are

fifty-four (54) and constitute 27.0% of total respondents. Respondents with First School

leaving Certificate follows next with forty-three constituting 21.5% of total respondents.

Respondents with WAEC ‘O’ level or secondary school qualifications follow next with a

total of thirty-eight (38) respondents and constituting 19.0% of respondents’ total.

Respondents that possess other qualifications aside the listed are categorized under

“others” and are 4 constituting the least, 2.0% of respondents’ total.

The marital status of respondents distribution shows that majority of the respondents

are single, are One hundred and three (103) and constitute 51.8% of total respondents.

The respondents that are married are ninety-six (96) and constitute 48.2% of total

respondents.

In terms of position within management of their organizations in which they belong,

majority of the respondents are in the first-line management of their organizations which

are One hundred and three (103) and constitute 51.5% of total respondents. The

respondents in middle management category follow next with eighty -five (85) and

constitute 42.5% of the total respondents. The respondents under top management

category among the respondents are twelve (12) and constitute 6.0% of total respondents.

In relating to the religion of the respondents, most of the respondents were seen to be

muslims are ninety –six (96) and constitute 48.0% of total respondents. The Christian

respondents are seventy-five (75) and constitute 37.5% of total respondents.

Respondents in other religions are twenty-nine (29) and constitute 14.5% of total

respondents.
In terms of the income distribution of the respondents, most of the respondents were

seen to be in between N15,000 – N50,000 income category are seventy-one (71) and

constitute 39.23% of respondents’ total. Respondents earning below N15, 000 follows

next are sixty-eight (68) and constitute 37.6% of respondents’ total. Respondents earning

above N50, 000 are the least among the respondents are forty-two (42) and constitutes

21.3% of respondents total.

4.2 SECTION B: FREQUENCY DISTRIBUTION TABLES

Table 2: Opinion of Respondents Concerning the Relevance of Accounting
Information to Investment Decisions in Nigeria.
SA A U D SD Tota %
(5) (4) (3) (2) (1) l Agree
ment
8. I am aware of accounting information
been reported by listed companies as 72 81 3 20 23 199 77%
relevant to investment decisions
9. The current state of companies
financial reporting and accounting
31 42 6 53 68 200 37%
information is professional and
satisfactory
10. Corporate accounting information
follow regulatory standards and 1
manners of presentation such as laid 41 57 40 45 194 51%
down by CBN and other regulatory 1
bodies
11 Accounting information is a true
indication and reflection of the 2
26 38 52 64 200 32%
financial and market status of the 0
listed company
12. Accounting information guides majorly
3
most of your investment in the stock 20 16 88 45 200 18%
1
exchange.
13 I place heavy reliance of accounting
17 41 2 63 56 200 29%
 and financial information published by
listed companies before taking any 3
investment decision.
14. Lack of professionals and structures
have been affecting Nigerian corporate 31 36 0 63 68 198 34%
organizations financial reporting
15 Issues of ethical conduct and criminal
11
conduct has been the bane of 51 4 16 10 199 85%
8
transparent financial reporting
16. The state of financial reporting among
listed companies has divested
56 64 5 31 44 200 60%
investments to other sectors of the
economy.
17. The investing public is ignorant of this
1
corporate ill and thus patronage is still 17 34 81 54 200 26%
4
significant
18. The general public perceives this 1
corporate behavoir has normal for 19 32 49 81 198 26%
survival 7
19. The regulatory bodies are performing
to ensuring a safer and healthy 1
51 59 42 37 200 55%
accounting information reporting for 1
investors and the public in general
20. The rate of investment in Nigeria can
be said to be negatively affected by the
43 62 9 45 41 200 53%
state of accounting information
published by listed companies.
Source: Survey research 2012

