COST ACCOUNTING INFORMATION DISCLOSURE AND MANAGEMENT DECISION MAKING, A CASE STUDY OF ,,,,,,,,

Cost Accounting Information Disclosure and Management Decision Making

(A Case Study of Coca Cola Bottling Company)

Research Project

By

My Name

Matric. Number

Presented to the Department of Accounting, University of ..... in Partial Fulfillment of the Requirement for the Award of The Degree of Bachelor of Science (B.Sc.) Accounting of University of ,,,,,,,,,,

December 2017

CHAPTER ONE

INTRODUCTION

1.1  Background of Study

Today’s managers operate in dynamic business environment that are ever bereted with uncertainties. To make decisions geared towards achievement of organisations’ objectives, managers need information. Cost accounting information is vital in managerial decision making and problem solving. Managers in making their decisions, be they programmed, non-programmed, repetitive, innovative, adaptive, operational or strategic decisions may need such cost accounting information like quantities of raw materials in use, cost of labour, machine hourly rate of production, unit of goods to produce, total production quantity, overhead expenses, variable cost information, fixed cost information, variances, sales volume, selling price and other vital information which are contingent in achieving organizational objectives.

According to the Institute of Cost Accountants of India (2012), Accounting is a very old science which aims at keeping records of various transactions. The accounting is considered to be essential for keeping records of all receipts and payments as well as that of the income and expenditures. Accounting can be broadly divided into three categories. Financial Accounting, aims at finding out profit or losses of an accounting year as well as the assets and liabilities position, by recording various transactions in a systematic manner. Cost Accounting helps the business to ascertain the cost of production/services offered by the organization and also provides valuable information for taking various decisions and also for cost control and cost reduction. Management Accounting helps the management to conduct the business in a more efficient manner.

ICAN (2014) defined costing as the establishment of budgets, standard costs and actual costs of operations, processes, activities, or products and the analysis of variances, profitability or he social use of funds.

Institute of Cost Accountants of India (2012) noted that in the modern days of cut throat competition, any business organization has to pay attention towards their cost of production. Computation of cost on scientific basis and thereafter cost control and cost reduction has become of paramount importance. Hence it has become essential to study the basic principles and concepts of cost accounting. These are discussed in the subsequent paragraphs. They went and defined the following terms in relation to cost accounting:-

Cost :- Cost can be defined as the expenditure (actual or notional) incurred on or attributable to a given thing. It can also be described as the resources that have been sacrificed or must be sacrificed to attain a particular objective. In other words, cost is the amount of resources used for something which must be measured in terms of money. For example – Cost of preparing one cup of tea is the amount incurred on the elements like material, labor and other expenses; similarly cost of offering any services like banking is the amount of expenditure for offering that service. Thus cost of production or cost of service can be calculated by ascertaining the resources used for the production or services.

Costing :- Costing may be defined as ‘the technique and process of ascertaining costs’. Costing is classifying, recording, allocation and appropriation of expenses for the determination of cost of products or services and for the presentation of suitably arranged data for the purpose of control and guidance of management. It includes the ascertainment of every order, job, contract, process, service units as may be appropriate. It deals with the cost of production, selling and distribution. If we analyze the above definitions, it will be understood that costing is basically the procedure of ascertaining the costs. As mentioned above, for any business organization, ascertaining of costs is must and for this purpose a scientific procedure should be followed. ‘Costing’ is precisely this procedure which helps them to find out the costs of products or services.

Cost Accounting :- Cost Accounting primarily deals with collection, analysis of relevant cost data for interpretation and presentation for various problems of management. Cost accounting accounts for the cost of products, service or an operation. It is defined as, ‘the establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds’, ( Institute of Cost Accountants of India 2012).

Cost Accountancy :- Cost Accountancy is a broader term and is defined as, ‘the application of costing and cost accounting principles, methods and techniques to the science and art and practice of cost control and the ascertainment of profitability as well as presentation of information for the purpose of managerial decision making.’ If we analyze the above definition, the following points will emerge; cost accounting is basically application of the costing and cost accounting principles; this application is with specific purpose and that is for the purpose of cost control, ascertainment of profitability and also for presentation of information to facilitate decision making. Cost accounting is a combination of art and science, it is a science as it has well defined rules and regulations, it is an art as application of any science requires art and it is a practice as it has to be applied on continuous basis and is not a one time exercise.

