Fundamental factors and stock price volatility of listed banking firms in Nigeria

Abstract

The study examined the impact of fundamental factors on the stock prices of Nigeria's listed banking sector companies. Using panel data analysis, the effects of five fundamental variables on share prices of listed banks in Nigeria, which include return on assets (ROA), return on equity (ROE), earnings per share (EPS), dividend per share (DPS), and growth in net interest income (NII), as well as two control variables (firm size and firm age), were analyzed. Data were gathered from eleven sampled banks' annual reports from 2006 to 2020. Based on the Hausman test, fixed effect model was estimated and regression results indicated that the coefficients of ROE, EPS, DPS, NII and SIZE were positive but ROE and SIZE were statistically not significant. On the other hand, the coefficients of ROA and AGE were negative but statistically significant. The study recommended that; regulators should pay attention to earnings management by banks to monitor any attempts to smooth dividend; existing shareholders should pay more attention on high dividend paying banks for capital gain; and boards of directors of banks should strive to maintain adequate dividend payment, specifically by reducing the proportion of yearly retain earnings while minimizing cost.