THE EFFECT OF FINANCIAL RATIOS IN PREDICTING SHARE PRICE PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA FROM 2013 TO 2022

Abstract

Financial ratios are fundamental analytical tools that predict and measure entity financial health and
as a yardstick for assessing performance of Deposit Money Banks’s share price in the Nigeria stock
market. Stock Market analyst, fund managers and investors use financial ratios as essential instrument
in valuing and predicting future share price performance. This study seeks to examine the effect of
Earning per share (EPS) ratio, Price Earnings (PE) ratio, Earning Yield (EY) ratio, Dividend Yield
(DY) ratio and Return on Asset (ROA) ratio in predicting share price performance of DMBs listed in
Nigeria Exchange Group from 2913 to 2022. The study adopted Ex-post factor research design and
secondary data on the population of twelve listed DMB in the Nigeria Exchange Group as at 2022. Due
to small size of the population a census sampling technique was adopted and data were analyzed using
multiple linear regression approach. The analysis revealed that financial ratios significantly predict
and explained variation in share market price. In addition, financial ratios are ineffective in short term
decision and is a weak tool in performance measurement and share price prediction, due to
manipulative capability, lack of ideal comparative measure, is subjective, is sourced from outdated
data. The study recommended that financial ratios prediction be supported with Information
Technology tools and derived from current, true and fair financial Statement prepared in compliance
with International Financial Reporting Standard (IFRS)