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DETERMINATION OF SHARE PRICE OF AGRO ALLIED FIRMS: EVIDENCE FROM NIGERIA
Corresponding Author(s) : Bukola Bose LAWAL-ADEDOYIN
Humanities & Social Sciences Reviews,
Vol. 8 No. 4 (2020): July
Abstract
Purpose: The study aims to investigate the determinant of the share price of agro-related firms listed on the Nigerian stock exchange.
Methodology: We employed regression analysis, unit root test as well as vector correction model to determine the degree of relationship between share prices and each of return on assets (ROA), earnings per share (EPS), dividend per share (DPS).
Findings: The study found that share price is majorly influenced by earnings per shares, while other variables lag it.
Practical implications: Results from the study have some possible policy implications, for instance, it is recommended that policymakers should put in place conducive market environments that will stimulate earnings from investments. Investors should on the other hand pay keen attention to information within and outside the economy when making investment decisions.
Originality/Value: This study is one of the first studies on determinants of share prices with a focus on agro-allied firms.
Keywords
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- Aatola, P., Ollikainen, M. And Toppinen, A. (2013). Price determination in the EU ETS market: Theory and Econometric analysis with market fundamentals. Energy Economics 36, 380 – 395. https://doi.org/10.1016/j.eneco.2012.09.009 DOI: https://doi.org/10.1016/j.eneco.2012.09.009
- Adelegan, O. J. (2003). Capital Market Efficiency and the Effects of Dividend Announcements on Share Prices in, African Development Review 15(2-3) 218–236. https://doi.org/10.1111/j.1467-8268.2003.00072.x DOI: https://doi.org/10.1111/j.1467-8268.2003.00072.x
- Ariff, M., Chung, T-F. and Shamsher, M. (2012). Money supply, interest rate, liquidity and shar prices: A test of their rifflinkage. Global Finance Journal, 23, 202 – 220. https://doi.org/10.1016/j.gfj.2012.10.005 DOI: https://doi.org/10.1016/j.gfj.2012.10.005
- Asaleye, A. J., Popoola, O., Lawal, A. I., Ogundipe, A. & Ezenwoke, O. (2018). The credit channels of monetary policy transmission: implications on output and employment in Nigeria. Banks and Bank Systems, 13(4), 103-118. https://doi.org/10.21511/bbs.13(4).2018.10 DOI: https://doi.org/10.21511/bbs.13(4).2018.10
- Asaleye, A. J., Isoha, L. A., Asamu, F., Inegbedion, H., Arisukwu, O., Popoola, O. (2018). Financial development, manufacturing sector and sustainability: Evidence from Nigeria. Journal of Social Sciences Research, 4(12), 539-546. https://doi.org/10.32861/jssr.412.539.546 DOI: https://doi.org/10.32861/jssr.412.539.546
- Ayopo, B. A., Isola, L. A. & Olukayode, S. R. (2016a). Stock market response to economic growth and interest rate volatility: Evidence from Nigeria. International Journal of Economics and Financial Issues 6(1), 354-360. https://www.econjournals.com/index.php/ijefi/article/view/1608/pdf
- Ayopo, B. A., Isola, L. A. & Olukayode, S. R. (2016b). Stock market volatility: Does our fundamentals matter? Ikonomicheski Izsledvania 25(3), 33-42. https://www.ceeol.com/search/article-detail?id=356000
- Ayopo, B. A., Isola, A. L., and Somoye, R. O. C. (2015). Monetary policy dynamics and the stock market movements: empirical evidence from Nigeria. Journal of Applied Economic Sciences, X38(8), 1179–1188.
- Isola, L. A., Frank, A. and Leke, B. K. (2015). Can Nigeria achieve Millennium Development Goals? Journal of Social Sciences Research 1(6), 72-78. http://arpgweb.com/?ic=journal&journal=7&info=aims
- Beck, T., & Levine, R. (2004). Stock markets , banks , and growth : Panel evidence, Journal of Banking and Finance 28, 423–442. https://doi.org/10.1016/S0378-4266(02)00408-9 DOI: https://doi.org/10.1016/S0378-4266(02)00408-9
- Chelimo, J. K., & Kiprop, S. K. (2017). Effect of Dividend Policy on Share Price Performance : A Case of Listed Insurance Companies at the Nairobi Securities Exchange , Kenya, International Journal of Accounting, Finance and Risk Management 2(3), 98–106.
