Investors Reliance on Profit Forecast Disclosed in Prospectus: An Empirical Evaluation
 /  Investors Reliance on Profit Forecast Disclosed in Prospectus: An Empirical Evaluation

Investors Reliance on Profit Forecast Disclosed in Prospectus: An Empirical Evaluation


Bosun-fakunle Yemisi Funmilayo, YEMISI F. AND ADEBAYO, GBENGA A.

ABSTRACT
Accounting information plays a central role because of the fact that there is information asymmetry between company management and investors. Investing in a company depends on the level of confidence the investor has in the company which is determined by the performance of the firm in terms on its profitability and dividend. The prospectus contains the profit forecast which is an estimate of financial results made in advance of completion of financial statement. Thus, the main objective of this research is to empirically examine the reliability of profit forecast disclosed in prospectus issues. The study also attempted to determine the relationship between stock and the earnings forecast. Four hypotheses were stated and tested. The study used mostly secondary data from the prospectus and annual reports of forty-eight firms quoted on the Nigerian stock exchange across various sectors. The study used descriptive statistics, t-test and correlation analysis. Result revealed that there is no significant difference in the earnings forecast contained in the prospectus and the actual earnings in the annual reports. The study also shows that there is a positive relationship between profit forecast and the stock price. The study concludes that profit forecasts disclosed by Nigerian companies provide reliable information to some degree. The study amongst others recommends that profit forecasts or estimates should contain disclosure that is not too complex or extensive for investors to understand.

Journal Article
PDF, 137.2 KB
Creative Commons LicenseCreative Commons license
Accounting, Banking and Finance
N/A
Value relevance, earnings, dividends, cash flow, Book value, Regression
Christian Bassey
17th April, 2018
17th April, 2018
http://oer.educationobjects.uk/wp-content/uploads/2015/04/Journal-Investors-Reliance-on-Profit-Forecast-Disclosed-in-Prospectus.docx


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