Mediating Effect of Inflation on the Relationship between Earnings and Share Prices of Listed Firms in Nigeria
Bilyaminu Hanga *
Department of Accountancy, Modibbo Adama University, Yola, Adamawa State, Nigeria.
Benedict Soje
Department of Accounting, Federal University Wukari, Taraba State, Nigeria.
Mohammed Abba
Department of Accountancy, Modibbo Adama University, Yola, Adamawa State, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
This study examines the effects of earnings on share price as well as the mediating effects of inflation on the relationship between earnings and share prices of listed companies in Nigeria using earnings per share as the independent variable, share prices as the dependent variable and inflation rate as the mediating variable. Data were collected from a sample size of 75 companies across all the sectors of the Nigerian Exchange Limited (NGX). Regression analysis and structural equation model (SEM) were used to analyze the data collected. The results of the findings indicates that EPS has a positive but insignificant effect on share prices of listed companies in the NGX while inflation shows a mediating effect on the relationship between EPS and share prices. Based on the findings, the study recommend that attention should be on EPS by investors hoping to grow share prices of their companies and that other macro-economic variable should also be considered in making investment decision on share prices.
Keywords: Earnings per share, share price, inflation