- 12. Ehikioya, B. I. (2015). An Empirical Investigation of the Impact of Dividend Policy on the Performance of Firms in Developing Economies : Evidence from Listed Firms in Nigeria, International Journal of Finance and Accounting 4(5), 245–252.
- Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383. https://doi.org/10.2307/2325486 DOI: https://doi.org/10.2307/2325486
- Fashina, O. A., Asaleye, A. J. Ogunjobi, J. O. & Lawal, A. I. (2018) Foreign aid, human capital and economic growth nexus: Evidence from Nigeria. Journal of International Studies, 11(2), 104-117. https://doi.org/10.14254/2071-8330.2018/11-2/8 DOI: https://doi.org/10.14254/2071-8330.2018/11-2/8
- Fontaine, C., Haarman, A. and Schmid, S. (2006). The Stakeholder Theory, (December). https://pdfs.semanticscholar.org/606a/828294dafd62aeda92a77bd7e5d0a39af56f.pdf?_ga=2.106356099.16940460.1585141767-825472732.1571135113
- Geertsema, P. and Lu, H/ (2019). Regulated price and demand in China’s IPO market. Journal of Economics and Business, 106, 105846. https://doi.org/10.1016/j.jeconbus.2019.105846 DOI: https://doi.org/10.1016/j.jeconbus.2019.105846
- Hintermann, B., Peterson, S., and Rickels, W. (2016). Price and market behaviour in Phase II of the EU ETS: A review of literature. Review of Environmental Economics and Policy, 10(1), 108 -128. https://doi.org/10.1093/reep/rev015 DOI: https://doi.org/10.1093/reep/rev015
- Hunjra, A. I.., Chani,M. I. Shahzad, M., Farooq, M., Khan, K. (2014). The Impact of Macroeconomic Variables on Stock Prices in Pakistan. International Journal of Economics and Empirical Research. 2(1), 13-21.
- Idawati, W. & Wahyudi, A. (2015). Effect of earning per share (EPS) and return on assets (ROA) against share price on coal mining company listed in Indonesia stock exchange. Journal of Resources Development and Management: An International Peer-reviewed Journal, 7, 79-91.
- Ilmiyono, A. F. (2019). The effect of ROE, ROA & EPS towards stock prices in companies sub-sektor construction and building listed in exchange Indonesia effect (IDX). International Journal of Latest Engineering and Management Research 4(8), 24-35 http://www.ijlemr.com/v4-i8.html
- Kassouri, Y. And Altintas, H. (2020). Threshold cointegration, nonlinearity and frequency domain causality relationship between stock prices and Turkish Lira. Research in International Business and Finance, 52, 101097 https://doi.org/10.1016/j.ribaf.2019.101097 DOI: https://doi.org/10.1016/j.ribaf.2019.101097
- Lawal, A. I., Asaleye, A.J, Ise Olorun kami, J., Popoola, O. R. (2018). Economic Growth, Agricultural Output and Tourism Development in Nigeria: An Application of the ARDL Bound Testing Approach. Journal of Environmental Management and Tourism, IX, Summer (28), 786–794. https://doi.org/10.14505//jemt.v9.4(28).12 DOI: https://doi.org/10.14505//jemt.v9.4(28).12
- Lawal A. I., Ozturk, I., Olanipekun, I. O., Asaleye, A. J. (2020a) Examining the linkages between electricity consumption and economic growth in African economies, Energy. https://doi.org/10.1016/j.energy.2020.118363 DOI: https://doi.org/10.1016/j.energy.2020.118363
- Lawal, A. I., Oseni, E., Babajide, A. A., Lawal-Adedoyin, B. & Bonetipin, F. (2020b). The impact of International Financial Reporting Standard (IFRS) adoption on key financial ratios in Nigeria. Humanities & Social Sciences Reviews eISSN: 2395-6518, Vol 8, No 4, 2020, pp 289-300. https://doi.org/10.18510/hssr.2020.8430 DOI: https://doi.org/10.18510/hssr.2020.8430
- Babajide, A., Lawal, A., Asaleye, A., Okafor, T. & Osuma, G., (2020). Financial stability and entrepreneurship development in sub-Sahara Africa: Implications for sustainable development goals, Cogent Social Sciences, 6: 1798330. DOI: https://doi.org/10.1080/23311886.2020.1798330
- Lawal, A. I., Nwanji, T. I., Adama, I.J & Otekunrin, A. O. (2017a). Examining the nigerian stock market efficiency: Empirical evidence from wavelet unit root test approach. Journal of Applied Economic Sciences, 12(6), 1680–1689.
