Abstract: This study sought to investigate the effect of financial accounting variables on stock liquidity of firms listed at the Rwanda Stock Exchange. The study used earnings per share, net book value per share, return on equity, and cash flow from operation per share as proxies for accounting information. The study was addressing the gap of whether the selected accounting variables have an effect on the stock liquidity and whether one can use them to predict the stock liquidity at the bourse. The main objective of this study was to establish the effect of financial accounting information disclosure on stock liquidity of firms listed at the Rwanda Stock Exchange. Specifically, the study established the effect of earnings per share, book value per share, return on equity and cash flow from operation per share on the equity share investment. The study adopted descriptive and explanatory research designs. Simple and multiple linear regression analysis methods, were employed to determine the relationship between the dependent variable and the explanatory variables. The population of this study comprised of all the eight listed firms at the Rwanda Stock Exchange from January 2012 to December 2016. The sample constituted all the firms that comprise the RSE 20 Share Index. Both primary and secondary data was used to carry out the study. The primary data was collected through questionnaires administered on the respondents. Secondary data was collected for all variables for a period of four years (2012 to 2016) published on the website of Rwanda Stock Exchange, Published annual financial reports of listed companies in Rwanda and the Rwanda Stock Market annual reports. Data analysis was carried out using SPSS Software Version 21. Correlation and regression methods was used to carry out the inferential analysis. Statistical t-test and F- test were used to test the significance of explanatory variables on dependent variable. The results of the study revealed that there is a significant relationship between accounting information and stock liquidity in companies listed on the Rwanda Stock Exchange. All accounting information disclosure variables considered in this study significantly influenced equity share investment. Earnings per share have the highest correlation coefficient with equity share investment, followed by net book value per share, return on equity and then cash flow from operation per share. The study recommends that all listed companies in Rwanda should prepare and disclose accounting information indices that are relevant for stock liquidity alongside with the mandatory financial statements to meet the needs of equity share investors. Furthermore, accounting regulatory bodies and government should impose strict compliance with accounting standard guidelines on listed companies in their preparation and presentation of financial statements. Sanctions should be imposed on the managers who failed to adhere to the accounting standard guidelines in the preparation and presentation of their company’s financial statements.
Keywords: return on equity information disclosure, stock liquidity, Rwanda Stock Exchange.
Title: EFFECT OF FINANCIAL ACCOUNTING INFORMATION DISCLOSURE ON STOCK LIQUIDITY OF FIRMS LISTED AT RWANDA STOCK EXCHANGE
Author: NDIKUMANA JOSEPH, Dr. PATRICK MULYUNGI
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
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