ABSTRACT
This study
examined the influence of financial ratios on stock market prices of banks in Nigeria;
specifically, the study aims at (i) determining the extent to which Return on
Assets affects stock prices of quoted deposit money banks in Nigeria (ii) examining the
predictive power of Cash Deposit Ratio on stock prices of quoted deposit money
banks in Nigeria (iii)
investigate
if Debts to Total Assets Ratio influences the stock prices of quoted deposit
money banks in Nigeria
(iv) find
out the effect of Net Asset Per Share on stock prices of quoted deposit money
banks in Nigeria (v) evaluate
the relationship between Earnings per Share and stock prices of quoted deposit
money banks in Nigeria.
The study adopted the ex-post-facto research design and data covering 7-year
period 2009-2015 were collated from annual reports of banks and the Nigeria
Stock Exchange daily official list. Panel multiple regression was used to
estimate the relationship between these financial ratios and stock prices. Stock
prices were adopted as the dependent variable, while the independent variables
included Return on Asset (ROA), Cash Deposit Ratio (CDR), Debts to Total Asset
Ratio (DTAR), Net Assets Per Share (NAPS) and Earnings Per Share (EPS). The result
emanating from this
study revealed the following: (i) returns on assets had about 47%
correlation with stock price, suggesting a positive but statistically
insignificant association with stock prices of selected banks in Nigeria (ii)
cash deposit ratio showed a negative and significant association with stock
price with a beta coefficient of -0.8531 (iii) debt to assets ratio showed a
negative effect on stock prices and this association fails to be statistically
significant at 5%. The beta coefficient was -0.7294 (iv) The relationship
between net asset per share with stock prices negative coefficient of -0.0137.
The result was not statistically significant at 5% level of significance (v)
Earnings per share (EPS) was found to have a significant and positive
association with stock prices of money deposit banks and the statistical
significance is within the acceptable bound of 5%. The beta coefficient of EPS
was 0.1170. The study therefore recommends among others that financial analysts
and prospective investors should rely on earnings per share and cash deposit
ratios in predicting the behavior of stock prices in Nigerian banks, and that government,
policy makers, accounting standards setters and the monitoring authorities
should require listed firms to disclose accurate, relevant and sufficient
information in their financial statements, as these information affect stock
price movements, and are guides to financial analysts and prospective investors
in making rational investment decisions.
ISAAC, I (2022). Financial ratios and stock market prices Of quoted deposit money banks in Nigeria. Mouau.afribary.org: Retrieved Oct 31, 2024, from https://repository.mouau.edu.ng/work/view/financial-ratios-and-stock-market-prices-of-quoted-deposit-money-banks-in-nigeria-7-2
ISAAC, ISAAC. "Financial ratios and stock market prices Of quoted deposit money banks in Nigeria" Mouau.afribary.org. Mouau.afribary.org, 15 Nov. 2022, https://repository.mouau.edu.ng/work/view/financial-ratios-and-stock-market-prices-of-quoted-deposit-money-banks-in-nigeria-7-2. Accessed 31 Oct. 2024.
ISAAC, ISAAC. "Financial ratios and stock market prices Of quoted deposit money banks in Nigeria". Mouau.afribary.org, Mouau.afribary.org, 15 Nov. 2022. Web. 31 Oct. 2024. < https://repository.mouau.edu.ng/work/view/financial-ratios-and-stock-market-prices-of-quoted-deposit-money-banks-in-nigeria-7-2 >.
ISAAC, ISAAC. "Financial ratios and stock market prices Of quoted deposit money banks in Nigeria" Mouau.afribary.org (2022). Accessed 31 Oct. 2024. https://repository.mouau.edu.ng/work/view/financial-ratios-and-stock-market-prices-of-quoted-deposit-money-banks-in-nigeria-7-2