- Lawal, A. I., Somoye, R. O. & Babajide, A. A. (2017b). Are African stock market efficient? Evidence from wavelet unit root test for random walk. Economics Bulletin, 37(4), 2665-2679 http://www.accessecon.com/ Pubs/EB/2017/Volume37/EB-17-V37-I4-P239.pdf
- Lawal, A. I.,Olayanju, A., Salisu, A. A., Asaleye, A. J., Dahunsi, O., Dada, O., Omoju, O. E., and Popoola, O. R. (2019a). Examining Rational Bubbles in Oil Prices: Evidence from Frequency Domain Estimates. International Journal of Energy Economics and Policy, 9(2), 166-173. https://doi.org/10.32479/ijeep.7463 DOI: https://doi.org/10.32479/ijeep.7463
- Mogonta, K. & Pandowo, M. (2016). Analyzing the effects of return on assets, return on equity and earnongs per share on market share price: A study of LQ-45 mining companies listed on Indonesia stock exchange. Journal of Economic, Business and Accounting Research 4(2), 703-713.
- Ndede, F. W. S., & Jagongo, A. O. (2014). Dividend Payout by Agricultural Firms in Kenya [ An Empirical Analysis of Firms Listed on the Nairobi Security Exchange], 5(11), 63–74. https://ir-library.ku.ac.ke/handle/123456789/12610
- Pandey, M. K. (2019). The effect of internal and external factors on the stock price of pharmaceutical companies in emerging and emerged markets. European Journal of Business and Management, 11(36), 162 – 199. https://www.iiste.org/Journals/index.php/EJBM/article/view/50831/52524
- Hunjra, A. I., Ijaz, M. S, Chani, M. I., Hassan, S. and Mustafa, U. (2014). Impact of Dividend Policy, Earning per Share, Return on Equity, Profit after Tax on Stock Prices. International Journal of Economics and Empirical Research, 2(3), 109-115.
- Shi, W., Wang, G., Zhao, X., Feng, X. and Wu, J. (2018) Price determination in the electrolytic aluminum industry: the role of electricity prices. Resource Policy 59, 274-281 https://doi.org/10.1016/j.resourpol.2018.07.014 DOI: https://doi.org/10.1016/j.resourpol.2018.07.014
- Saragih, J. L. (2018). The effect of return on assets (RoA), return on equity (RoE), and debt to equity ratio (DER) on stock returns in wholesale and retail trade companies listed in Indonesia stock exchange. International Journal of Science and Research Methodology, 8(3) 348-367.
- Sharif, T., Purohit, H. & Pillai, R. (2015). Analysis of factors affecting share prices: The case of Bahrain stock exchange. International Journal of Economics & Finance 7(3), 207-216. https://doi.org/10.5539/ijef.v7n3p207 DOI: https://doi.org/10.5539/ijef.v7n3p207
- Su, F. and Zhang, J. (2018). Global price discovery in Australian dollar market and its determinants. Pacific-Basin Finance Journal 48, 35 – 55. https://doi.org/10.1016/j.pacfin.2018.01.002 DOI: https://doi.org/10.1016/j.pacfin.2018.01.002
- Utami, M.R & Darmawan, A. (2019). Effect of DER, ROA, ROE, EPS and MVA on stock prices in Sharia Indonesia stock index. Journal of Applied Accounting and Taxation 4(1), 15-22. DOI: https://doi.org/10.30871/jaat.v4i1.1195
- Zainudin, R., Mahdzan,S. N. & Yet, C. H. (2018). Dividend policy and stock.
