AN ANALYSIS OF FACTORS THAT DETERMINE CORPORATE VALUE 
ABSTRACT
This study examined an analysis of factors that determine corporate value.  In light of the empirical review and other discussions, a number of questions arose as to whether the earnings of a company as reflected in the earnings per share (EPS) are the value of the company.. Using the Ordinary Least Square Regression technique with the aid of a computer software. The empirical findings revealed among other things that, earnings per share has a positive relationship with market price per share, which means that increase in market price per share will cause an increase in earning yield and vice versa. Recommendation therefore made in the concluding chapter of this study based on the findings obtained.
TABLE OF CONTENTS
CHAPTER ONE
Introduction                                
Statement of the Research Problem                
Objectives of Study                        
The Scope of the Study                        
Statement of Research Hypothesis                
Significance and Relevance of the Study            
Limitation of the Study                        
Definition of Terms                        
CHAPTER TWO: LITERATURE REVIEW
Introduction                                
The Corporate Value                        
Valuation of a Business Using Income Flow Method    
The Intrinsic Value                        
Market Value Per Share As Reflection of the Corporate Value
Theories of Share Price Behaviour                
Share Price and Corporate Earning                 
Studies Carried Out on Share Price Behaviour            
Empirical Evidence on Share Price Movement            
Factors Affecting Investor Relation to the Share Price of a
Company                                
Relationship Between Earnings Per Share and Corporate Value    
Dividend Per Share and Corporate Value                
Trading Volume, Return Volatility and Daily Information Flow    
Relationship Between Share Prices and Dividend Policy        
Dividend Yield                                
Price Earning Ratio                        
Earning Yield                            
Dividend Pay Out Ratio                            
Dividend Cover Ratio                        
Efficient Market Hypothesis (EMH)                    
Share Price and Cashflows                        
CHAPTER THREE: RESEARCH METHODOLOGY
Introduction                                
The Research Design                    
The Population                        
Sample and Sampling Method                
Source of Data                            
Method of Data Analysis                            
Model Specification                         
CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
Introduction                                
Data Presentation                                
Analysis of Regression Result                    
CHAPTER FIVE:    SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATION
Summary of Findings                    
Conclusion                                
Recommendations                        
Bibliography                        
Appendix                         
CHAPTER ONE
INTRODUCTION
A company can be defined as “artificial person” with legal entity, perpetual succession and a common seal (Wikipadia 2010). Also, a company has been defined as a complex network of contract binding on various interest groups (Ilahoya, 2008:121) it take cognizance of the stake of various interest groups in the business activities of the company: these stakeholders include the shareholders (owners) of the company, investors, employees, labour union, government and general public. These various stakeholders have different uses for the financial statement, the financial statement of a company is the annual report and accounts, including the balance sheet and profit and loss account, prepare by the company and duly audited by the company’s external auditor(s), copies of which are presented to shareholder’s the tax authorities, the Corporate Affair Commission and other relevant person/bodies (Igben 2005:94). Accounting of Statement of Accounting Standars (SAS) No.2, financial statements are the means of communicating to interested parties, information on the resources obligation and performance of the business entity.
Section 21 of the Company and Allied Matter Act (CAMA) 2004, prescribed three (3) different types, of companies. These are companies limited by shares, companies limited by guarantee and unlimited companies. However whether limited by shares, limited by guarantee or unlimited, a company can either be a private company or public company. However, for the purpose of this research work our focus will be on public quoted companies. Section 24 of the Companies and Allied Matter Act (CAMA) 2004 states that, any company, and it shall be stated in it’s memorandum of associate that it is a public company. The prescribed minimum membership of a public company is seven (7) without a ceiling. Public company can raise capital through the issues of shares and such shares are transferable. The must have minimum of two (2) directors.
The ownership and management of pubic company are separated which makes the directors render adequate or proper servicesto the shareholders. The financial statement which is the sole responsibility of the directors to prepare must contain the financial report which enables the various stakeholders to find out the true performance of the company. It has been observed that important decisions that involve huge financial responsibility on the part of investors are made of the basis of information available on the financial report of the company. Thus it is very important that the information contained in such financial report goes a long way in intimating such investors of the true value of the company. The corporate value of the company is known as the value of the company. There are lots of variable which could assist for the purpose of this research work, the market value of the company would be representing the corporate value.
