THE IMPACT OF FINANCIAL REPORTING ON INVESTMENT DECISIONS OF SMALL AND MEDIUM ENTERPRISES IN NIGERIA

This study investigates the impact of financial reporting on the investment decisions of Small and Medium Enterprises (SMEs) in Nigeria, focusing specifically on enterprises operating within Lagos State. The research was conducted using a descriptive survey design, targeting a sample of 30 SMEs and investors. Data were collected through structured questionnaires and analyzed using SPSS Version 25, employing both descriptive statistics (frequencies, means, percentages) and inferential methods including Pearson correlation and multiple linear regression analysis. The study assessed key dimensions such as the quality of financial reports, compliance with International Financial Reporting Standards (IFRS) for SMEs, transparency, and the challenges affecting reporting practices. Findings revealed that while SMEs acknowledge the importance of financial reporting, actual compliance is low due to factors such as lack of financial expertise, high costs of professional services, and reliance on informal methods. Despite these challenges, the results show a significant positive relationship between the quality of financial reporting and investment decisions (r = 0.66, p < 0.01), with regression results indicating that financial reporting accounts for 47.6% of investment decision variability. The study concludes that enhanced financial literacy, increased adoption of IFRS, and the integration of digital accounting tools can significantly improve financial reporting quality, thereby boosting investor confidence and funding accessibility. Based on these findings, recommendations are made for policymakers, SME owners, and financial institutions to support reforms that promote financial transparency and investment readiness among Nigerian SMEs.