Effect of Financial Ratios on Stock Market Performance in Nigeria

Abstract

The broad objective of the study is to examine the effect of financial ratios on stock market performance among listed manufacturing firms in Nigeria. The specific objective was to investigate the effect of liquidity ratio, and activity ratio on stock return of listed manufacturing firms in Nigeria. The study used the ex-post facto research design. The population of the study comprised all 21 manufacturing firms which are listed under the consumer goods sector of the Nigerian Exchange Group. Data for the study were sourced from the published financial statements of the purposively sampled fifteen (15) firms from 2013 - 2022. Analyses of data were done using descriptive statistics and inferential analysis. Hypotheses were tested by means of ordinary least square regression technique at 5% significance level. The study found that liquidity ratio has a non-significant positive effect on stock return of listed manufacturing firms in Nigeria (p-value = 0.1322); while activity ratio has a non-significant negative effect on stock return of listed manufacturing firms in Nigeria. Hence, the study recommend that manufacturing firms in Nigeria should actively manage their short-term resources, focusing on efficient working capital practices to enhance liquidity, instill investor confidence, and potentially boost stock returns.