Incremental Value Relevance of Disaggregated Book Values and Disaggregated Earnings: Evidence from Nigeria

Okun Omokhoje Omokhudu, Peter Okoeguale Ibadin


The link between accounting information and firm value has attracted the attention of accounting and finance researchers since the seminar work of Ball and Brown (1968) and Beaver (1968). The association of accounting information with firm value is value relevance research. Value relevance is the degree to which accounting information captures information impounded in stock prices. Ohlson (1995) provided the conceptual linkage between accounting information and firm value. Since then, value relevance research has increased in volume and diversity. A trend in this line of enquiry is to determine if disaggregated accounting information is incrementally value relevant beyond bottom line accounting information. The objective of this paper was to ascertain if disaggregated accounting information has more value relevance compared to bottom line measures for firms listed on the Nigerian Stock Exchange Market. We specifically investigated the value relevance of disaggregated accounting information for Nigerian listed firms, using a sample of 940 firm-years from 1994 to 2013. The study contributes to the extant value relevance literature by employing a methodology that accounts for documented inefficiencies of the Nigerian capital market. Given the analysis conducted,  findings indicate that disaggregated earnings are incrementally value relevant beyond bottom line earnings. Besides, disaggregated book value is found to be more value relevant compared to book value. In the light of these findings, both investors and analysts should shift emphasis from bottom line accounting information, like earnings and book value to disaggregated accounting numbers to improve the quality of investment decisions they make. Besides, regulatory authorities must improve on the corporate governance environment in order to mitigate incidences of window dressing, creative accounting and other corporate malfeasances

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