- price volatility of industrial products firms in Malaysia. International Journal of Emerging Markets, 3(1), pp.203-217. https://doi.org/10.1108/IJoEM-09-2016-0250 DOI: https://doi.org/10.1108/IJoEM-09-2016-0250
- Zhang, Y-J. And Sun, Y-F (2016). The dynamic volatility spill over between European carbon trading market and fossil energy market. Journal of Cleaner Production 112, 2654 – 2663. https://doi.org/10.1016/j.jclepro.2015.09.118 DOI: https://doi.org/10.1016/j.jclepro.2015.09.118
References
Aatola, P., Ollikainen, M. And Toppinen, A. (2013). Price determination in the EU ETS market: Theory and Econometric analysis with market fundamentals. Energy Economics 36, 380 – 395. https://doi.org/10.1016/j.eneco.2012.09.009 DOI: https://doi.org/10.1016/j.eneco.2012.09.009
Adelegan, O. J. (2003). Capital Market Efficiency and the Effects of Dividend Announcements on Share Prices in, African Development Review 15(2-3) 218–236. https://doi.org/10.1111/j.1467-8268.2003.00072.x DOI: https://doi.org/10.1111/j.1467-8268.2003.00072.x
Ariff, M., Chung, T-F. and Shamsher, M. (2012). Money supply, interest rate, liquidity and shar prices: A test of their rifflinkage. Global Finance Journal, 23, 202 – 220. https://doi.org/10.1016/j.gfj.2012.10.005 DOI: https://doi.org/10.1016/j.gfj.2012.10.005
Asaleye, A. J., Popoola, O., Lawal, A. I., Ogundipe, A. & Ezenwoke, O. (2018). The credit channels of monetary policy transmission: implications on output and employment in Nigeria. Banks and Bank Systems, 13(4), 103-118. https://doi.org/10.21511/bbs.13(4).2018.10 DOI: https://doi.org/10.21511/bbs.13(4).2018.10
Asaleye, A. J., Isoha, L. A., Asamu, F., Inegbedion, H., Arisukwu, O., Popoola, O. (2018). Financial development, manufacturing sector and sustainability: Evidence from Nigeria. Journal of Social Sciences Research, 4(12), 539-546. https://doi.org/10.32861/jssr.412.539.546 DOI: https://doi.org/10.32861/jssr.412.539.546
Ayopo, B. A., Isola, L. A. & Olukayode, S. R. (2016a). Stock market response to economic growth and interest rate volatility: Evidence from Nigeria. International Journal of Economics and Financial Issues 6(1), 354-360. https://www.econjournals.com/index.php/ijefi/article/view/1608/pdf
Ayopo, B. A., Isola, L. A. & Olukayode, S. R. (2016b). Stock market volatility: Does our fundamentals matter? Ikonomicheski Izsledvania 25(3), 33-42. https://www.ceeol.com/search/article-detail?id=356000
Ayopo, B. A., Isola, A. L., and Somoye, R. O. C. (2015). Monetary policy dynamics and the stock market movements: empirical evidence from Nigeria. Journal of Applied Economic Sciences, X38(8), 1179–1188.
Isola, L. A., Frank, A. and Leke, B. K. (2015). Can Nigeria achieve Millennium Development Goals? Journal of Social Sciences Research 1(6), 72-78. http://arpgweb.com/?ic=journal&journal=7&info=aims
Beck, T., & Levine, R. (2004). Stock markets , banks , and growth : Panel evidence, Journal of Banking and Finance 28, 423–442. https://doi.org/10.1016/S0378-4266(02)00408-9 DOI: https://doi.org/10.1016/S0378-4266(02)00408-9
Chelimo, J. K., & Kiprop, S. K. (2017). Effect of Dividend Policy on Share Price Performance : A Case of Listed Insurance Companies at the Nairobi Securities Exchange , Kenya, International Journal of Accounting, Finance and Risk Management 2(3), 98–106.
12. Ehikioya, B. I. (2015). An Empirical Investigation of the Impact of Dividend Policy on the Performance of Firms in Developing Economies : Evidence from Listed Firms in Nigeria, International Journal of Finance and Accounting 4(5), 245–252.
Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383. https://doi.org/10.2307/2325486 DOI: https://doi.org/10.2307/2325486
Fashina, O. A., Asaleye, A. J. Ogunjobi, J. O. & Lawal, A. I. (2018) Foreign aid, human capital and economic growth nexus: Evidence from Nigeria. Journal of International Studies, 11(2), 104-117. https://doi.org/10.14254/2071-8330.2018/11-2/8 DOI: https://doi.org/10.14254/2071-8330.2018/11-2/8
Fontaine, C., Haarman, A. and Schmid, S. (2006). The Stakeholder Theory, (December). https://pdfs.semanticscholar.org/606a/828294dafd62aeda92a77bd7e5d0a39af56f.pdf?_ga=2.106356099.16940460.1585141767-825472732.1571135113
Geertsema, P. and Lu, H/ (2019). Regulated price and demand in China’s IPO market. Journal of Economics and Business, 106, 105846. https://doi.org/10.1016/j.jeconbus.2019.105846 DOI: https://doi.org/10.1016/j.jeconbus.2019.105846
Hintermann, B., Peterson, S., and Rickels, W. (2016). Price and market behaviour in Phase II of the EU ETS: A review of literature. Review of Environmental Economics and Policy, 10(1), 108 -128. https://doi.org/10.1093/reep/rev015 DOI: https://doi.org/10.1093/reep/rev015
Hunjra, A. I.., Chani,M. I. Shahzad, M., Farooq, M., Khan, K. (2014). The Impact of Macroeconomic Variables on Stock Prices in Pakistan. International Journal of Economics and Empirical Research. 2(1), 13-21.
Idawati, W. & Wahyudi, A. (2015). Effect of earning per share (EPS) and return on assets (ROA) against share price on coal mining company listed in Indonesia stock exchange. Journal of Resources Development and Management: An International Peer-reviewed Journal, 7, 79-91.
Ilmiyono, A. F. (2019). The effect of ROE, ROA & EPS towards stock prices in companies sub-sektor construction and building listed in exchange Indonesia effect (IDX). International Journal of Latest Engineering and Management Research 4(8), 24-35 http://www.ijlemr.com/v4-i8.html
Kassouri, Y. And Altintas, H. (2020). Threshold cointegration, nonlinearity and frequency domain causality relationship between stock prices and Turkish Lira. Research in International Business and Finance, 52, 101097 https://doi.org/10.1016/j.ribaf.2019.101097 DOI: https://doi.org/10.1016/j.ribaf.2019.101097
Lawal, A. I., Asaleye, A.J, Ise Olorun kami, J., Popoola, O. R. (2018). Economic Growth, Agricultural Output and Tourism Development in Nigeria: An Application of the ARDL Bound Testing Approach. Journal of Environmental Management and Tourism, IX, Summer (28), 786–794. https://doi.org/10.14505//jemt.v9.4(28).12 DOI: https://doi.org/10.14505//jemt.v9.4(28).12
Lawal A. I., Ozturk, I., Olanipekun, I. O., Asaleye, A. J. (2020a) Examining the linkages between electricity consumption and economic growth in African economies, Energy. https://doi.org/10.1016/j.energy.2020.118363 DOI: https://doi.org/10.1016/j.energy.2020.118363
Lawal, A. I., Oseni, E., Babajide, A. A., Lawal-Adedoyin, B. & Bonetipin, F. (2020b). The impact of International Financial Reporting Standard (IFRS) adoption on key financial ratios in Nigeria. Humanities & Social Sciences Reviews eISSN: 2395-6518, Vol 8, No 4, 2020, pp 289-300. https://doi.org/10.18510/hssr.2020.8430 DOI: https://doi.org/10.18510/hssr.2020.8430
Babajide, A., Lawal, A., Asaleye, A., Okafor, T. & Osuma, G., (2020). Financial stability and entrepreneurship development in sub-Sahara Africa: Implications for sustainable development goals, Cogent Social Sciences, 6: 1798330. DOI: https://doi.org/10.1080/23311886.2020.1798330
Lawal, A. I., Nwanji, T. I., Adama, I.J & Otekunrin, A. O. (2017a). Examining the nigerian stock market efficiency: Empirical evidence from wavelet unit root test approach. Journal of Applied Economic Sciences, 12(6), 1680–1689.
