Abstract

Financial ratio disclosure has become an essential component of corporate financial reporting, providing investors, analysts, creditors, and other stakeholders with meaningful indicators for evaluating a company's financial health, operational efficiency, profitability, liquidity, solvency, and market performance. Financial ratios, derived from published financial statements, simplify complex accounting information into measurable indicators that facilitate investment analysis and informed decision-making. In modern capital markets, timely and transparent disclosure of financial ratios enhances market efficiency, reduces information asymmetry, strengthens investor confidence, and promotes effective allocation of financial resources. In Nigeria, companies listed on the Nigerian Exchange Group (NGX) are required to prepare and disclose financial statements in accordance with the International Financial Reporting Standards (IFRS), the Companies and Allied Matters Act (CAMA), the Financial Reporting Council of Nigeria (FRCN) Act, and the Securities and Exchange Commission (SEC) regulations. These disclosure requirements encourage transparency and provide investors with relevant information for assessing corporate performance and making investment decisions. Financial ratios such as profitability, liquidity, leverage, efficiency, and market value ratios are widely utilized by institutional and individual investors in evaluating investment opportunities and estimating future returns. While comprehensive financial ratio disclosure is expected to improve investment confidence and capital market efficiency, inadequate disclosure, inconsistent reporting, and poor financial transparency may increase uncertainty, reduce market confidence, and discourage investment. Although previous studies have examined financial reporting quality and investment behaviour, empirical evidence regarding the influence of financial ratio disclosure on investment decisions in the Nigerian capital market remains limited and inconclusive. Against this background, this study investigates the influence of financial ratio disclosure on investment decisions in the Nigerian capital market. The study is anchored on Signaling Theory, Efficient Market Hypothesis (EMH), and Stakeholder Theory. Signaling Theory posits that firms communicate their financial strength and future growth prospects through transparent disclosure of financial information, thereby influencing investors' perceptions and investment decisions. The Efficient Market Hypothesis argues that security prices rapidly reflect publicly available information, including disclosed financial ratios, making financial disclosure a key determinant of investment behaviour and market efficiency. Stakeholder Theory emphasizes that organizations have a responsibility to provide accurate, reliable, and transparent financial information that enables investors and other stakeholders to make informed economic decisions. Collectively, these theoretical perspectives provide a comprehensive framework for explaining the relationship between financial ratio disclosure and investment decisions in the Nigerian capital market. The study adopts a quantitative research design using a structured questionnaire administered to institutional investors, stockbrokers, portfolio managers, financial analysts, investment advisers, fund managers, individual investors, and other active participants in the Nigerian capital market. A stratified random sampling technique will be employed to ensure adequate representation of respondents across major investment institutions, brokerage firms, asset management companies, pension fund administrators, insurance companies, and retail investor groups. Financial ratio disclosure will be measured using the disclosure of profitability ratios, liquidity ratios, leverage ratios, efficiency ratios, market value ratios, timeliness of disclosure, and disclosure transparency, while investment decisions will be measured using investment intention, investment confidence, portfolio allocation decisions, perceived investment risk, investment satisfaction, and willingness to invest. Primary data collected from respondents will be analyzed using descriptive statistics to summarize respondents' demographic characteristics and perceptions regarding financial ratio disclosure and investment decisions. Structural Equation Modeling (SEM) will be employed to examine the influence of financial ratio disclosure on investment decisions. The measurement model will be evaluated using Cronbach's Alpha, Composite Reliability (CR), Average Variance Extracted (AVE), and Confirmatory Factor Analysis (CFA) to establish the reliability and validity of the research instrument. Additional diagnostic tests, including multicollinearity assessment, common method bias analysis, and model fit indices such as the Comparative Fit Index (CFI), Tucker-Lewis Index (TLI), Root Mean Square Error of Approximation (RMSEA), and Standardized Root Mean Square Residual (SRMR), will be conducted to ensure the adequacy, consistency, reliability, and robustness of the structural model. The study anticipates that financial ratio disclosure will have a significant positive influence on investment decisions in the Nigerian capital market. Comprehensive and transparent disclosure of financial ratios is expected to improve investors' understanding of corporate financial performance, reduce information asymmetry, strengthen confidence in financial reports, and facilitate informed investment decisions. Effective financial ratio disclosure is also anticipated to improve market transparency, enhance investment efficiency, promote rational portfolio allocation, and attract both domestic and foreign investors. Furthermore, companies providing timely and high-quality financial ratio disclosures are expected to experience improved investor confidence, greater market liquidity, enhanced corporate reputation, increased access to capital, and stronger market valuation. Conversely, inadequate disclosure, delayed reporting, inconsistent financial information, and weak corporate transparency may increase investment uncertainty, reduce investor confidence, discourage market participation, and adversely affect investment decisions. Consequently, effective financial ratio disclosure is expected to contribute significantly to improving investment decisions, market efficiency, and sustainable development of the Nigerian capital market. This study is expected to make significant theoretical and empirical contributions to the literature on accounting, finance, investment analysis, and capital market research by providing comprehensive evidence on the relationship between financial ratio disclosure and investment decisions in the Nigerian capital market. Unlike previous studies that broadly examined financial reporting quality or accounting disclosure, this research specifically evaluates the role of financial ratio disclosure in influencing investment decisions using primary data and Structural Equation Modeling (SEM). The findings will provide valuable insights for the Nigerian Exchange Group (NGX), the Securities and Exchange Commission (SEC), the Financial Reporting Council of Nigeria (FRCN), listed companies, investors, financial analysts, stockbrokers, professional accounting bodies, policymakers, and academic researchers regarding the strategic importance of financial ratio disclosure in enhancing investor confidence and promoting capital market efficiency. The study will also provide evidence-based recommendations for strengthening corporate disclosure practices, improving financial reporting transparency, enhancing investor education, reinforcing regulatory compliance, promoting informed investment decisions, and fostering sustainable growth within the Nigerian capital market.

Keywords: Financial ratio disclosure, investment decisions, Nigerian capital market, financial reporting, investor confidence, accounting disclosure, Structural Equation Modeling (SEM), Nigerian Exchange Group (NGX), financial transparency, Nigeria.