Dynamic Determinants of Share Price in Emerging Markets: Evidence from System GMM Estimation in Nigeria
DOI:
https://doi.org/10.35877/454RI.qems3959Keywords:
share Price, System GMM, Earnigs Per Share, Efficient Market Hypothesis, Signalling Theory, Agency TheoryAbstract
This study investigates the dynamic determinants of share price among listed firms in Nigeria’s Consumer Goods and Agriculture sectors using a decade-long panel dataset covering the period from 2012 to 2023. Anchored on the theoretical perspectives of the Efficient Market Hypothesis, Signalling Theory, and Agency Theory, the study evaluates how firm-specific indicators such as earnings per share (EPS), return on equity (ROE), current ratio, debt-to-equity ratio, and total asset turnover, as well as macroeconomic variables like exchange rate and GDP per capita, influence share price in an environment characterised by institutional inefficiencies and information asymmetry. The empirical analysis begins with a static panel regression using the Fixed Effects model to establish a baseline understanding. To improve robustness and account for econometric challenges such as endogeneity, serial correlation, and unobserved heterogeneity, the study adopts the two-step System Generalised Method of Moments (System GMM) as the main estimation technique. The dynamic model reveals strong persistence in share price, as lagged share price is significantly associated with current values. While EPS shows a positive and significant effect in the static model, the dynamic GMM results indicate a negative and significant relationship, suggesting that reported earnings may reflect investor scepticism or earnings manipulation, particularly in contexts with weak governance oversight. Other variables, including ROE, leverage, and macroeconomic indicators, remain statistically insignificant in the dynamic specification. Year effects are incorporated to control for time-specific macro shocks. This study contributes to frontier market finance literature by offering sector-specific insights and demonstrating the added value of dynamic modelling. It also cautions investors and policymakers against excessive reliance on earnings-based metrics without adequate consideration of the institutional environment.
References
References:
Adedokun, K. A., Obademi, O. E., & Shiro, A. (2023). Effect Of Dividend Policy on Share Price Movement Of Selected Quoted Companies In Nigeria. https://lares.unilag.edu.ng/index.php/LJBFEI/article/view/2501
Adeniyi, S. I. (2023, August 27). Financial Performance and Market Price Per Share Volatility: Nigeria Consumer Goods Manufacturing Firms Experience. https://journals.unizik.edu.ng/jocia/article/view/2522
Ajayi, J. A., Abolaji, D. A., & Akinbode, W. A. (2025). Evaluating the effect of dividend policy decisions on firms’ earnings in Nigeria. African Journal of Business and Development Studies, 1(2), 105. https://doi.org/10.70641/ajbds.v1i2.105
Akisik, O., Gal, G., & Mangaliso, M. P. (2020). IFRS, FDI, economic growth and human development: The experience of Anglophone and Francophone African countries. Emerging Markets Review, 45, 100725. https://doi.org/10.1016/j.ememar.2020.100725
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297. https://doi.org/10.2307/2297968
Arofatin, N., Bahrim, S. M. S., Mardiono, V. E. P., & Pandin, M. Y. R. (2023). The effect of earnings growth, financial ratios and dividends on stock prices in manufacturing companies listed on the lq45 index for the period 2020 – 2022. Brilliant International Journal of Management and Tourism, 4(1), 01-11. https://doi.org/10.55606/bijmt.v4i1.2444