According to CPA Australia (2012), the terms ‘cost accounting’ and ‘management accounting’ are often used interchangeably. It is not correct to do so. Cost accounting is part of management accounting. Cost accounting provides source data for the management accountant to use. Cost accounting is concerned with the following:- preparing statements (e.g. the construction of budgets and costing statements); cost data collection; measuring inventory costs, and the costs and profitability of products and services. Management accounting on the other hand is concerned with the following;- interpretation and assessment of financial and accounting data, and communicating it as information to users, for example as financial targets or performance measurements.

Decision making is the process of identifying alternatives and choosing one of the alternatives to solve a problem or to attend to a need. Managers irrespective of their managerial levels make decisions. Cost accounting information plays vital roles in managerial decision making. In fact all types of organizations, from large multinational manufacturing companies like Ford Motor Company to small custom-furniture manufacturers, have a need for cost accounting information. Retailers, such as Wal-Mart and others like FedEx, law firm, accounting firms, consultants, and even nonprofit organizations, such as the American Red Cross and small local museums and homeless shelters need cost accounting information. This information is needed by internal managers in their day-to-day decision making. All decisions require using judgment. The quality of the decision often depends on how good that judgment is. Judgment refers to the cognitive aspects of the decision-making process (Institute of Cost Accountants of India, 2012). They further defined cognitive, to mean taking a logical, thinking approach to making decisions rather than just making decisions on the spur of the moment.

1.2  Statement of Problem

Decision making is a vital function of every manager. To perform this role better, and to ensure that corporate objectives are actualized, cost accounting information is very essential. Unfortunately, such vital information upon which managerial decision making are contingent upon are not readily available as at when needed. Some cost accounting information may be available but not on time and in the right quantity. These trends do negatively impacts on the managerial decision making processes and the outcomes of managerial decisions. Decisions that are quantitative information dependent are their heuristically made using rule of the thumb or guesses rather than adopting quantitative approach to decision making. Instead of abdicating responsibility for establishing standards, the management would scientifically study all facets of an operation and carefully set a logical and rational standard. Instead of guessing or relying solely on rule – of – the thumb or trial and error, the management should go through the time consuming process of logical study and scientific research to develop answers to the business problems through information gathering and proper analysis of the information being obtained. The situation in the organization being studied is the management is still using the unscientific method of decision making. Rarely do they make use of the cost accounting information as aid in making their managerial decisions. Also rather than making use of the cost accounting methods and techniques like marginal costing, standard costing, budgetary and budgetary controls, job costing, batch costing, process costing, operating costing, and contract costing, they are still using some crude methods and techniques that are unscientific.

Due to their use of crude costing methods and costing techniques, often time, there are frequency of production problems and bottlenecks. Often time, actual production time/hours are usually above standards or budgeted time. The cost of man-hour resulting from production activities are often above budgeted man-hour; actual production overheads and associated costs are usually above budgeted. All these have sporadically increased the overall cost of production thereby affecting the organizations performance and profitability. It is in the bid of the researcher to provide lasting solutions to these problems that the researcher deemed it necessary to carry out this study.

1.3  Research Questions

i.                    How does the use of cost accounting information enhance managerial decision making?

ii.                  How does cost accounting information disclosure contribute to organizational profitability?

iii.                How does cost accounting information disclosure enhance managerial effectiveness?

iv.                What are the various costing techniques that are being used mostly in Nigerian organizations?

1.4  Objectives of the study

The main aim of this study is to examine how Cost Accounting Information Disclosure impacts

on Management Decision Making. Other objectives of this study include;-

i.                 To determine how managerial decision making are enhanced through the use of cost

 accounting information.

ii.                  To determine how cost accounting information disclosure contribute to organizational profitability.

iii.             To determine how cost accounting information disclosure enhances managerial effectiveness

iv.             To determine the various costing techniques that are being used mostly in Nigerian organizations.

1.5  Statement of Hypotheses

i.                    H₀:     The use of cost accounting information does not enhance managerial decision making.

H₁:     The use of cost accounting information do enhance managerial decision making.

ii.                  H₀:     Cost accounting information disclosure does not contribute to organizational profitability.