Lawal, A. I., Somoye, R. O. & Babajide, A. A. (2017b). Are African stock market efficient? Evidence from wavelet unit root test for random walk. Economics Bulletin, 37(4), 2665-2679 http://www.accessecon.com/ Pubs/EB/2017/Volume37/EB-17-V37-I4-P239.pdf
Lawal, A. I.,Olayanju, A., Salisu, A. A., Asaleye, A. J., Dahunsi, O., Dada, O., Omoju, O. E., and Popoola, O. R. (2019a). Examining Rational Bubbles in Oil Prices: Evidence from Frequency Domain Estimates. International Journal of Energy Economics and Policy, 9(2), 166-173. https://doi.org/10.32479/ijeep.7463 DOI: https://doi.org/10.32479/ijeep.7463
Mogonta, K. & Pandowo, M. (2016). Analyzing the effects of return on assets, return on equity and earnongs per share on market share price: A study of LQ-45 mining companies listed on Indonesia stock exchange. Journal of Economic, Business and Accounting Research 4(2), 703-713.
Ndede, F. W. S., & Jagongo, A. O. (2014). Dividend Payout by Agricultural Firms in Kenya [ An Empirical Analysis of Firms Listed on the Nairobi Security Exchange], 5(11), 63–74. https://ir-library.ku.ac.ke/handle/123456789/12610
Pandey, M. K. (2019). The effect of internal and external factors on the stock price of pharmaceutical companies in emerging and emerged markets. European Journal of Business and Management, 11(36), 162 – 199. https://www.iiste.org/Journals/index.php/EJBM/article/view/50831/52524
Hunjra, A. I., Ijaz, M. S, Chani, M. I., Hassan, S. and Mustafa, U. (2014). Impact of Dividend Policy, Earning per Share, Return on Equity, Profit after Tax on Stock Prices. International Journal of Economics and Empirical Research, 2(3), 109-115.
Shi, W., Wang, G., Zhao, X., Feng, X. and Wu, J. (2018) Price determination in the electrolytic aluminum industry: the role of electricity prices. Resource Policy 59, 274-281 https://doi.org/10.1016/j.resourpol.2018.07.014 DOI: https://doi.org/10.1016/j.resourpol.2018.07.014
Saragih, J. L. (2018). The effect of return on assets (RoA), return on equity (RoE), and debt to equity ratio (DER) on stock returns in wholesale and retail trade companies listed in Indonesia stock exchange. International Journal of Science and Research Methodology, 8(3) 348-367.
Sharif, T., Purohit, H. & Pillai, R. (2015). Analysis of factors affecting share prices: The case of Bahrain stock exchange. International Journal of Economics & Finance 7(3), 207-216. https://doi.org/10.5539/ijef.v7n3p207 DOI: https://doi.org/10.5539/ijef.v7n3p207
Su, F. and Zhang, J. (2018). Global price discovery in Australian dollar market and its determinants. Pacific-Basin Finance Journal 48, 35 – 55. https://doi.org/10.1016/j.pacfin.2018.01.002 DOI: https://doi.org/10.1016/j.pacfin.2018.01.002
Utami, M.R & Darmawan, A. (2019). Effect of DER, ROA, ROE, EPS and MVA on stock prices in Sharia Indonesia stock index. Journal of Applied Accounting and Taxation 4(1), 15-22. DOI: https://doi.org/10.30871/jaat.v4i1.1195
Zainudin, R., Mahdzan,S. N. & Yet, C. H. (2018). Dividend policy and stock.
price volatility of industrial products firms in Malaysia. International Journal of Emerging Markets, 3(1), pp.203-217. https://doi.org/10.1108/IJoEM-09-2016-0250 DOI: https://doi.org/10.1108/IJoEM-09-2016-0250
Zhang, Y-J. And Sun, Y-F (2016). The dynamic volatility spill over between European carbon trading market and fossil energy market. Journal of Cleaner Production 112, 2654 – 2663. https://doi.org/10.1016/j.jclepro.2015.09.118 DOI: https://doi.org/10.1016/j.jclepro.2015.09.118
Funding data
-
Landmark University Centre for Research and Development
Grant numbers 05CBS04/2020