Earnings surprise and share price of firms in Nigeria

AbstractThis study examines earnings surprise and share price of firms in Nigeria. It sought to evaluate the impact of earnings surprise in predicting share price of firms. The paper employed the Ohlson valuation model and variants of the model to ascertain the impact of earnings surprise on share price. The sample consisted of 76 listed firms over the period 2010–2020. The study reveals that earnings surprise has a negative insignificant impact on share price. The study further reveals that with the interaction of earnings surprise with the bottom line metrics of book value per share and earnings per share, earnings surprise also has a negative insignificant impact on share price of firms, respectively. The paper provides fact that earnings surprise interacts with book value per share and earnings per share in determining share price. This paper also presents evidence to the fact that investors are not just concerned with the magnitude of book value per share and earnings per share but are also concerned with the quality of the earnings in terms of its surprise. This paper further presents evidence to the fact that investors do not consider magnitude and surprise of earnings in isolation. Rather, the decision is influenced by the fusion of the magnitude and the surprise of the metric.