H₁:     Cost accounting information disclosure contributes to organizational profitability.

iii.                H₀:     Cost accounting information disclosure does not enhance managerial effectiveness.

H₁:     Cost accounting information disclosure enhances managerial effectiveness.

1.6  Significance of the study

Information are essential in making managerial decision. To ensure managerial effectiveness, managers need information. Cost accounting information is a veritable tool in the hand of managers in achieving organizational objectives. Cost accounting help managers in bringing down costs through cost control and cost reduction. Cost control implies various actions taken in order to ensure that the cost do not rise beyond a particular level while cost reduction means reducing the existing cost of production. This study shall be useful to both the cost accountants and other managers that are in-charge of operational activities. The study shall avail readers with various cost control techniques, the methodologies to adopt in achieving their cost targets and ensuring effective and efficient utilization of organizational resources. This study shall also avail readers with cost techniques and other cost accounting disclosure information that are essential in ensuring corporate success. The significance of this study can thus be summarized as follows:

(i)                 The findings is to enable management appreciate the need to carefully examine cost accounting information in order to improve a better and more effective business performance.

(ii)               The companies are supplied with information to help them make good decisions in the performance of their business.

(iii)             This study helps the cost accountants and the organization to understand and appreciate the use cost accounting information disclosure as a useful tool in managerial decision making..

(iv)             This research provides a guide as to which cost accounting data and information is or is not relevant to managers, and which should help the preparers of cost accounting information in order to enhance future cost accounting information provision.

1.7  Justification of the study

Cost control is an essential element of operational management. Excessive costs can eat deep into revenue and can significantly affect profitability. Effective cost control and cost reduction mechanism is a key for achieving competitive advantage for an organization that is pursuing cost leadership strategy. Empirical studies have shown that it is those organizations that are able to maintain tight control on cost of production while at the same time satisfying customers’ expectations that will be able to achieve superior performance in the market place. Managers need cost related information to have effective control on operation and other overhead costs. Such information is made available by cost accounting. Such information needed by management may include information about the units of goods produced, price per unit of goods sold, labour rate, cost per unit of goods produced, number of units in the inventory, total volume of products budgeted, budget variances, materials variance and sales variance etc. All these information are essential for planning and in making managerial decisions to enable management achieve organizational objectives. Without these information it will be difficult for an organization to achieve its overall objectives.

1.8  Scope of the Study

This study focuses on Cost Accounting Information Disclosure and Management Decision Making, a case study of Coca Cola Bottling Company. The study shall examine how the use of cost accounting information enhances managerial decision making; how cost accounting information disclosure contributes to organizational profitability; how cost accounting information disclosure enhance managerial effectiveness and also the identification of the various costing techniques that are used mostly in Nigerian organizations. The study shall be restricted to Lagos state.

1.9       Definition of Terms

Absorption Costing:- In this type of costing system, costs are absorbed in the product units irrespective of their nature. In other words, all fixed and variable costs are absorbed in the products. It is based on the principle that costs should be charged or absorbed to whatever is being costed, whether it is a cost unit, cost center.

Cost: Cost is the amount of money paid to acquire a resource, a product or service

Costing :- Costing may be defined as ‘the technique and process of ascertaining costs’. Costing is classifying, recording, allocation and appropriation of expenses for the determination of cost of products or services and for the presentation of suitably arranged data for the purpose of control and guidance of management. It includes the ascertainment of every order, job, contract, process, service units as may be appropriate. It deals with the cost of production, selling and distribution.

Cost Accounting :- Cost Accounting primarily deals with collection, analysis of relevant of cost data for interpretation and presentation for various problems of management. It is defined as, ‘the establishment of budgets, standard costs and actual costs of operations, processes, activities or products and the analysis of variances, profitability or the social use of funds.

Cost Center :- Cost Center is defined as, ‘a production or service, function, activity or item of equipment whose costs may be attributed to cost units. A cost center is the smallest organizational sub unit for which separate cost allocation is attempted’. To put in simple words, a cost center is nothing but a location, person or item of equipment for which cost may be ascertained and used for the purpose of cost control.

Fixed Costs :- Out of the total costs, some costs remain fixed irrespective of changes in the production volume. These costs are called as fixed costs. The feature of these costs is that the total costs remain same while per unit fixed cost is always variable. Examples of these costs are salaries, insurance, rent, etc.

