USEFULNESS OF CORPORATE FINANCIAL STATEMENTS FOR INVESTMENT DECISIONS

ABSTRACT

Following the increasing corporate failures globally, some recent empirical works have suggested that the financial statement might have lost its relevance to investors significantly over the past few decades. The main objective of this study therefore, is to examine the usefulness of corporate financial statements for investment decisions. The study employed survey research design by which data were generated through the administration of questionnaire to seven hundred (700) investors of selected banks, financial analysts and academicians. The descriptive statistics was used for the data analysis and the hypotheses were tested using one sample t-test statistic. The statistical package for social sciences (SPSS) software version 20.0 was employed in the analysis of data and test of hypotheses. The results reveal that investors do not use information contained in published financial statements in making investment decisions (tcal (6.46) < tcritical (6.52). p  0.05). It also showed that investors have enough knowledge of the accounting factors relevant to investment decision (tcal (17.08) > tcritical (8.52). p  0.05). The results of the analysis also indicated that investors rely significantly on financial analysts’ advice in making investment decisions (tcal 8.96) > tcritical (8.61). p  0.05) and as such investors are not satisfied with the quality of information contained in the published financial statements (tcal 6.0 < tcritical 6.52; p  0.05). It was recommended that adequate care and due diligence should be maintained in preparing financial statements to avoid faulty investment decisions which could lead to loss of funds. It was also recommended that enlightenment programmes for the enhancement of investors knowledge and understanding of financial statements be put in place by appropriate agencies.