Capital Appreciation and Share Investment Decision-Making in Nigeria’s Financial Institutions

Abstract

This study examined the effects of book reserve per share (BRPS) and capital appreciation per share (CAPS) as proxies for capital appreciation on the market-to-book asset (MBA) ratio as a proxy for share investment decision-making (SID). The study adopted an ex post facto research design. The population of the study was the 15 financial firms quoted on the Nigerian Exchange Group (NGX) which had published annual reports consistently within the period (2001-2022) covered by the study. This was also the study sample. Data were collected from the financial statements of the sampled financial firms listed on the NGX. The study adopted a linear functional model, which was estimated by both the techniques of ordinary least squares (OLS) and two-stage least squares (2SLS) after testing for the normality assumption and transforming the data to standard form. F-statistics, t-statistics and P-values were relied upon to test hypotheses at a 5% significance level. Results indicated that BRPS has a significant and positive effect on MBA, and CAPS had a significant positive effect on MBA. The study concluded that capital appreciation positively impacted SID. The investing public is motivated to invest in shares of financial institutions based on their expectations to make capital gains. It was recommended that investors in shares should not rely on capital appreciation to make share investment decisions without considering firms’ fundamental values.