EFFECT OF CORPORATE FINANCIAL DISCLOSURE ON INVESTORS CONFIDENCE IN NIGERIA. A CASE STUDY OF NIGERIA STOCK EXCHANGE

Abstract

This study examines the effect of corporate financial disclosure on investor confidence in Nigeria, with a focus on earnings transparency, disclosure compliance, and audit quality as determinants of trading volume. Specifically, the study investigates the effect of earnings transparency on trading volume, assesses the impact of disclosure compliance on trading volume, and evaluates the influence of audit quality on trading volume. The research adopts an ex-post facto design, utilizing secondary data from publicly available financial reports of listed firms on the Nigerian Exchange Group (NGX) from 2010 to 2019. A purposive sampling technique was used to select 30 firms from key sectors, including banking, manufacturing, oil and gas, and telecommunications, based on their consistent financial disclosures. Data analysis involved descriptive statistics and Ordinary Least Squares (OLS) regression to determine the relationship between corporate financial disclosure variables and trading volume. Findings indicate that firms generally exhibit high disclosure compliance and earnings transparency levels, with a majority audited by Big Four firms. The regression analysis reveals that earnings transparency positively influences trading volume; however, its effect is not statistically significant (p > 0.05). Disclosure compliance and audit quality were not directly tested in the model but were inferred to have limited explanatory power based on the low adjusted R-squared value (0.226). These results suggest that while financial disclosure enhances market confidence, other factors such as market sentiment and macroeconomic conditions may play a dominant role in investor decision-making. The study concludes that corporate financial disclosure alone may not sufficiently drive trading volume. It contributes to the literature by highlighting the need for enhanced qualitative disclosures and investor education. It recommends that regulatory bodies strengthen compliance mechanisms and that firms improve voluntary disclosures to bolster investor confidence and market efficiency