SHARE PRICE DETERMINATION AND CORPORATE FIRM CHARACTERISTICS

By

AKINLESI OMOTOLA ADEDOYIN

Presented To

Department of Accounting

At the close of 2009 the total market value of  266  securities  listed  on the Nigerian Stock market dropped by 26.5% resulting mainly from share price losses. In effect the crux of this work was to investigate share price determination  and  corporate  firm characteristics  in a view to critically examine  the significant effect corporate firm characteristics  has in determining  the price of shares  listed on the Nigerian Stock Exchange.  A panel data design was adopted using seventy-two companies  from 2004-2009, a six year period which were purposely selected  based on availability and adequacy of data.  Due to the panel nature of the study  Ordinary Least Square (OLS),  fixed  effect and random effect estimation technique  were employed  in the  analysis with the use of Gretl  econometric analytical tool. The result indicates  that  the size of the  firm  has the most significant effect on  share price determination in the two models adapted for the study. Conclusions were made on the note that our findings provided new and additional insights in the finance literature and point to a fruitful new line of research from both a theoretical and an empirical standpoint.  Hence recommendations were made in the lights that  investors should be critical and objective  in considering  corporate firm characteristics in making investment decisions  also  Managements and board members should aim at improving earnings which was rated through the literature reviewed to be a major determinant of share price. This could be done by  proper definitions of earnings management to avoid manipulations of accounts which most times lead to fraud.
Keywords: Share Price, Corporate Firm Characteristics, Nigerian Stock Exchange.

CONTENTS--------  PAGE
Cover------------ i
Title page----------  ii
Declaration----------  iii
Certification----------  iv
Dedication----------  v
Acknowledgements----------vi
Abstract----------  vii
Table of Content----------viii
List of Tables----------  ix
List of Figures----------  x

CHAPTER ONE: INTRODUCTION
11 Background of Study--------  1
12 Research Problem----------4
13 Objectives of Study--------  6
14 Research Questions--------  7
15 Research Hypothesis--------   7
16 Significance of the Study--------  8
17 Scope and Limitation of the Study------  9
18  Summary of Research Methodology------  9
19 Sources of Data----------11
110 Definition of Terms--------  12
References----------  15

CHAPTER TWO: LITERATURE REVIEW
20 Introduction----------16
21 The Nigerian Experience--------   16
211 The Nigerian Financial System------  16
212 The Nigerian Stock Market------   17
22 Conceptual Framework--------  21
221 Concept of Share Price Determination------23
222 Corporate Firm Growth and Share Price Determination--  26
223 Corporate Firm Profitability and Share Price Determination--   26
224 Corporate Firm Risk and Share Price Determination----29
225 Corporate Firm Age and Share Price Determination----31
226 Corporate Firm Size and Share Price Determination----31
227 Share Price Determination and Macro Economic Variables--  33
23 Theoretical Framework--------  35
231 Efficient Market Hypothesis------  35
24 Review of Empirical Literature on Share Price Determination and Corporate
Firm Characteristics--------  39
References----------  45

CHAPTER THREE: RESEARCH METHODOLOGY
30 Introduction----------51
31 Research Design----------51
32 Population of Study--------  52
33 Sample Size and Sampling Technique------  52
34 Data Gathering Method--------  53
341 Sources of Data--------  53
342 Instruments for Data Collection------  54
343 Validity and Reliability of Instruments----   54
344 Administration of Instruments ------  55
35 Problem of Data Collection--------56
36  Actual Field Work/ Location of Study------  56
37 Data Analysis Method--------  57
371  Method of Data Analysis------  57
372   Instruments for Data Analysis (Including Formulae)--  57
373  Diagnostic Analysis--------60
References----------  62

CHAPTER FOUR: DATA PRESENTATION AND ANALYSIS
40 Introduction----------63
41 Data Presentation and Preliminary analysis------63
42 Overall Descriptive Analysis--------65
43 Data Analysis Advance--------   67
431 Correlation Analysis-------- 67
432 Regression Analysis--------71
44 Hypothesis Testing--------  78
441 Model 1----------78
442 Model 2----------80
References----------   86

CHAPTER FIVE: SUMMARY OF FINDINGS, CONCLUSION AND
RECOMMENDATIONS
50 Introduction----------87
51 Summary of Work Done--------  87
52 Summary of Findings--------   89
521 Theoretical Findings--------89
522 Empirical Findings--------91
53 Conclusions---------- 93
54 Recommendations----------95
55 Suggestions for Further Studies--------96
References----------  97


LIST OF FIGURES
Figure 11  Nigerian Stock Exchange Share Price Index for the Period 1985 to 2009  2
Figure 41  Percentages of Samples Selected From Companies----64

LIST OF TABLES
Table 421:  Overall Descriptive Statistics for Model 1----  65
Table 422 Overall Descriptive Statistics for Model 2----  66
Table 4311 Correlation Coefficient Matrix for Model 1----  68
Table 4312 Correlation Coefficient Matrix for Model 2----  69
Table 4321 Regression Result for Model------   71
Table 4322 Regression Result for Model 2------  75
Table 441 Summary of Hypothesis Results For Model 1----  84
Table 442 Summary of Hypothesis Results For Model 2----  85