Value Relevance of Accounting Information, Investor Sophistication, and Market Microstructure on the Nigerian Exchange Group

This study examines the value relevance of accounting information in the Nigerian capital market and investigates how investor sophistication and market microstructure characteristics moderate the relationship between accounting disclosures and equity pricing. Value relevance research examines the extent to which accounting numbers are reflected in stock prices, providing evidence on the usefulness of financial reporting for capital market decisions. Existing value relevance studies have predominantly focused on developed markets, with limited attention to the unique institutional features of African stock exchanges. This study uses a longitudinal panel dataset covering 60 listed companies on the Nigerian Exchange Group for the period 2008 to 2023. Value relevance of earnings and book values is estimated using the Ohlson price model and returns model. Investor sophistication is measured using analyst coverage, institutional ownership, and trading volume relative to market capitalization. Market microstructure quality is proxied by bid-ask spread, market depth, and price impact measures. Three-stage least squares regression is used to model simultaneity among accounting quality, investor sophistication, and price informativeness. Results establish that accounting information has significant but declining value relevance in the Nigerian market, with a structural break in 2015 coinciding with the oil price shock and market liquidity contraction. Investor sophistication significantly amplifies accounting value relevance, suggesting that the informational benefits of high-quality accounting are concentrated among institutional investors. The study contributes an original institutional explanation for time-varying value relevance in emerging markets and recommends regulatory incentives for analyst coverage expansion.

Keywords: value relevance, accounting information, Nigerian Exchange Group, investor sophistication, market microstructure.