Marginal Costing :- In Marginal Costing, only variable costs are charged to the products and fixed costs are written off to the Costing Profit and Loss A/c. The principle followed in this case is that since fixed costs are largely period costs, they should not enter into the production units. Naturally, the fixed costs will not enter into the inventories and they will be valued at marginal costs only.

Profit Center :- Profit Center is defined as, ‘a segment of the business entity by which both revenues are received and expenses are incurred or controlled’.  A profit center is any sub unit of an organization to which both revenues and costs are assigned.

Semi-variable Costs :- Certain costs are partly fixed and partly variable. In other words, they contain the features of both types of costs. These costs are neither totally fixed nor totally variable. Maintenance costs, supervisory costs etc are examples of semi-variable costs. These costs are also called as ‘stepped costs’.

Variable Costs:- These costs are variable in nature, i.e. they change according to the volume of production. Their variability is in the same proportion to the production.

REFERENCES

CPA Australia (2012) Management Accounting, Australia: BPP Learning Media Ltd,            www.cpaaustralia.com.au/learningsupport.

The Institute of Cost Accountants of India (2012), Cost and Management Accounting, India: Repro India Limited

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VALUE RELEVANCE OF ACCOUNTING INFORMATION AND CORPORATE PERFORMANCE - A CASE STUDY OF SOME SELECTED BANKS

 VALUE RELEVANCE OF ACCOUNTING INFORMATION AND CORPORATE PERFORMANCE

 PROJECT BY

MY NAME

BEING A PROJECT SUBMITTED TO THE POST GRADUATE SCHOOL.

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF M.SC DEGREE IN ACCOUNTANCY, OF THE UNIVERSITY OF ---

JULY, 2017

                                                          CHAPTER ONE 

1.0                                                                                                 INTRODUCTION

1.1 Background to the Study

Accounting Information

Accounting is a common measuring stick in business. A business owner can use accounting information to measure her company’s business and operational performance. Accounting continues to develop in response to human civilization. As human beings advances in concepts and applications, so does accounting. This means that accounting is an information system used for communication purposes and for the purpose of aiding business performance. The role of accounting in business is to enable internal and external stakeholders make better decisions by providing them with financial information. Accounting is often called “the language of business”, this is because it communicates so much of the information that owners, managers and investors need to evaluate a business’ financial performance. In fact, the purpose of accounting is to help stakeholders make better business decisions by providing them with financial information. All this means that Accounting can be defined as a system for measuring and summarizing business activities, interpreting financial information and communicating the results to management and other decision makers.

Value relevance is defined as the ability of accounting numbers contained in the financial statements to explain the stock markets 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 et al, 2007). Studies on value relevance are broad and diverse and they are motivated by the fact that quoted companies in Nigeria use financial statements as one of the major media of communicating with their equity shareholders and public at large (Vishnani and Shah, 2008).

Value relevance is measured as a statistical association between financial statement information and business performance. It is therefore important to define the structure of concept of value relevance for this study. The information perspective of value relevance is used for this study to determine the value relevance of accounting data on the performance of listed firms. For instance, in Companies and Allied Matters Act (CAMA), (1990) and the subsequent amendments require the directors of all companies listed on the Nigeria Stock Exchange to prepare and publish annually the financial statements. Beyond this, the Nigeria Stock Exchange mandates all companies listed on first tier to submit quarterly, semi-annual and annual statements of accounts to stock exchange. Companies on second tier market are to submit their statements of accounts annually to stock exchange in order to evaluate their business performance (Osaze, 2007).

The Nigeria Stock Exchange (NSE) commenced operation in 1961 with only 19 securities worth N80million. As at May 2009, the number of listed securities had increased to 294, made up of 86 Government stocks with Industrial Loan stocks and 208 Equity/Ordinary shares (including emerging  market) with a total market capitalization of N9.45 trillion (The Nigeria Stock Exchange, Fact book, 2009). Value relevance of accounting information talks about the degree to which accounting information discusses the information that is impounded in share prices. The degree of value relevance is a function of development of accounting regulation, control mechanisms, business cycle, economic development and industry structure (Hellston, 2005).

