CHAPTER ONE
INTRODUCTION
1.1 Â Â Â Background to the study
In the wake of the financial scandals and economic disintegration witnessed in Nigeria where billions of naira worth of investment and retirement wealth has been lost (Oyerinde, 2009), the very integrity and survivability of the capital market has been called to question. The capital market experienced a turbulent time in 2008 which led to downward trend in the movement of share prices. This downward trend as noted by Jeroh and Okoro (2015), is attributed to several forces or dynamism that have the tendency to determine the prices of share in the capital market. In line with the above view, Tan and Lim (2007) opined that share prices in the capital market are either influenced by accounting or non-accounting dynamics. Accounting dynamics refers to those statistics, facts, figures (often called ‘accounting numbers’) reported in the statement of comprehensive income, statement of financial position and cash flows of firms such as earnings per share, dividend per share, price earnings ratio, dividend yield, book value per share, return on equity, market value per share, net assets per share, dividend cover, profitability, and so onNon-accounting dynamics are those numbers not reported in financial statements of firms. These may include exchange rates, inflation rates, interest rates, political instability, speculation, forced sales, gambling, rumour, forces of demand and supply, and so on. Glezakos, Mylonakis and Kafouros (2012) believed that investors in the capital market make use of these dynamics in choosing which firm they will invest or not. Murinde (2006) posits that investors rely on accounting and non-accounting statistics while trading long-term financial securities (such as ordinary shares, debentures, unsecured loan stock and convertible bonds), government bonds and other public sector securities such as treasury bills and gilt-edged stocks. Thus, these dynamics (accounting and non-accounting information) are good enough in determining share prices of companies. Germon and Meek (2001) state that those who have funds to invest or lend may decide where to place their resources based on the information they get. Generally, investors usually depend on financial reports prepared by the management of such organizations. The financial report is one of the best sources of accounting information about a firm listed on the floor of the stock exchange. The primary purpose of financial statements is to provide information concerning the financial position of the company, its operational results, and any changes of control in the company cash flow. Inspite of the pivotal role accounting information plays, there are still certain dynamisms (such as inflation, interest, exchange rates, government policies etc) that may downturn or upturn the prices of share (Terfa, 2010).In developed countries, studies have shown that accounting and non-accounting information have the tendency to determine share prices of companies (Collins, Maydew & Weiss, 1997; Hamid & Sumit, 1998; Beaver, 2002; TErfa, 2010). Studies on share price determinants are aggravated by the fact that investors use both accounting and non-accounting information in choosing which firm they will invest or not.
