ABSTRACT

 This research work empirically investigates the effect of information content of financial statement on shareholders' investment decisions. This study is vital as it portrays the extent which information content of financial statement influences shareholders in making investment decisions. The study is significant to shareholders as to the importance of proper investigation of the financial statement of the companies of their interest so as to make efficient and effective investment decisions. To determine the relationship between information content of financial statement and shareholders' investments, some contents of financial statement were used as variables in this work. These include profitability — proxied by Profit after Tax to Total Assets, Dividend Per Share, Earnings Per Share, Leverage — proxied by Total Liabilities to Total Assets, and Liquidity — proxied by Current Assets to Current Liabilities; while shareholders' investments was represented by Logarithm of Change in Number of Shares — Change in Number of Shares was proxied by Number of Shares in the current year less Number of Shares in the previous year. Regression model was employed to establish the relationship as secondary data sourced from Annual Financial Reports of selected companies were used for the analysis. The result indicates a positive relationship between information content of financial statement and shareholders' investment decisions; however, profitability and leverage appear to pose greater influence on shareholders' investment decisions than other contents of financial statement, having tested significant at 5% significant level. From the findings generally, the following conclusions were drawn: Shareholders do not see financial statement as a major determinant factor for their investment decisions. Other factors such as stability of dividend and market price of shares are also considered so as to make effective and efficient investment decisions. Companies whose goal is to maximize shareholders' wealth through payment of dividend attract larger number of shareholders. Companies who want more equity than debt will not see maximization of earnings per share as a good objective, as that will mean nonpayment of dividend which will rather scare investors from investing in such companies. it is therefore recommended that shareholders should make proper investigation about the financial state of the company of their interest before making investment decisions; and should seek the advice of financial analysts so as to be properly guided in their investment decisions. Companies should avoid misstating their financial statements as such actions have negatively affected the confidence of the shareholders on financial statements. Companies should maintain the shareholders' wealth maximization objective through regular payment of dividend so as to ensure that shareholders receive the benefits of their investment as at when due.