In studying value relevance of accounting information, the investments  of a company and the book value of equity are the basic accounting numbers that are used in literature to represent accounting information. In confirmation, Talebnia, et al (2011) opined that earnings and book value per share are measures that different individuals, investors and financial analysts use to evaluate the performance of the enterprise. Value relevance research is motivated by the fact that quoted companies use financial statements as one of the major medium of communication with their shareholders and the public. For making the financial reporting to be effective, information contained in the financial reports should be relevant and reliable (Barth et al, 2001). According to Barth et al. (2001), value relevant information should have both the features of relevance and reliability. The value of a company is based on what is perceived by the market about its performance, and accounting disclosures provide the needed information so as to form the basis of such perception.

According to Oyerinde (2009), accounting information is defined as the quantitative written information presented in complete or partial in the face of financial statements either quarterly or annually, while Vijitha P. and Nimalathasan B. (2014) considered accounting information and non accounting information as the two categories of financial information presented in a set of financial statements. The primary objectives of financial statements are to provide information about the company’s performance, financial position and to enable users make better decisions particularly by the investors (Germon and Meek, 2001). Financial information is the output of accounting process and should be duly communicated to users to improve business performance. Bello (2009) was of the opinion that corporate organizations use accounting information to communicate to all stakeholders about their business performance and position at a particular period.

According to Khanagha (2011) the value and quality of accounting information are determined by how well it meets the needs of users and that value relevance study is the evaluation of the relationship between accounting information and capital market values. Babalola (2012), in his study, on ‘significance of accounting information on corporate value of firms in Nigeria,’ claims that the accounting information plays an important role in reflecting business performance and investment in equity of shares of listed companies in Nigeria. Accounting data provide critical information to shareholders and or investors as far as the company’s past performance is concerned, and are used extensively in forecasting future performance and valuation of equity (Monzi et al, 2011).

Organizational Performance

Hardly can any organization employ any employee if not because of the contributions that the employee will make towards the achievement of the goals and objectives of such organization. The emphasis is on performance, results or achievement. For making himself/herself available, the employee shall be remunerated, such remuneration shall be based on the contribution such individual employee is making towards the attainment of the organization’s objectives. Individual or group performance in terms of quality and quantity of work done is a major criteria for distributing rewards within the organization. This goes to show how performance is so dear to management.

Performance management is a tool which focuses on managing the individual and the work environment in such a manner that an individual or team can achieve set organizational goals.

Employees performance is a major factor that contribute towards organization’s performance. Organizational performance on the other hand is determined by examining the respective employees level of productivity. Productivity of an employee can be defined as the ratio of output of a given commodity to the input of labour (the employee).

According to Obisi (2006), there are three key elements needed for organizational productivity. The first is for every manager to decide first and foremost how he or she would achieve higher productivity. Organizations should also recruit and develop competent people. No organization can achieve higher productivity unless its people have a drive to improve themselves, Obisi (2006) noted. Organizations should also know how to measure productivity and make adequate compensation to their employees.

The growth of an organization is closely related to the development of its human resources. When employees fail to grow and develop in their work, a stagnant organization will most probably result. A strong employee development programme does not guarantee organisational success, but such a programme is generally found in successful, expanding organisations. One important developmental function is the appraisal of employee performance. During an appraisal process, employees become aware of any performance deficiencies they may have and are informed of what they must do to improve their performance and thus become promotable. Various methods and techniques of performance appraisal are available. For many organisations, the heart of the development process is composed of on-the-job and off-the-job activities that teach employees new skills and abilities. Because modern managers recognise the benefits derived from the training and developmental process, expenditures for employee education are at an all-time high. The rise in employee education has been accompanied by growing professionalism in the training field and a demand for competent, qualified trainers. Training and development offer many rewards but also pose many problems for training personnel: Who should be trained and why? What training techniques should be used? Is training cost-effective? A further important issue is that of career management. HR managers are devoting increasing amounts of attention to processes and activities that enhance career advancement and solve problems employees encounter along their career paths. While career management is difficult to implement, advances in recent years have brought about improvements in the decision-making processes that affect employees’ careers.

Obisi C. (2006) identified the following as ways to increase productivity:- Labour must participate in management; there should be mutual trust and co-operation between labour and management; workers should be assured that automation and technology would not displace them; proper communication channels should be maintained; all needed raw materials should be made available; there should be proper training and development of workers; there should be proper equipment and plant maintenance; good working conditions and adequate safety measures should be provided.

