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Effect of Liquidity and Profitabilty on Value Relevance of Listed Financial Companies in Nigeria

Author

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  • ABAKU Boma, FCA, FCTI.

    (Department of Accounting, Faculty of Management and Social Sciences, Base University Abuja, Nigeria)

  • Dr VERR Bernard, FCA.

    (Department of Accounting, Faculty of Management and Social Sciences, Base University Abuja, Nigeria)

  • Prof NDEM Ayara Ndiyo

    (Dean of the Faculty of Social Sciences, University of Calabar, Nigeria)

Abstract

The Nigerian financial sector has witnessed significant growth and transformation over the past decade, contributing significantly to the country’s economic progress. Consequently, this study is undertaken to examine the effect of profitability and liquidity on the value relevance of listed financial companies in Nigeria for the period of ten years 2012 to 2021. Profitability and liquidity are the independent variables while TOBIN’s Q is the proxy for value relevance as the dependent variable of the study. The debt-to-equity ratio was used as the control variable. Value Relevance theory is the theory used to underpin the work. The study adopted a quantitative research design and data for the fourty listed financial companies were sourced from the published financial statements of the companies. Multiple regression with the aid of STATA 16 application software was used in analyzing the data. The study outcome revealed that profitability and liquidity significantly affected the value relevance of listed financial companies in Nigeria. The study recommends that Management should pay more attention to profitability and liquidity as it enhances the value relevance of listed financial companies in Nigeria. The study suggests further studies to be domiciled in listed non-financial companies in Nigeria.

Suggested Citation

  • ABAKU Boma, FCA, FCTI. & Dr VERR Bernard, FCA. & Prof NDEM Ayara Ndiyo, 2024. "Effect of Liquidity and Profitabilty on Value Relevance of Listed Financial Companies in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(2), pages 696-712, February.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:2:p:696-712
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    References listed on IDEAS

    as
    1. M. O. Yusuf & Christopher I. Nwufo & Emmanuel Ib Chima, 2019. "Optimum Synergy between Liquidity and Profitability Management of Quoted Banks: The Nigerian Perspective," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(2), pages 138-148, April.
    2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    3. Gideon Tayo AKINLEYE & Joseph Segun OGUNLEYE, 2019. "Liquidity and The Profitability of Manufacturing Firms in Nigeria," Applied Finance and Accounting, Redfame publishing, vol. 5(2), pages 68-73, August.
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