Azizah, N., Ridjal, S., & Sohilauw, M. I. (2023). Total asset turnover and debt to equity ratio on pharmaceutical company stock prices: An exploration of the moderator roles of operating efficiency. International Journal of Health, Economics, and Social Sciences, 5(4), 555–563. https://doi.org/10.56338/ijhess.v5i4.4504
Baharuddin, Abdul Wahab, & Sultan, Z. (2023). The effect of current ratio and earning per share on stock prices in manufacturing companies in the agricultural sector. The Journal of Economics and Business, 3(2), 1-12. https://doi.org/10.33830/tjeb.v3i2.11
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/s0304-4076(98)00009-8
Bui, T. N., Nguyen, X. H., & Pham, K. T. (2023). The effect of capital structure on firm value: A study of companies listed on the Vietnamese stock market. International Journal of Financial Studies, 11(3), 100. https://doi.org/10.3390/ijfs11030100
Bunyaminu, A., Ayamga, W. N., Yakubu, I. N., Tuffour, J. K., Seidu, A. B., & Mahama, F. (2025). The linkage between capital structure and stock price volatility: the moderating role of board composition. African Journal of Economic and Management Studies. https://doi.org/10.1108/ajems-04-2024-0264
Chen, J., Tian, C., & Gou, X. (2023). An Empirical Study on the Correlation between Stock Prices and Financial Indexes Based on Regression Analysis—Take the Education Industry as an Example. Academic Journal of Business & Management, 5(10), 34–39. https://doi.org/10.25236/AJBM.2023.051006
Choiriyah, C., Fatimah, F., Agustina, S., & Ulfa, U. (2021). The effect of return on assets, return on equity, net profit margin, earning per share, and operating profit margin on stock prices of banking companies in Indonesia Stock Exchange. International Journal of Finance Research, 1(2), 103–123. https://doi.org/10.47747/ijfr.v1i2.280
Chucks, A. D., Felix, I. E., & Temile, S. O. (2021). Determinants of equity share price movement: Evidence from the Nigerian banking industry (2000 – 2014). International Journal of Financial Research, 12(1), 319. https://doi.org/10.5430/ijfr.v12n1p319
Ezeana, K. S., & Ezeagba, C. E. (2024). Asset management and profitability of listed commercial banks in Nigeria. Journal of Global Accounting, 10(3), 107–121. https://journals.unizik.edu.ng/joga
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383–417. https://doi.org/10.2307/2325486
Felandi, V. R., & Rochmatullah, M. R. (2024). What's Up With Stock Prices? An Empirical Study of Financial Performance and Company Scale Indexed in LQ45 During 2019–2022. International Journal of Economics Development Research, 5(2), 1616–1631.
Ferniawan, M. F., Kusumawati, A., & Madein, A. (2024). The influence of earnings per share (EPS), Price earnings Ratio (PER), price to book Value (PBV), and Debt Equity Ratio (DER) on the stock return. Deleted Journal, 114–130. https://doi.org/10.26487/akrual.v17i01.32073
Gharaibeh, A. T., Saleh, M. H., Jawabreh, O., & Ali, B. J. A. (2022). An empirical study of the relationship between earnings per share, net income and stock price. Applied Mathematics & Information Sciences, 16(5), 673–679. https://doi.org/10.18576/amis/160502
Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (5th ed.). McGraw-Hill/Irwin.
Ikwuo, A. K., Nwite, I. M., Nworie, G. O., & Nworie, F. N. (2025). Shareholder value diminution through long-term debts: Evidence from the Nigerian oil industry. Annals of Management and Organization Research, 6(3), 271–285. https://doi.org/10.35912/amor.v6i3.2628
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76(2), 323–329.