Obisi also identified the following as factors that affect productivity (performance):- personal factors, skills and motivation of employees, work factors, environmental factors, and adequate utilization of factors of production like men, machines, materials, money, power, and market for finished goods.

The principal objective of this study is to ascertain if accounting information of listed companies in the Nigeria Stock Exchange is relevant for business performance.

Gap in the study

So much works have been done in the areas of accounting information and international financial reporting standard (Adekoya, O. 2011; Ahmed, 2011; Ajayi, 2004; Akinyemi, 2012; Anao, and Obazee, 2002; Antle, R. 2002; Ashbaugh and Pincus, 2001; Ball, R 2006; Cai & Wong, 2010; Carlson, 2007; Chen, Tang, Jiang, & Lin, 2010; Daske, H, Hail, ,Leuz,  C, and Verdi, R. 2007; Deloitte, 2008; Garuba,  and Donwa, 2011; Greening, 2010), nothing much have been done in the area of value relevance of accounting information especially with reference to Nigerian environment. A work on value relevance carried out by Umoren and Ekwere focused on IFRS adoption and Financial Statement. None of these studies focused attention on the value relevance of accounting information on business performance on quoted companies in Nigeria.  It is due to this gap in study that motivated the researcher to carry out study in this area so as to fill in the gap in the study and to contribute to more understanding in this area.

1.2   Statement of the Problem

Quoted companies had turbulent times in 2008 which brought value relevance of accounting information under criticisms. Accounting theory and practice have not been kept at pace which affect the value relevance of accounting information. It may not be an overstatement to say that the Nigeria stock exchange will not function without relevant and reliable accounting information. Deficiency will affect Nigeria’s economy because capital market is the engine of economic growth (Okeke, 2004). The purpose of accounting information has been a discussion of academic argument in the past decades and even now. It is of great use to standard setters, investors and researchers since it empirically proves the reflection of accounting information in quoted companies.

Investors and other shareholders alike need much information about the performance of business organizations to enable them make decisions either to invest or not to invest in such companies. Accounting information and its analysis is an essential instrument in the hand of investors in making such investment decisions. Unfortunately here in Nigeria, the situation is that either these information are not available or manipulated by using the creative accounting technique, which aims at presenting a healthy picture about organizations while in reality most of these organizations are not unhealthy. This was one of the major situations that led to so many investors and shareholders alike loosing millions of naira some years ago.

Also in such organizations, there is high rate of fraudulent activities. For instance, Modugu Kennedy Prince and Anyaduba J.O. (2013) attribute the collapse of Enron, WorldCom, Tyco, Adelphia, to corporate fraud. USD460 Billion was said to have been lost. In Nigeria, Cadbury Nigeria Plc whose books were criminally manipulated by management was credited to have lost N15 billion, In the case of the nine collapsed commercial banks in Nigeria, about N1 trillion was reported to have been lost through different financial malpractices. This is still being investigated by EFCC under the EFCC Act (2004). Generally financial fraud is varied and committed by individuals and institutions

As highlighted above, the occurrence of frauds do result to serious problems for organizations and their owners. Accounting information when prepared and presented to both shareholders and other investors could be a very useful tool to assess the viability of companies for their investment decisions and ascertain the possibility of frauds being committed by the management in such organisations.

1.3   Objectives of the study

The main objective of this study is to examine value relevance of accounting information on business performance on quoted companies in Nigeria. To achieve the above objective, the following specific objectives were formulated:

(i)                 To determine the relationship between understandability of accounting information and net profit;

(ii)               To determine the relationship between reliability of accounting information and return and equity;

(iii)             To determine the relationship between comparability of accounting information and return on asset.

1.4   Research Questions

In the light of the above, the specific research questions were formulated:

(i)                 What is the relationship between understandability of accounting information and net profit?

(ii)               What is the relationship between reliability of accounting information and return and equity?

(iii)             What is the relationship between comparability of accounting information and return on asset?

1.5   Research Hypotheses

In order to validate data analysis, the following null hypotheses were tested:

H_o:       Understandability of accounting information has no relationship with net profit.

H_o:       Reliability of accounting information has no relationship with return on equity.