This research work seek to verify the relationship that exists between the earnings of the company, the dividend it pays out, it trading volume and the value of the company. This is because apart from the fact that a company uses the earning’s to pay dividend to it’s shareholders. It can also plough or invest portion of such earnings back into the business. The decision of what portion of earning to reinvest is usually made in the light of certain factors. The research work therefore seeks to find out what affect such decision has on the corporate value.
STATEMENT OF THE RESEARCH PROBLEM
In Nigeria today, many investors especially in the manufacturing sectors, invest lot of money in share with the hope of maximizing profit inform of dividend without taking into consideration the earning and market value of the company. Since earning and market values of a company is an important decision variable, it needs to be handle with care if an investors must maximize profit and remain in business.
In view of these complexities and importance surroundings earnings, dividends, trading volume and market value of the firm. This research work has attempted to offer solutions to the problem put in question form as stated below:
What influence do the earning of a company as reflected in the earnings per share (EPS) has on the value of the company.
What influence does the dividend per share (DPS) paid by the company has on the value of the company.
Does the earning yield of a company affect the market value of the firm.
Is there a relationship between the dividend cover by a company and it’s market value.
OBJECTIVES OF STUDY
An investor’s return received from a particular company for putting his money in such a company is usually in form of dividend. Such dividend depends on the amount of earning which the company made that financial year such earning help to indicate the performance of the company. Therefore, it is very important for us to establish whether there is any relationship between the earnings of a company and the corporate value.
The objective that this research work seek to achieve include:
To ascertain whether there is any relationship between the earnings of a company as reflected in the earnings per share (EPS) are the value of the company.
To determine whether there is any relationship between the amount of dividend per share (DPS) paid by a company to it’s shareholders and the value of the company.
To ascertain whether or not there is a relationship between earnings yield of a company and its market value.
To determine the types of relationship that exist between the dividend yield by a company and its corporate value.
THE SCOPE OF THE STUDY
Ideally, this research work should cover all the companies quoted on the Nigeria Stock Exchange but due to some obvious constrains, we have selected companied in a particular industry, the scope of this study covers at least ten (10) companies in the manufacturing industry from 1996-2010, so that a useful cross sectional analysis can be carried out.
STATEMENT OF RESEARCH HYPOTHESIS
H0:     There is no relationship between earning per share of a company and its corporate value.
    H1:     There is a relationship between earning per share of a company and its corporate value.
H0:     There is no relationship between dividend payout of a company and its corporate value.
    H1¬:     There is a relationship between dividend payout of a company and its corporate value.
H0:     There is no relationship between earning yield of a company and its corporate value.
    H1:     There is a relationship between earning yield of a company and its corporate value.
SIGNIFICANCE AND RELEVANCE OF THE STUDY
The regular agencies function is to ensure that environmental for investments encourage investors. The quality of accounting information which the companies made available to the public for decision making is very important issue to these agencies, hence, this study seeks to enables the following see that such information is contained in the financial statement of companies.
Investors
To investors, it will enable them when making investment decision to take a close look at the value of the company which they are interest in investing their resources so that they can appreciate and understand the type of relation that exists between the earnings of a company and the value of such company.
Students
To student, it will increase their knowledge and better understanding of earning, as well as dividend of a company to its shareholder affects the market value of the company.
Researchers
To researcher in the field, they can make use of the project as it will serve as a guide to intending researchers in the future, bearing in mind that this research will expose all there is to know about the relation that exists between the earnings of a company, other variable and its corporate values.
General Public
This research is beneficial to the public by providing them with an understanding of the meaning, purpose of companies earning, as well as its relationship to its corporate value.
In general, this study will help to expand ones knowledge on share price movement in Nigeria, therefore, researcher and reading public will find the work extremely useful.
LIMITATION OF THE STUDY
Every research work has aspect in which falls short of idea which the researcher has established or recognizes. According to Ibrahim (2010:15) limitations are factors beyond our control which tend to impede the accomplishment of the objectives. On this note, the following are the limitation of the study.