Karki, D. (2024). An Empirical Study of Commercial Banks in Nepal. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4850145
Muslim, A. B., Wulandari, D. S., & Rusyidi, R. a. S. (2024). Decoding Stock Price Movements: How Net Profit Margin and Debt-to-Equity Ratio Drive Value, with Earnings per Share as the Game-Changer. Asian Journal of Management Analytics, 3(4), 1233–1250. https://doi.org/10.55927/ajma.v3i4.12049
Ngozi, A. P., Segun, A. T., & Ifeanyi, O. C. (2025, February 24). Effect of dividend policy on market price of ordinary shares of quoted manufacturing firms in Nigeria. https://uonjournals.uonbi.ac.ke/ojs/index.php/adfj/article/view/2685
Odhiambo, J. D., Murori, C. K., & Aringo, C. E. (2024). Financial Leverage and Firm Performance: An Empirical Review and analysis. East African Finance Journal, 4(1), 25–35. https://doi.org/10.59413/eafj/v4.i1.2
Olumuyiwa-Ganiyu, Y., Adelopo, I., Rodionova, Y., & Luqman-Samuel, O. (2018). Capital structure in emerging markets: Evidence from Nigeria. The European Journal of Applied Economics, 15(2), 74–90. https://doi.org/10.5937/ejae15-17631
Okonkwo, C. J., Obiezekwem, C. J., & Ifechukwu-Jacobs, C. J. Influence of Dividend Policy and Earnings on Stock Prices: Evidence from Selected Nigerian Firms.
Redy, H. A., & Herawati, L. M. (2021). The effect of current ratio, total asset turnover, and earnings per share on stock prices in banking sub-sectors listed on the Indonesia Stock Exchange 2018–2019. Strategic Management Business Journal, 2(1), 30–34. https://journal.smbjupmi.com/index.php/smbj
Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86–136. https://doi.org/10.1177/1536867X0900900106
Ross, S. A. (1977). The determination of financial structure: The incentive-signalling approach. The Bell Journal of Economics, 8(1), 23–40. https://doi.org/10.2307/3003485
Saputra, A. I. (2021). Influence of Debt to Equity Ratio (DER) and Earning per Share (EPS) on Stock Price PT Nippon Indosari Corpindo Tbk. Indonesian Financial Review, 1(2), 95–113. https://www.researchgate.net/publication/359015793
Sinaga, A. H., Bukit, R. B., & Rujiman. (2023). The Effect of Financial Ratio and Institutional Ownership on Stock Price with Earnings Per Share as a Moderating Variable in Construction Sub-Sector Companies Listed on the IDX 2015–2019. International Journal of Research and Review, 10(3), 173–183
Sinebe, M. T., Jeroh, E., & Ebiaghan, F. O. (2025). Liquidity metrics as predictors of share price movements in Nigeria. *RIK International Journal of Business and Management (RIK-IJBM), 9*(1). https://www.researchgate.net/publication/391600226_Liquidity_Metrics_as_Predictors_of_Share_Price_Movements_in_Nigeria
Ulfiani, N., Simon, Z. Z., & Nasution, A. H. (2024). What factors affecting Indonesian mining companies’ stock price before and during the COVID-19 pandemic. Journal of Business Studies (JOBS), 5(1). https://doi.org/10.33476/jobs.v5i1.4172
Adedokun, K. A., Obademi, O. E., & Shiro, A. (2023). Effect Of Dividend Policy on Share Price Movement Of Selected Quoted Companies In Nigeria. https://lares.unilag.edu.ng/index.php/LJBFEI/article/view/2501
Adeniyi, S. I. (2023, August 27). Financial Performance and Market Price Per Share Volatility: Nigeria Consumer Goods Manufacturing Firms Experience. https://journals.unizik.edu.ng/jocia/article/view/2522
Ajayi, J. A., Abolaji, D. A., & Akinbode, W. A. (2025). Evaluating the effect of dividend policy decisions on firms’ earnings in Nigeria. African Journal of Business and Development Studies, 1(2), 105. https://doi.org/10.70641/ajbds.v1i2.105
Akisik, O., Gal, G., & Mangaliso, M. P. (2020). IFRS, FDI, economic growth and human development: The experience of Anglophone and Francophone African countries. Emerging Markets Review, 45, 100725. https://doi.org/10.1016/j.ememar.2020.100725
Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297. https://doi.org/10.2307/2297968
Arofatin, N., Bahrim, S. M. S., Mardiono, V. E. P., & Pandin, M. Y. R. (2023). The effect of earnings growth, financial ratios and dividends on stock prices in manufacturing companies listed on the lq45 index for the period 2020 – 2022. Brilliant International Journal of Management and Tourism, 4(1), 01-11. https://doi.org/10.55606/bijmt.v4i1.2444
Azizah, N., Ridjal, S., & Sohilauw, M. I. (2023). Total asset turnover and debt to equity ratio on pharmaceutical company stock prices: An exploration of the moderator roles of operating efficiency. International Journal of Health, Economics, and Social Sciences, 5(4), 555–563. https://doi.org/10.56338/ijhess.v5i4.4504
Baharuddin, Abdul Wahab, & Sultan, Z. (2023). The effect of current ratio and earning per share on stock prices in manufacturing companies in the agricultural sector. The Journal of Economics and Business, 3(2), 1-12. https://doi.org/10.33830/tjeb.v3i2.11
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143. https://doi.org/10.1016/s0304-4076(98)00009-8
Bui, T. N., Nguyen, X. H., & Pham, K. T. (2023). The effect of capital structure on firm value: A study of companies listed on the Vietnamese stock market. International Journal of Financial Studies, 11(3), 100. https://doi.org/10.3390/ijfs11030100
Bunyaminu, A., Ayamga, W. N., Yakubu, I. N., Tuffour, J. K., Seidu, A. B., & Mahama, F. (2025). The linkage between capital structure and stock price volatility: the moderating role of board composition. African Journal of Economic and Management Studies. https://doi.org/10.1108/ajems-04-2024-0264
Chen, J., Tian, C., & Gou, X. (2023). An Empirical Study on the Correlation between Stock Prices and Financial Indexes Based on Regression Analysis—Take the Education Industry as an Example. Academic Journal of Business & Management, 5(10), 34–39. https://doi.org/10.25236/AJBM.2023.051006
Choiriyah, C., Fatimah, F., Agustina, S., & Ulfa, U. (2021). The effect of return on assets, return on equity, net profit margin, earning per share, and operating profit margin on stock prices of banking companies in Indonesia Stock Exchange. International Journal of Finance Research, 1(2), 103–123. https://doi.org/10.47747/ijfr.v1i2.280
Chucks, A. D., Felix, I. E., & Temile, S. O. (2021). Determinants of equity share price movement: Evidence from the Nigerian banking industry (2000 – 2014). International Journal of Financial Research, 12(1), 319. https://doi.org/10.5430/ijfr.v12n1p319
Ezeana, K. S., & Ezeagba, C. E. (2024). Asset management and profitability of listed commercial banks in Nigeria. Journal of Global Accounting, 10(3), 107–121. https://journals.unizik.edu.ng/joga
Fama, E. F. (1970). Efficient capital markets: A review of theory and empirical work. The Journal of Finance, 25(2), 383–417. https://doi.org/10.2307/2325486
Felandi, V. R., & Rochmatullah, M. R. (2024). What's Up With Stock Prices? An Empirical Study of Financial Performance and Company Scale Indexed in LQ45 During 2019–2022. International Journal of Economics Development Research, 5(2), 1616–1631.
Ferniawan, M. F., Kusumawati, A., & Madein, A. (2024). The influence of earnings per share (EPS), Price earnings Ratio (PER), price to book Value (PBV), and Debt Equity Ratio (DER) on the stock return. Deleted Journal, 114–130. https://doi.org/10.26487/akrual.v17i01.32073
Gharaibeh, A. T., Saleh, M. H., Jawabreh, O., & Ali, B. J. A. (2022). An empirical study of the relationship between earnings per share, net income and stock price. Applied Mathematics & Information Sciences, 16(5), 673–679. https://doi.org/10.18576/amis/160502
Gujarati, D. N., & Porter, D. C. (2009). Basic econometrics (5th ed.). McGraw-Hill/Irwin.
