RELEVANCE OF ACCOUNTING INFORMATION IN THE NIGERIAN STOCK MARKET
CHAPTER ONE
1.1 Background to the study
Accounting provides a vital service to broad and diverse users. Investors use financial accounting information for investment decisions; government agencies need it particularly for tax purposes while regulatory agencies use it to determine whether existing statutory pronouncements are complied with, among others (Kajola and Adedeji, 1999). According to Meyer (2007), accounting plays a significant role within the concept of generating and communicating wealth of companies. Financial statements no doubt still remain one of the most important sources of .externally feasible information on companies. Nevertheless, in the wake of the recent accounting scandals and economic meltdown where billions of naira of investment and retirement wealth have disappeared, the very integrity and survivability of the value relevance of this services has been called to question (Oyerinde, 2011).
Value relevance is defined as the ability of accounting numbers contained in the financial statements to explain the stock market measures (Beisland, 2009). Accounting data, such as earnings per share, is termed value relevant if it is significantly related to the dependent variable, which may be expressed by price, return or abnormal return (Gjerde, Knivsfla and Saettem, 2007). Studies on value relevance of accounting information are motivated by the fact the listed companies on stock exchange use financial statements as one of the major media or means of communication with their equity shareholders and public at large (Vishnani and Shah, 2008). In Nigeria, for instance, Companies and Allied Matters Act (CAMA), (1990) and the subsequent amendments require the Directors of all companies listed on the Nigerian Stock Exchange to prepare and publish annually the financial statements. Beyond this, the Nigerian Stock Exchange mandates all companies listed on first market to submit quarterly, semi-annual and annual statements of their accounts to the Stock Exchange. Companies on second tier market are to submit their statements of accounts annually to Stock Exchange (Osaze, 2007). It is worthy to note that accounting information is any data or information obtains from the accounting system of a firm whether contained in a financial statement, a special  report, or verbal statement (William, 1968). However, for the purpose of this project, accounting information refers to written information contained in a complete or partial financial report balance sheet or profit and loss account or fund flow statement. This project   nvestigates whether these various  items of financial statements are value relevant in the Nigerian  Stock Exchange or not.  The researcher in this study is highly motivated to study  the extent to which accounting information summarizes stock prices in the Nigerian stock market as an indicator of value relevance. The study of likelihood of the market prices of stock listed in the Nigerian Stock Exchange being a reflection of accounting information is very essential to investors as well as policy makers. Recent evidence shows that stock markets have positive impact on economic growth (Healy and Williston, 2005 and Charles, 2008). In a bid to corroborate the afore- mentioned, the perception of institutional and individual investors about value relevance of accounting information as well as other various items of financial statements for equity valuation is also considered in this project work.
While there have been a number of studies on this topic in developed' countries (Collins, Maydew and Weiss, 1997; Lev and Zarowin, 1999; Francis and Schipper, 1999; Beisland, Hamberg and Navak, 2010), one is not aware of any expansive study or empirical research that has explored the subject of value relevance of accounting information in Nigeria stock Exchange. It has not been comprehensively research primarily because of problems with data availability (Negah 2008). Literature review in accounting in Nigeria, in this subject area is so scanty and insufficient to determine this making with accurate data.
Stock markets worldwide had turbulent time in 2008 which brought value relevance of accounting information under severe criticisms.(Oyerinde, 2011). There are some concerns that accounting theory and practice have not kept pace with rapid economic and high-technology changes which invariably affect the value relevance of accounting information(Oyerinde, 2011). The claim is that financial statements are less relevant in assessing the fundamental market value of service-oriented companies, which are by nature high-technology driven. According to Sutton (1997), while accounting can be important factor in some decisions, accounting that fails to capture meaningful information for the benefit of all investors is not sound and puts investors at risk. This will make those who have money to lend and invest to take it to where their need for accounting information is met (Germon and Meek, 2001). The value and the quality of accounting information are determined by how well it meets the needs of users (Khanagha, 2011). Therefore, the flow of reliable information is crucial to the growth of the Nigerian Stock Exchange- without it, savers would simply keep their hard-earned savings under their mattress.
It may not be an overstatement to say that Nigerian Stock Exchange will not function well without relevant and reliable accounting information. Deficiency in Nigerian Stock
Exchange will affect Nigerian economy because capital market is the engine of economic growth (Okeke, 2004). Hence, the study of whether the market prices of stock listed on the Nigerian Stock Exchange reflect accounting information is not only important to investors but also crucial to Nigerian economic growth.
Negah (2008) asserts that studies on the value relevance of accounting numbers in emerging markets are limited. He further claims that the scanty literature replicates works done in mature markets and that closer examination of these works reveals that they face both epistemological and empirical challenges.
As a result, this study is undertaken to fill the gap in literature by critically evaluating and assessing the value relevance of accounting information on the Nigerian stock exchange. This in turn is expected to accelerate development of the Nigerian stock market as well as the firms that are listed on the floor of the Nigerian stock exchange.
1.2    STATEMENTS OF THE RESEARCH PROBLEM
Negah (2008) asseverated that studies on the value relevance of accounting information in emerging markers are limited; and further claims that the scanty literature replicates these works reveals that they face both epistemological and empirical challenges. Following these existing gaps in the literature, the following research questions are raised with a
i.    What is the relationship between market price of shares in the Nigerian Stock Exchange and dividend yield among firms listed in Nigeria stock exchange?
ii.    What is the relationship between dividend per share and the market price of shares?
iii.    What is the relationship between market price of shares and return on equity of firms?
iv.    What is the relationship between earnings yield and the market price of shares of firms?
v.    What is the relationship between debt ratio and the market price of share of a firm?
vi.    What is the significant relationship between the earnings per share and market price of share of firms in Nigeria?
OBJECTIVE OF THE STUDY
The objectives of the study are basically divided into the general and specific objective. The general objective is to examine the value relevance of accounting information in Nigeria stock exchange. However, the specific objectives of the study or project are.
(i)     To find out the relationship between market price of shares in the Nigerian Stock Exchange and dividend yield among firms listed in Nigeria stock exchange.
(ii)     To ascertain the relationship between dividend per share and the market price of shares.

