Relevance of Accounting Information

Topics: Financial statements, Stock market, Stock exchange Pages: 20 (7058 words) Published: April 21, 2012
European Journal of Social Sciences – Volume 7, Number 3 (2008)

Optimising Investment Decisions Through Informative Accounting Reporting Ishola Rufus Akintoye Department of Accounting, Olabisi Onabanjo University, Ago-Iwoye Ogun State, Nigeria, West - Africa E-mail: irakintoye@yahoo.com Tel: 234-8035369293, 8082130269 Abstract There is growing pressure around the world to promote greater transparency and disclosure, consistent with the importance of the growth of world trade and investment. Disclosure regulation varies internationally and there is often a lack of transparency especially in the emerging economies. From the study, we discover that the quality of accounting information in terms of its accuracy, adequacy, reliability and mode of disclosure is a major determinant of the level of efficiency of the capital market and other decision tasks. It also determines the nature and extent of moral hazard to which existing and potential investors could be exposed, thereby influencing the level of optimality of allocation of societal resources. This study employs a total of 50 companies quoted on the Nigerian Stock Exchange (NSE), however, the final sample cuts across 17 out of the 21 sectoral classification for the period 1986 to 2004. Two sets of data were collected that is predicted values of the relevant performance indicator over the projection period as presented in the prospectus of each company. The second set of data is the Actual Values of the indicators up to three years of operations after public issue. The findings in this study suggested among other things, that the current level of adequacy of accounting information made available to potential and existing investors requires significant improvement. We therefore recommend:• Strict compliance with prescribed accounting information disclosure requirements. This could be achieved if the relevant regulatory agencies effectively pursue the disclosure requirements recognized by laws, while making sure that corporate entities who default are made to face the due penalties, thus protecting innocent investors from undue heartaches. • Transparency in accounting related forecast. In most of the financial reports most forecasts have been discovered to suffer from actual realization, we hereby suggest that relevant regulatory agencies hold managers of corporate bodies responsible for any significant variance between projected and realised performance of entities concerned. • Ensuring adequate disclosure of RELEVANT accounting information. Disclosure of a long list of irrelevant accounting information is tantamount to outright non-disclosure, all those concerned with setting standards are enjoined to ensure proper standards on disclosure. Conclusively, there’s need for relevant regulatory agencies to alert investors on the extent to which they can rely on the accounting information provided in financial/corporate reports, as a basis for making their investment decisions, while specifically disclosing the limitation of such accounting information being provided. 178

European Journal of Social Sciences – Volume 7, Number 3 (2009)

Introduction
Accounting information is the most basic input into any informed economic decision making. Yet we are not aware of any structured research into whether this primary input possesses the attributes required, to enable it play creditably its assigned or presumed role in such decision tasks. The amount of information disclosed by organisations in corporate reports has considerably expanded in recent times, although reliability on same has proven little to be desired with the recent increase in collapse of world class financial institutions among others which necessitated the increased pressure for optimal disclosures in corporate reports. The major source of pressure for increased disclosures has been the financial and investment community. Both MNEs and standard setting bodies in countries with well-developed securities markets...

References: [1] [2] [3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17] [18] [19] [20] [21] [22] Akintoye, I.R. (2006), Optimising Management Financial Decision in Tertiary Educational Institutions in Nigeria. A Ph.D Dissertation, Delta State university, Abraka Nigeria. Anao, R.A (1978). The information content of published accounts of Nigerian Public Limited Companies: A note on the publication forecasts. Niegrian Journal of Economic and Social studies, 20, 125-140 Ariyo, A (1985) Relevant accounting information for investment decisions: An empirical investigation. NASMET: Journal of Management Education and Training 2, 59-68. Ariyo A and Soyode A. (1985) – A framework for measuring information adequacy and redundancies in annual financial reports. In Inanga, E.L. (Ed.) Managing Nigeria Economic System, A book of readings, Lagos. Heinemann Books. Ball, R and Brown P. (1968). An empirical evaluation of accounting income numbers. Journal of Accounting Research, Vol. 6(2) Bearer, W. Lambert R. and Morse D. 91980), The Information content of security pricesJournal of Accounting and Economics, Vol 2(16) Brown, L.D. (1993) Earnings forecasting research: Its implications for capital markets research. International journal of forecasting, vol 9(2) Capstaff, J. Pandyal, K. and Rees, W. (1995). The accuracy and rationality of earnings forecasts. Journal of Business Finance and Accounting, January, Vol. 22(1) Cragg, J.G. and malkiel B.G (1968). The consensus and accuracy of some predictions of corporate earnings. Journal of Fiannce, March: Vol 4(19) De Grort, M.H (1970) Optimal Statistical decisions (New York, Mcgraw Hill). Foster G. (1978). Financial Statement Analysis. New Jersey: Pretice Hall. Inanga, E.L. (1997) Accounting and accountability. Inaugural lecture, University of Ibadan Inanga, E.L. (1976) – the information content of published accounts of Nigerian Public Limited companies – Nigerian Journal of Economics and Social Studies, 18 Lutz, F.A. and V.C Lutz (1951). The theory of investment of the firm 1969 reprint, West Point, Conn: Greenwood Press. Sidney J., Stephen, B, Lee H., (2001). Global Accounting and Control A Managerial Emphasis – Hamilton Press Pg 146-167 Adhikari A. and R.h. Tondkar (1992). Environmental Factors Influencing Accounting Disclosure Requirements of Global Stock Exchanges. Journal of International Financial Management and Accounting. Vol 4(2): 75-105. Balalrishnan, H., T. Harris, and P.K. Sen. 91990). “The Predictive Ability of Geographic Segment Disclosures.” Journal of Accounting Research. Chow, C.W. and A. Wong-Boren. (1987) “Voluntary Financial Disclosure by Mexican Corporations.” Accounting Review (July) Vol. 62, No 3:533-541. Cooke, T.E. (1991) “An Assessment of Voluntary Financial Disclosure in the Annual Reports of Japanese Corporations.” International Journal of Accounting.. Vol.26(3); 174-189. Gray S.J. and C.B. Roberts (1989). “Voluntary Information Disclosure and the British Multinationals: Corporate Perceptions of Costs and Benefits.” In International Pressures for Accounting Change, A.G. Hopwood, Ed. Englewood Cliffs, NJ: Prentice-Hall. International Accounting Standards Committee (1983). International Accounting Standards Committee,. Objectives and Procedures. London: LASC, January. Meek, G.K., C.B. Roberts, and S.J. Gray (1995). “Factors Influencing Voluntary Annual Reports Disclosures by U.S., U.K. and Continental European Multinational Corporations:. Journal of International Business Studies (Third Quarter). Vol. 26, No.3: 555-572.
191
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • The Relevance of Accounting Information Essay
  • users of accounting information Essay
  • Accounting Information System Essay
  • Relevance or Otherwise of Accounting Information to Investment Decisions in Nigeria Essay
  • Users of Accounting Information Essay
  • Accounting Information; User and Uses Essay
  • Accounting Is an Information System That Identifies Essay
  • Users of Accounting Information Essay

Become a StudyMode Member

Sign Up - It's Free
Thám Tử Lừng Danh Conan chap 923 | Abelssoft FileFusion 2019 2.04 Build 168 Multilingual | Powerless HDTV 720p AC3 5.1