Ikwuo, A. K., Nwite, I. M., Nworie, G. O., & Nworie, F. N. (2025). Shareholder value diminution through long-term debts: Evidence from the Nigerian oil industry. Annals of Management and Organization Research, 6(3), 271–285. https://doi.org/10.35912/amor.v6i3.2628
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76(2), 323–329.
Karki, D. (2024). An Empirical Study of Commercial Banks in Nepal. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4850145
Muslim, A. B., Wulandari, D. S., & Rusyidi, R. a. S. (2024). Decoding Stock Price Movements: How Net Profit Margin and Debt-to-Equity Ratio Drive Value, with Earnings per Share as the Game-Changer. Asian Journal of Management Analytics, 3(4), 1233–1250. https://doi.org/10.55927/ajma.v3i4.12049
Ngozi, A. P., Segun, A. T., & Ifeanyi, O. C. (2025, February 24). Effect of dividend policy on market price of ordinary shares of quoted manufacturing firms in Nigeria. https://uonjournals.uonbi.ac.ke/ojs/index.php/adfj/article/view/2685
Odhiambo, J. D., Murori, C. K., & Aringo, C. E. (2024). Financial Leverage and Firm Performance: An Empirical Review and analysis. East African Finance Journal, 4(1), 25–35. https://doi.org/10.59413/eafj/v4.i1.2
Olumuyiwa-Ganiyu, Y., Adelopo, I., Rodionova, Y., & Luqman-Samuel, O. (2018). Capital structure in emerging markets: Evidence from Nigeria. The European Journal of Applied Economics, 15(2), 74–90. https://doi.org/10.5937/ejae15-17631
Okonkwo, C. J., Obiezekwem, C. J., & Ifechukwu-Jacobs, C. J. Influence of Dividend Policy and Earnings on Stock Prices: Evidence from Selected Nigerian Firms.
Redy, H. A., & Herawati, L. M. (2021). The effect of current ratio, total asset turnover, and earnings per share on stock prices in banking sub-sectors listed on the Indonesia Stock Exchange 2018–2019. Strategic Management Business Journal, 2(1), 30–34. https://journal.smbjupmi.com/index.php/smbj
Roodman, D. (2009). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86–136. https://doi.org/10.1177/1536867X0900900106
Ross, S. A. (1977). The determination of financial structure: The incentive-signalling approach. The Bell Journal of Economics, 8(1), 23–40. https://doi.org/10.2307/3003485
Saputra, A. I. (2021). Influence of Debt to Equity Ratio (DER) and Earning per Share (EPS) on Stock Price PT Nippon Indosari Corpindo Tbk. Indonesian Financial Review, 1(2), 95–113. https://www.researchgate.net/publication/359015793
Sinaga, A. H., Bukit, R. B., & Rujiman. (2023). The Effect of Financial Ratio and Institutional Ownership on Stock Price with Earnings Per Share as a Moderating Variable in Construction Sub-Sector Companies Listed on the IDX 2015–2019. International Journal of Research and Review, 10(3), 173–183
Sinebe, M. T., Jeroh, E., & Ebiaghan, F. O. (2025). Liquidity metrics as predictors of share price movements in Nigeria. *RIK International Journal of Business and Management (RIK-IJBM), 9*(1). https://www.researchgate.net/publication/391600226_Liquidity_Metrics_as_Predictors_of_Share_Price_Movements_in_Nigeria
Ulfiani, N., Simon, Z. Z., & Nasution, A. H. (2024). What factors affecting Indonesian mining companies’ stock price before and during the COVID-19 pandemic. Journal of Business Studies (JOBS), 5(1). https://doi.org/10.33476/jobs.v5i1.4172
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Published
2025-02-28
How to Cite
Edokpa, S. I., & Akpadaka, O. S. (2025). Dynamic Determinants of Share Price in Emerging Markets: Evidence from System GMM Estimation in Nigeria. Quantitative Economics and Management Studies, 6(1), 108–119. https://doi.org/10.35877/454RI.qems3959
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