From table 4.2 above, Item 8 showed respondents’ opinion on I am aware of accounting
information been reported by listed companies as aid to investment decisions. The
responses revealed that 77% of the respondents agreed that they are aware of accounting
information been reported by listed companies as aid to investment decisions. This arose
from 36 percent of the total respondents who strongly agreed with the statement and 41
percent of respondents who ordinarily agreed. On the other hand, a total of 23% of
respondents disagree. This was from 10 percent of respondents who ordinarily disagreed
and 13 percent who strongly disagreed to the statement. Also 10 percent of the
respondents are seen to be undecided. This implies that respondents agreed that they
are aware of accounting information been reported by listed companies as aid to
investment decisions.
Item 9 showed respondents’ opinion on the current state of companies financial reporting

and accounting information is professional and satisfactory. The responses revealed that

37% of the respondents agreed that the current state of companies financial reporting

and accounting information is professional and satisfactory. This arose from 16 percent

of the total respondents who strongly agreed with the statement and 21 percent of

respondents who ordinarily agreed. On the other hand, a total of 60% of respondents

disagree. This was from 26 percent of respondents who ordinarily disagreed and 34

percent who strongly disagreed to the statement. Also 3 percent of the respondents are

seen to be undecided. This implies that respondents disagreed that the current state of

companies financial reporting and accounting information is professional and

satisfactory.

Item 10 showed respondents’ opinion on corporate accounting information follow

regulatory standards and manners of presentation such as laid down by CBN and other
regulatory bodies. The responses revealed that 51% of the respondents agreed that
Corporate accounting information follow regulatory standards and manners of
presentation such as laid down by CBN and other regulatory bodies. This arose from 21
percent of the total respondents who strongly agreed with the statement and 29 percent
of respondents who ordinarily agreed. On the other hand, a total of 43 percent of
respondents disagree. This was from 21 percent of respondents who ordinarily disagreed
and 22 percent who strongly disagreed to the statement. Also 6 percent of the
respondents are seen to be undecided. This implies that respondents agreed that
Corporate accounting information follow regulatory standards and manners of
presentation such as laid down by CBN and other regulatory bodies.
Item 11 showed respondents’ opinion on accounting information is a true indication and

reflection of the financial and market status of the listed company. The responses

revealed that 32 percent of the respondents agreed that Accounting information is a true

indication and reflection of the financial and market status of the listed company. This

arose from 13 percent of the total respondents who strongly agreed with the statement

and 19 percent of respondents who ordinarily agreed. On the other hand, a total of 58

percent of respondents disagree. This was from 26 percent of respondents who ordinarily

disagreed and 38 percent who strongly disagreed to the statement. Also 10 percent of the

respondents are seen to be undecided. This implies that respondents disagreed that

accounting information is a true indication and reflection of the financial and market

status of the listed company.

Item 12 showed respondents’ opinion on accounting information guides majorly most of

your investment in the stock exchange. The responses revealed that 18 percent of the

respondents agreed that accounting information guides majorly most of your investment

in the stock exchange. This arose from 10 percent of the total respondents who strongly

agreed with the statement and 8 percent of respondents who ordinarily agreed. On the

other hand, a total of 66percent of respondents disagree. This was from 44 percent of

respondents who ordinarily disagreed and 22 percent who strongly disagreed to the

statement. Also 16 percent of the respondents are seen to be undecided. This implies

that respondents disagreed that Accounting information guides majorly most of your

investment in the stock exchange.

Item 13 showed respondents’ opinion on I place heavy reliance of accounting and

financial information published by listed companies before taking any investment

decision. The responses revealed that 29 percent of the respondents agreed that they
place heavy reliance of accounting and financial information published by listed

companies before taking any investment decision. This arose from 9 percent of the total

respondents who strongly agreed with the statement and 20 percent of respondents who

ordinarily agreed. On the other hand, a total of 60 percent of respondents disagree. This

was from 32 percent of respondents who ordinarily disagreed and 28 percent who

strongly disagreed to the statement. Also 12 percent of the respondents are seen to be

undecided. This implies that respondents disagreed that on they or individuals place

heavy reliance of accounting and financial information published by listed companies

before taking any investment decision.