H_o:       Comparability of accounting information has no relationship with return on asset.

1.6   Significance of study

This study shall provide more insights about the value relevance of accounting information on business performance on quoted companies in Nigeria. The significance of this study can thus be summarized as follows:

(i)                 The findings is to enable management appreciate the need to carefully examine accounting information in order to improve a better and more effective business performance.

(ii)               The companies are supplied with information to help them make good decisions in the performance of their business.

(iii)             This study helps the users of financial statement and the organization to understand and appreciate the value relevance of accounting information.

(iv)             This study fills the gap in literature by investigating the value relevance of accounting data on business performance in the Nigerian stock market. The results provide useful evidence to other emerging stock markets.

(v)               This research provides 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.

1.7   Scope of study

This study provides insight into value relevance of accounting information of quoted companies in Nigeria and it covers a period of 7 years from 2008 to 2014. Ten banks in the financial institution, including First Bank Nigeria Plc, Diamond Bank Nigeria Plc, Access Bank Nigeria Plc, Zenith Bank Nigeria Plc, Wema Bank Nigeria Plc, Guaranty Trust Bank Nigeria Plc, Ecobank Nigeria Plc, Fidelity Bank Nigeria Plc, First City Monument Bank Plc and United Bank for Africa Plc are being used as the case study. This study examines the value relevance of accounting information in enhancing the performance of some selected companies in the financial sector of Nigerian economy. Over the period, this sector has undergone some transformations. This study therefore examined how value relevance on accounting information contributed to enhance the performance of some selected banks from 2008 to 2014.

1.8   Definition of terms

Accounting information:                  This is quantitative written information contained in a complete or partial financial report –balance sheet or profit and loss account or fund flow statement.

Book Value:                                       It is an accounting concept which tends to put a value on assets after making provision for depreciation. It is total equity divided by the number of shares outstanding. It is the original price paid for the assets reduced by any allowable depreciation on the assets.

Earnings:                                           The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year payment. Earnings typically refer to after-tax net income.

Financial Statements:                        Statement of the accounting policies; the balance sheet as at the last day of the year; a profit and loss account or, in the case of a company not trading for profit, an income and expenditure account for the year; notes on the accounts; the auditors reports; the directors’ report; a statement of the source and application of fund.

Individual Investor:                          Non- institutional investor who invests in listed firm on Nigerian Stock Market.

Institutional Investor:                       Corporate organization who invests in other listed firm on Nigerian Stock Market.

Market value:                                    This is the current price at which securities are bought and sold in the market. It is the price the market assigns to the company’s share.

Response Rate:                                  In survey research, the actual percentage of questionnaires completed and returned.

Stock Exchange:                                Stocks are listed and traded on stock exchange which is an entity a corporation or mutual organization that specializes in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together.

Stock Market:                                    This refers to entire market of equity for trading in the shares and derivatives of the various companies.

Value Relevance:                               Ability of accounting information to capture or summarize share price of firm listed on the stock market.

                                                       

REFERENCES

Germon, H. and G.K.Meek (2001). Accounting: An International Perspective,

McGraw Hill, Singapore.

Hawkins, D. F (1998). Corporate financial reporting and analysis: Text and cases,

McGraw-Hill Book, Homewood, 4th ed.

Obisi C. (2006) Personnel Management, Ibadan: Jackbod Enterprises, page 125

Okeke, F. (2004). Fiscal Sustainability and The Challenges of a Responsive Capital Market in Global Perspective. Nigerian Stock Market Annual ,Lagos

Osaze, E. B. (2007).Capital Markets – African and Global, Lagos: the Bookhouse

Company.

Securities and Exchange Commission (1990). Investments and Securities Act,1999; Abuja: SEC.

The Nigerian Stock Exchange ( 2009). Factbook, 28.

INTERNET SOURCES

Barth, M., W. Beaver and W. Landsman. (1998). Relative valuation roles of equity book value and net income as a function of financial health, Journal Accounting and Economics, 1-34.

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PROJECT PROPERTIES

Project Status	Available
Number of Chapters	5
Number of Pages	120
Number of Words	32,692
Number of References	29
Project Level	M.Sc.
Price	N15,000 (Non-Negotiable)
Abstract, Sample of Questionnaire are included
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