FINANCIAL PERFORMANCE AND SHARE PRICE VOLATILITY OF SELECTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study assessed the influence of financial performance on the share price volatility of selected Deposit Money Banks in Nigeria.  Specifically, the effect of return on equity, dividend per share and earnings per share on the share price volatility of selected Deposit Money Banks in Nigeria were investigated in this study. Ex post facto research design was adopted in this study. The population of the study is made up of twenty-four (24) deposit money banks on the Nigerian Exchange Group (NGX) while a sample of 13 DMBs was utilized using a purposive sampling technique. The study employed descriptive statistics, cross-sectional dependence test, second generation panel unit root test, variance inflation factor, Kao residual cointegration and dynamic ordinary least squares (DOLS) estimation method to analyse data collected (between 2013 and 2022) through EVIEWS 13 package. Also, the Wald Test was conducted to examine the combined significance effect of the explanatory variables on the explained variable.  The study observed that return on equity and dividend per share significantly contribute to the volatility in share prices of the selected DMBs in Nigeria. However, earnings per share was observed to have a negative and insignificant impact on share price volatility. The study concluded that financial performance indicators are the single most significant factor influencing decisions to buy shares as it has a significant effect on share price fluctuations. Therefore, the study recommends among others that market analysts and stock brokers   should include key financial performance indicators in their advice to investors/potential customers because financial performance has a statistically significant effect on share price volatility in the Nigerian banking sector.

Key words: Return on equity; earnings per share; dividend per share; market price per share; share price volatility & financial performance indicators.