Item 14 showed respondents’ opinion on lack of professionals and structures have been

affecting Nigerian corporate organizations financial reporting. The responses revealed

that 34 percent of the respondents agreed that lack of professionals and structures have

been affecting Nigerian corporate organizations financial reporting. This arose from 16

percent of the total respondents who strongly agreed with the item and 18 percent of

respondents who ordinarily agreed. On the other hand, a total of 66 percent of

respondents disagree. This was from 32 percent of respondents who ordinarily disagreed

and 34 percent who strongly disagreed to the statement. None of the respondents are

seen to be undecided on this item. This implies that respondents disagreed that the lack

of professionals and structures have been affecting Nigerian corporate organizations

financial reporting.

Item 15 showed respondents’ opinion on Issues of ethical conduct and criminal conduct

has been the bane of transparent financial reporting. The responses revealed that 85

percent of the respondents agreed that issues of ethical conduct and criminal conduct
has been the bane of transparent financial reporting. This arose from 26 percent of the

total respondents who strongly agreed with the item and 59 percent of respondents who

ordinarily agreed. On the other hand, a total of 13 percent of respondents disagree. This

was from 8 percent of respondents who ordinarily disagreed and 5 percent who strongly

disagreed to the statement. It was seen that 2 percent of the respondents are seen to be

undecided on this item. This implies that respondents agreed that issues of ethical

conduct and criminal conduct has been the bane of transparent financial reporting.

Item 16 showed respondents’ opinion on the state of financial reporting among listed
companies has divested investments to other sectors of the economy. The responses
revealed that 60 percent of the respondents agreed that the state of financial reporting
among listed companies has divested investments to other sectors of the economy. This
arose from 28 percent of the total respondents who strongly agreed with the item and 32
percent of respondents who ordinarily agreed. On the other hand, a total of 37 percent of
respondents disagree. This was from 15 percent of respondents who ordinarily disagreed
and 22 percent who strongly disagreed to the statement. Also 3 percent of the
respondents are seen to be undecided. This implies that respondents agreed that the
state of financial reporting among listed companies has divested investments to other
sectors of the economy.
Item 17 showed respondents’ opinion on the investing public is ignorant of this corporate

ill and thus patronage is still significant. The responses revealed that 26 percent of the

respondents agreed that the investing public is ignorant of this corporate ill and thus

patronage is still significant. This arose from 9 percent of the total respondents who

strongly agreed with the item and 17 percent of respondents who ordinarily agreed. On

the other hand, a total of 67 percent of respondents disagree. This was from 40 percent

of respondents who ordinarily disagreed and 27 percent who strongly disagreed to the

statement. Also 7 percent of the respondents are seen to be undecided. This implies that
respondents disagreed that the investing public is ignorant of this corporate ill and thus

patronage is still significant.

Item 18 showed respondents’ opinion on the general public perceives this corporate

behavoir has normal for survival. The responses revealed that 26 percent of the

respondents agreed that the general public perceives this corporate behavoir has normal

for survival. This arose from 10 percent of the total respondents who strongly agreed with

the item and 16 percent of respondents who ordinarily agreed. On the other hand, a total

of 65 percent of respondents disagree. This was from 24 percent of respondents who

ordinarily disagreed and 41 percent who strongly disagreed to the statement. Also 9

percent of the respondents are seen to be undecided. This implies that respondents

disagreed that the general public perceives this corporate behavoir has normal for

survival.

Item 19 showed respondents’ opinion on the regulatory bodies are performing to

ensuring a safer and healthy accounting information reporting for investors and the

public in general. The responses revealed that 55 percent of the respondents agreed that

the regulatory bodies are performing to ensuring a safer and healthy accounting

information reporting for investors and the public in general. This arose from 25 percent

of the total respondents who strongly agreed with the item and 30 percent of respondents

who ordinarily agreed. On the other hand, a total of 49 percent of respondents disagree.

This was from 21 percent of respondents who ordinarily disagreed and 18 percent who

strongly disagreed to the statement. Also 6 percent of the respondents are seen to be

undecided. This implies that respondents agreed that the regulatory bodies are

performing to ensuring a safer and healthy accounting information reporting for

investors and the public in general. .

