Earnings Quality and Stock Market Valuation of Banks in Nigeria

Abstract

Abstract: The study investigated the effect of earnings quality on the stock market valuation of banks in Nigeria, focused on two key dimensions: accrual quality and earnings persistence. The population comprises 12 deposit money banks listed on the Nigerian Exchange Group, with data spanning five years from 2020 to 2024. Using an ex-post facto research design, secondary data were extracted from audited annual reports and NGX publications. The study used both descriptive and inferent.ial analysis. Inferential analysis involved multiple regression and diagnostic tests, including the Breusch-Pagan-Godfrey heteroskedasticity test, to ensure model validity. Results show that accrual quality has a positive and significant effect on stock market valuation (β = 0.137, p = 0.0201), while earnings persistence exhibits a negative but significant effect (β = -0.124, p = 0.0312). The model explains approximately 40% of the variation in Tobin’s Q (R² = 0.403). The study concludes that higher earnings quality, particularly accrual quality, enhances the market valuation of banks in Nigeria, while persistent earnings may signal limited growth potential. It recommends that banks improve financial reporting transparency and that management balances earnings consistency with indicators of growth to maintain investor confidence.