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: firstname.lastname@example.org 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)
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...
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