Financial Statement Transparency and Stock Price Volatility of Consumer Goods Companies in Nigeria

Abstract

This study looked at the relationship between stock price volatility and financial statement openness in Nigerian consumer products companies, specifically focusing on the effect of Big Four audits. Using panel data from eight purposefully chosen consumer goods companies listed on the Nigerian Exchange Group (NGX) between 2018 and 2023, an ex-post facto design was used. The standard deviation of monthly share prices was employed to measure stock market volatility, and the existence of a Big Four audit firm served as a stand-in for financial statement transparency in the study. As a control variable, firm size was calculated using the natural logarithm of total assets. The association between audit quality and stock price volatility was investigated using multiple regression analysis. Significantly reduced stock price volatility was observed in companies audited by Big Four firms (coefficient = -1.0945, p = 0.0000), suggesting that higher audit quality increases investor confidence and promotes market stability. Furthermore, it was discovered that price volatility was considerably and negatively impacted by business size (coefficient = -0.3132, p = 0.0346), indicating that larger companies often have more stable stock prices. In order to increase investor trust and foster capital market efficiency, the study suggests that businesses prioritize accurate financial reporting and collaborate with respectable audit firms. It also believes that both firm size and high-quality audits are critical in reducing stock price swings.

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