Conservatism and Value Relevance of Accounting Information in Quoted Firms in Nigeria

Abstract

This project work centered on conservatism and value relevance of accounting information to quoted firms in Nigeria stock exchange. While there have been a number of studies on this topic in the developed countries not much has been explored in Nigeria. Value relevance has been criticized by extant literature and also that conservatism in accounting as one reason for the observed decrease in value relevance. In order to ascertain the impact of conservatism on value relevance of accounting information, secondary source of data collection, statistical instruments such asmultiple regression and correlation coefficient were used in the analysis of data collected. It was discovered among others that there is the existence of a significant inverse relationship between Market-based conservatism (BMCONA) and Earnings per share (EPS) for the pooled OLS, fixed and random effects model. The results suggest that higher conservative practices by companies will affect the informativeness of financial estimates and declines in stock returns may be seen as an outcome of the markets assessment of disclosure credibility. In concluding this study, some recommendations were made. One of such recommendation was that the financial reporting council and other allied bodies should ensure clarity and provide rules with probably less discretionary tendencies for management to manipulate. The overall aim is to improve credibility of financial information.