Item 20 showed respondents’ opinion on the rate of investment in Nigeria can be said to

be negatively affected by the state of accounting information published by listed

companies. The responses revealed that 53 percent of the respondents agreed that the

rate of investment in Nigeria can be said to be negatively affected by the state of

accounting information published by listed companies. This arose from 22 percent of the

total respondents who strongly agreed with the item and 31 percent of respondents who

ordinarily agreed. On the other hand, a total of 43 percent of respondents disagree. This

was from 22 percent of respondents who ordinarily disagreed and 21 percent who

strongly disagreed to the statement. Also 4 percent of the respondents are seen to be

undecided. This implies that respondents agreed that the rate of investment in Nigeria

can be said to be negatively affected by the state of accounting information published by

listed companies.

4.3 SECTION C: ANALYSIS OF DATA

In this research work, three hypotheses were formulated. The hypotheses were tested

statistically using the Chi Square test.

1. Ho: Accounting information does not significantly represent a true reflection of

 financial situation of listed companies in Nigeria
Hi: Accounting information significantly represents a true reflection of financial
situation of listed companies in Nigeria.

2. Ho: Accounting information in Nigeria is not significant reliable for investment

purposes in Nigeria.
Hi: Accounting information in Nigeria is significant reliable for investment
purposes in Nigeria

3. Ho: Accounting information does not significantly affect the rate of investments
in Nigeria
Ho: Accounting information significantly affect the rate of investments in Nigeria

(i) In testing the first hypothesis which states that ‘Accounting information does not

significantly represent a true reflection of financial situation of listed companies in

Nigeria, a Chi Square test was carried out using the responses from item 11 (see table

4.3 below).

Table 4.3: Chi Square Analysis of hypothesis one

Responses Observed Expecte Residua (O – E)2

d l
(O)
(E) (O – E)

Strongly Agree 26 50 -24 576 11.52

Agree 38 50 -12 144 2.88

Undecided 20 50 -30 900 18

Disagree 52 50 2 4 0.08

Strongly
24 50 -26 676 13.52
Disagree

Total 200 X2 =46.0

Source: Responses from Table 4.3 (Item 13)

Degree of freedom=n-1 where n=number of categories (5), therefore df = 5-1=4

Level of significance=0.05

Chi-Square tabulated (from the tables) =39.4

Interpretation:

The Chi-Square test statistics (X2) was calculated as 46.0 at 5 percent level of

significance under 4 degrees of freedom, the table value is 39.4, the calculated value (X 2

cal) of 46.0 was greater than the tabulated value (X 2 tab) of 39.4, thus the null

hypothesis was accepted. Therefore, Accounting information does not significantly

represents a true reflection of financial situation of listed companies in Nigeria.

Hypothesis two:

2. In testing the second hypothesis which states that ‘Ho: Accounting information in
Nigeria is not significant reliable for investment purposes in Nigeria.’, a Chi Square
test was carried out using the responses from item 13 (see table 4.4 below).

Table 4.4: Chi Square Analysis of hypothesis two

Responses Observed Expected Residual (O – E)2

(O) (E) (O-E)

Strongly
17 50 -33 1089 21.78
agree

agree 41 50 -9 81 1.62

Undecided 23 50 -27 729 14.58

Disagree 63 50 13 169 3.38

Strongly
56 50 6 36 0.72
disagree

200 42.08

Source: Responses from Table 4.2 (Item 13)

Degree of freedom=n-1 where n=number of categories (5), therefore df=5-1=4

Level of significance=0.05

Chi-Square tabulated (from the tables) = 39.4

Interpretation: The test statistics (X2) is calculated as 42.08. At 5 percent level of

significance with degree of freedom 4, the table value is 39.4, the calculated value (X2 cal)

of 61.79 was greater than the tabulated value (X 2 tab) of 39.4, thus the null hypothesis is

accepted. Hence, Accounting information in Nigeria is not significant reliable for

investment purposes in Nigeria

Hypothesis three: In testing the third hypothesis which states that ‘Ho: Accounting

information does not significantly affect the rate of investments in Nigeria.’, a Chi Square

test was carried out using the responses from item 20 (see table 4.5 below).

