The Impact of Financial Statement on Investment Decision: An Empirical Study of Ecobank Nigeria PLC

Abstract

The importance of financial statement on investment to managers of business firms and investors of financial institutions have been undermined due to lack of proper understanding of their relationship. This study aims to assess the impact of financial statement on investment decision making in Ecobank Nigeria Plc. In order to achieve this aim, the study employed both descriptive survey research design which involve the collection of primary data and the ex-post facto research design which involved the use of secondary data in form of annual published financial statement of the bank. The primary data were sourced through the use of online questionnaire and were further analyzed using descriptive and inferential statistical method, while the secondary data were subjected to trend test using the Mann Kendall’s test, and regression analysis for model establishment. The study unraveled that all the selected profitability ratios had negative trend, while profit after tax had a very significant positive trend between 2002 and 2018; the regression model established was found to be weak in making future prediction of profit after tax based on ROE, ROA and cost to income ratio due to the low coefficient of determination and higher p-value of 0.167 than 0.05; while correlation analysis proved that all of the selected profitability ratios negatively affect the profit after tax of Ecobank, although none significantly. In addition, Chi-Square test lead to the conclusion that the component of the annually published financial statement of the bank do not significantly affect investment decision making (p-value = 0.305); and that the credibility of the financial statement has significant impact on investment of the Ecobank Nigeria Plc (p-value = 0.009). The study concludes that the components of the financial statement is less important than its credibility when making investment decision; while it was recommended that future studies should endeavor to employ machine learning model for establishing the non-linear relationships between investment and profitability ratios.