EFFECT OF FINANCIAL ACCOUNTING RATIOS ON INVESTMENT DECISIONS IN NIGERIAN LISTED PHARMACEUTICAL COMPANIES
Abstract
This study explores how financial accounting ratios affect investment decisions in Nigerian-listed pharmaceutical companies. Financial data from 2015 to 2024 were obtained from the audited financial statements of selected pharmaceutical firms listed on the Nigerian Exchange Group (NGX). The study focused on three key financial ratios such as Return on Assets (ROA), Return on Equity (ROE), and Earnings Per Share (EPS) and their influence on share trading volume, dividend decisions, investment growth, and market capitalization. A panel regression analysis was used, with conclusions drawn at a 5% significance level.
The analysis shows that financial accounting ratios greatly influence investment decisions. EPS had a positive and significant effect on share trading volume (β = 0.089, t = 2.333, p < 0.05), while ROE had a moderate impact on dividend decisions (β = 0.125, t = 1.096, p > 0.05). ROA displayed a weak but positive relationship with investment growth (β = 0.026, t = 0.688, p > 0.05). The combined influence of ROA, ROE, and EPS was statistically significant for audit reliability and market capitalization. These findings support stakeholder, signaling, and agency theories, highlighting the importance of financial transparency in influencing investor behaviour.
The study recommends that publicly listed pharmaceutical companies focus on improving their financial performance and maintaining transparent reporting to enhance investor confidence. Additionally, regulatory bodies should enforce standardized disclosure practices to improve market efficiency and foster investment growth.
Full-Text Access Notice
In accordance with the NERD Policy on promoting peer-reviewed publication, public access to the full text of a project, thesis or dissertation is restricted for three years, allowing the author and supervisors sufficient time to pursue peer-reviewed publication.
During this period, researchers with legitimate academic or research purposes may request authorisation directly from the author to enable NERD to release the indexed full texts of the work using the form below.