Table 4.5: Chi Square Analysis of hypothesis two

Responses Observed Expected Residual (O–E)2

(O) (E) (O-E)

Strongly agree 43 50 -7 49 0.98

agree 62 50 12 144 2.88

Undecided 9 50 -41 1681 33.62

Disagree 45 50 -5 25 0.5

Strongly disagree 41 50 -9 81 1.62

200 39.6

Source: Responses from Table 4.2 (Item 20)

Degree of freedom=n-1 where n=number of categories (5), therefore df =5-1=4

Level of significance=0.05

Chi-Square tabulated (from the tables) = 39.4

Interpretation:
The test statistics (X2) is calculated as 39.6. At 5 percent level of significance with degree

of freedom 4, the table value is 39.4, the calculated value (X 2 cal) of 39.6 was greater

than the tabulated value (X2 tab) of 39.4, thus the null hypothesis is accepted. Hence,

Accounting information does not significantly affect the rate of investments in Nigeria

SECTION 5: DISCUSSION OF FINDINGS

This section discusses the findings of the research aimed at investigating the relevance of

accounting information to investment decision in Nigeria. Accounting information does

not significantly represents a true reflection of financial situation of listed companies in

Nigeria.

Three (3) hypotheses were tested for inference and the prior hypothesis was confirmed.

Thus, the three main empirical inferences from the research hypothesis were that firstly;

accounting information in Nigeria is not significantly reliable for investment purposes in

Nigeria for hypothesis 1. Secondly, accounting information in Nigeria is not significantly

reliable for investment purposes in Nigeria, deducted from hypothesis 2 and thirdly;

Accounting information does not significantly affect the rate of investments in Nigeria

deducted from hypothesis 3.

Other findings include: and the general public respondents agreed are aware of

accounting information been reported by listed companies as aid to investment decisions.

Respondents disagreed that the current state of companies financial reporting and

accounting information is professional and satisfactory. Respondents agreed that

Corporate accounting information follow regulatory standards and manners of

presentation such as laid down by CBN and other regulatory bodies. Respondents

disagreed that accounting information is a true indication and reflection of the financial

and market status of the listed company. Respondents disagreed that Accounting

information guides majorly most of your investment in the stock exchange. Respondents

disagreed that on they or individuals place heavy reliance of accounting and financial

information published by listed companies before taking any investment decision.

Respondents disagreed that the lack of professionals and structures have been affecting

Nigerian corporate organizations financial reporting. Respondents agreed that issues of

ethical conduct and criminal conduct has been the bane of transparent financial

reporting. Respondents agreed that the state of financial reporting among listed

companies has divested investments to other sectors of the economy. Respondents

disagreed that the investing public is ignorant of this corporate ill and thus patronage is

still significant. Respondents disagreed that the general public perceives this corporate

behavoir has normal for survival. Respondents agreed that the regulatory bodies are

performing to ensuring safer and healthy accounting information reporting for investors

and the public in general. Respondents agreed that the rate of investment in Nigeria

can be said to be negatively affected by the state of accounting information published by

listed companies.

The findings in this study

suggested among other things, that the current level of adequacy of accounting information
made available to potential and existing investors requires significant improvement.
We therefore recommend:•
Strict compliance with prescribed accounting information disclosure
requirements. This could be achieved if the relevant regulatory agencies
effectively pursue the disclosure requirements recognized by...
SECTION 6: SUMMARY / CONCLUSIONS AND RECOMMENDATIONS
6.1 SUMMARY/ CONCLUSION
The state of accounting information in present day Nigeria under these prevailing
conditions is generally poor, though they follow regulatory standards as cited by
regulatory bodies such as CBN. This accounting information in most cases is not a true
reflection of the state of the corporate bodies they represent as such individuals do not
rely on these information for their investment decisions.

6.2 RECOMMENDATIONS
There is need to increase the ethical knowledge, discipline and its practice into the
profession of accounting most especially as it concerns the public through consistent and
practical education

There is need for punitive measures where unethical practices such as poor accounting
information or presentation are made to the public.

There is need to give public access to other corporate information in order to minimize
these corporate fraud.

There is need for a stringent policy readjustment to regulating the affairs of these
corporate bodies in accounting presentation.

There is also need for whistle blowing philosophy by the public when these issues are
noticed.
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