(iii)     To examine the relationship between market price of shares and return on equity of firms.
(iv)     To establish the relationship between earnings yield and the market price of shares of firms.
(v)     To examine the relationship between debt ratio and the market price of share of a firm.
(vi)     To fine out the significant relationship between the earnings per share and market price of share of firms in Nigeria.

1.4 STATEMENT OF RESEARCH HYPOTHESES
In order to validate data analysis, the null hypotheses (Ho) for the purpose of the study are postulated to ascertain the relationship between the dependent and independent variables in the construct.
(i)     Ho: There is no relationship between market price of shares in the Nigerian Stock Exchange and dividend yield among firms listed in Nigeria stock exchange.
(ii)     Ho: There is no relationship between dividend per share
and the market price of shares.
(iii)    Ho: There is no relationship between market price of shares and return on equity of firms.
(iv)    Ho: There is no relationship between earnings yield and the market price of shares of firms.
 (v)    Ho: There is no relationship between debt ratio and the market price of share of a firm.
(vi)   Ho: There is no significant relationship between the earnings per share and market price of share of firms in Nigeria.
1.5    SIGNIFICANT OF THE STUDY
The findings to be generated is expected to enable the national standards setters to know the nature of demand placed on accounting by their local investment community, stakeholders and public before they rush into adapting a unified set of accounting standard;
The work will be important to the Nigerian Accounting Standards Board as it will act as a feedback channel to the board on which accounting number is most widely used for equity valuation in Nigeria and This study is expected to fill the gap in literature by investigating the value relevance of accounting data in the Nigerian stock market. The results provide useful evidence to other emerging stock markets.
This research will provide a guide as to which accounting data is or is not valued by investors, which should help the preparers of accounting information and standards setters to further enhance value relevance of the most widely used accounting number.

1.6    SCOPE OF STUDY
This study provides insight into value relevance of accounting information in the Nigerian stock market and it covers a period of 2000- 2011. The choice of this period is necessitated by rapid growth in the Nigerian Stork at the time. In addition, during those years, the Nigerian Stock Market recorded a significant rise in activity and share prices rose considerably only to collapse in the second half of 2008. Before this collapse, investors were all enjoying the boom in the Nigerian stock market, making tremendous returns  as stock prices soared to unprecedented levels. The study therefore focuses on the period and immediately after this collapse. The value relevance of the accounting information of five manufacturing firms listed on the Nigeria stock exchange are critically examined within this time series period of ten years.
 REFERENCES
Adedeji, S. B. and S.O.Kajola (1998). Cost Accounting: Concept, Analysis and use for, Decision Making, CESAP, Ago-Iwoye.
Germon, H. and G.K. Meek (2001). Accounting: An International Perspective, McGraw Hill, Singapore.
Osaze, E. B. (21). Capital Markets - African and Global, the Bookhouse Company, Lagos
Collins, D. W., E.L. Maydew and IS. Weiss (1997). Changes in the Value -Relevance of Earnings and Book Value Over the Past Forty Years, Journal of Accounting and Economics, 24(1), 39-67.
Francis, J. and K. Schipper, (1999). Have Financial Statements Lost Their Relevance? Journal of Accounting Research, 37(2), 319-352.
Halsey, R.F. (2001). Using Residual -Income Stock Price Valuation Model to Teach and Learn Ratio Analysis, Issues in Accounting Education, /6(2), \-7
Khanagha, 1. B. (2011). International Financial Reporting Standards (lFRS) and Value Relevance of Accounting Information: Evidence from Bahrain and United Arab Emirates Stock Markets, African Journal of Social Sciences 7(1),101-114.
Lev, B. and P. Zarowin  (1999). The Boundaries of Financial Reporting and How to Extend them. Journal of Accounting Research, 37(2), 353-385.
Negah, M. (2008). Liberalization and the value relevance of Accrual Accounting Information: Evidence from the Johannesburg Securities Exchange, Afro -Asian Journal of Finance and Accounting, 7( 1), 81-104.
Ohlson, lA (1995). Earnings, Book Values and Dividends in Security Valuation. Contemporary/Accounting Research, 77(1),661-688.
Gjerde, 0., K. Knivsfla and F. Saettem (2007). The Value-Relevance of Financial     Reporting in Norway. 1965-2004, Working     Paper, February.     ivww.iaubd.org/2009 iaabdproceedings/tracklbpdj retrieved on 15 December, 2010.
Nigeria Stock Market Guide (2009).Nigerian Stock Exchange Quoted.