The sample may be too small in relation to the entire population.
Imprecise measurement of variables.
The sampling method adopted is not a census, because we are not researching everyone in the population.
DEFINITION OF TERMS
Some definition use in this research work are as follows:
Earnings: Earnings, otherwise known as net income or net profit represent the money that is left after a company pays out its bills, for many investors, the growth of a company’s earning is the most important factor when analyzing a company. It is also use as a gauge of profit performance.
Earnings Per Share (EPS): This is perhaps the fundamental investor’s ratio. This gives an indication of the amount of profit after tax and after preference dividend but before taking into account extra ordinary items attributable to equity holder’s it is given as
EPS = profit available to ordinary shareholder
Number of ordinary share
EPS show what shareholders earn by way of profit for a period it does not reflect how much is retained in the business it is calculated in kobo (Isenmila et al, 2010: 406).
Dividend: Accounting to ICAI “dividend to shareholders out of profit or reserves available for this purpose.
Dividend are payments made to stockholders from a firm’s earning, whether these earnings were generated in the current period or in previous periods dividend payment is normally form the year’s earnings (study finance.com). According to answer.com (2010), dividend means that part of the profits of a company distributed amongst its shareholders.
Dividend Per Share (DPS): DPS is the total declared net dividend per share payable to registered ordinary shareholders in respect of each historic period reported. It shows how much the company has paid out on each individual share and so it is worked out as
DPS = Dividend paid
Total number of share issue
It is important to note that dividend paid figure is that for the whole year. Some companies payout interim dividend after six (6) months and this should be included as well as the year end figure.
Trading Volume: The number of share transacted everyday. As there is a seller for every buyer, one can think of trading volume as half of the number of share transacted that is if A sells 100 shares B, the volume is 100 shares. (Campbell Rarvey, 2004).
Also, trading volume measures how many trades take place for a security or on an exchange on a given a trading day. A high trading volume is an indicator of high level of interest in a security at its current price. It is especially important tool in technical analysis, in which trading volume is used to determined the strength of market indicator. The method for determining trading volume is called volume counting (Farlex Financial Dictionary, 2009).
Price Earnings Ratio (PE): PE Ratio indicates the number of year purchase of the earnings and is regarded internationally as an indicator of future performance it is therefore calculated as
PE = Market price per share
    Earning per share
(Jenning, 2004: 404)
Earning Yield: This ration reflects the potential return on the shareholders investment. It is simply the reciprocal of P/C ratio.
Earning Yield  =     Earnings per share
            Market price per share
Dividend Payout Ratio: This is the part of the distributable earnings that is paid to equity shareholders by way of dividends it is calculated as:
DPR = Dividend per share
      Earning per share
Dividend Cover: Dividend cover is the ratio of company’s earning (net income) over the dividend paid to shareholders it is calculated as earning’s per share dividend by the dividend per share. Generally speaking, a ratio 2 or higher is considered safe, in the sense that the company can well affords the dividend, but anything below 1,5 risky. Typically the period cover one year (aka time to market). The investor can course compute it for a longer or shorter time period (wikianswer.com).
Dividend Yield: It’s a financial ratio that shows how much a company pays out in dividends each year in relation to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Dividend yield is calculated as follow:
DPS
EPS
The dividend yield or the dividend price ratio on a company stock is the company’s annual dividend payments dividend by the price per share. It is often expressed as a percentage.
Dividend yield is a way to measure how much cashflow you are getting for each naira invested in an equity position. In other words, how much “band for your back” you are getting from dividends. Investor who require a minimum stream of cashflow form their investment portfolio can secure this csahflow by investing in stock paying relatively high stable dividend yields (investorpedia, 2010).
Dividend Payment Ratio: This ration provides an idea of how well earnings support the dividend payments more nature companies tend to have a higher payout ratio. It is calculated as earnings per share divided by dividend per share. In general, the higher the payout ratio, the more mature the company (Dividend Investor.com).
According to International Research Journal of Finance and Economics, dividend payout ratio is positively related to profit, cashflows and it has inverse relationship with corporate taxes, sales growth and market to book value ratio.(Kanwal Anill and Sujata and Kapoor, 2008).