EFFECTS OF TREASURY SINGLE ACCOUNT IMPLEMENTATION ANNOUNCEMENT ON SHARE PRICES OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

EFFECTS OF TREASURY SINGLE ACCOUNT IMPLEMENTATION ANNOUNCEMENT ON SHARE PRICES OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

Deposit Money Banks are the key players in the inter-mediation of funds from the surplus economic units to the deficit units for investment and development purposes. Thus, the significance of Deposit Money Banks (DMBs) in the Nigerian financial sector cannot be over emphasized. This underscores the need to have a strong and vibrant banking sector, which can assure the sustainability of the financial sector. The market price of share is one of the most vital performance indicators which influences investment decision of investors not only in banks but all kinds of listed organizations. This informs the need to understand its behaviour in response to events and certain announcements.  The extant literature is replete with studies (such as:Maku & Atanda 2010, Osisanwo  Atanda, 2012, Malhotra & Tandon, 2013, Wiredu, Suleman & Adjartey, 2013, Uddin, Rahman & Hossain, 2013, Almumani, 2014 among others.) which show that the market value of firms   is   linked to many factors, such as earning per share, dividend per share, dividend pay-out ratio and major policy pronouncements such as the treasury single account among others that could affect the fortunes of listed firms.  The share price of any firm is often of significant importance to the firm and shareholders because it is what signals the worth of the firm in the eyes of various stockholders. Additionally, appreciation in share price overtime ultimately determines the gains/loss or returns on investment which shareholders enjoy (Almumani, 2014). This implies that one of the cardinal goals of the firm is to maximise shareholders‟ wealth, therefore returns on the price of stock remains of constant significant interest to the firms, shareholders and even regulators. In this regard, Mbutor (2010) posited that the stock market tends to signal the level of confidence in the economy in general and the financial system in particular. It mirrors the strength of the productive sector and anticipations about the stability of the financial system. Persistent increase in the stock indices would encourage banks to increase advances, both for direct investment in the stock market and other productive sectors of the economy. Higher returns on the stock market motivate foreign investors and direct the inflow of foreign portfolio investment to that economy. This on the other hand, will further enhance the capital base of banks and induces additional increases in their intermediation activities which will result to efficient and effective management of the nation‟s economy (Mbutor ,2010).

Efficient and effective management of a nation‟s economy as well as federal government banking structure through an arrangement such as the Treasury Single Account (TSA) are vital preconditions for proper control of Government‟s receipts and payments. This is more so, in most emerging markets and developing nations that lack unified systems for handling government receipts and payments (Akande, 2015).  This implies that the absence of unified structure might deprive the Government vis-à-vis the apex monetary authority of a single and consolidated structure/system for effective and efficient control of government revenues and disbursements in various Ministries, Departments and Agencies (MDAs). 

In this regard, it was argued that absence of effective cash control system such as the Treasury Single Account (TSA) by a federal government may lead to institutional deficiencies /challenges with its associated cost in several dimensions. Firstly, in most instances, bank accounts with unused cash balances fail to gain market-related compensation. Also, avoidable borrowing costs are incur by the government being uninformed of the unused resources so as to raise funds to cater for the professed cash deficiency. Thirdly, the government unused cash balances may also be utilized by the bank to extend credit since the cash are not idle in the banks. In fact, costs are also imposed on the apex bank by exhausting the extra liquidity via open market operations activities by the DMBs (Pattanayak &Fainboim, 2010).

On the contrary, Pattanayak andFainboim (2010) further noted that instituting a consolidated/unified system of government bank account through a Treasury Single Account (TSA) will resolve the aforementioned challenges. Thus, TSA establishment should be given topmost priority in any government financial control/management reform as it will assist in enhancing cash management and control. Existence of TSA will also ease superior fiscal and monetary synchronization in addition to improved reconciliation of fiscal banking data which will considerably decrease service cost of debt by the federal government (Pattanayak and Fainboim 2010). In relation to this, Igbekoyi and Agbaje (2017) noted that it is based on the above motives that the present global revolution in government accounting became vital. More so,the desire to benefit from the global best practices made Nigerian government introduced and implemented the Treasury Single Account (TSA) so as to help in the optimum management of her economy.

Previous studies such as Fama (1970, 1991), Malkiel (2005) and Yalcin (2010) have shown that the extent of responsiveness of stock market to immediately incorporate new information / policy announcement into stock prices determines its efficiency. Therefore, studies on response of stock prices to major events announcement such as the Treasury Single Account implementation can be linked to efficient market hypothesis. Consequently, in an efficient market, current stock prices fully reflect all available information such that there is no way to earn excess return by using this information, such as the Treasury Single Account announcement. Accordingly, Fama (1970) recognized three forms of efficiency in connection with stock market i.e. weak-form of efficiency is said to exist when current price fully incorporates information contained in the past history of prices only, semi-strong when the current price fully incorporates all publicly available information and strong-form when the current price fully incorporates allexisting information, both public and private (insider).

Thus, examining the reactions of deposit money banks‟ stock prices to Treasury Single Account announcement can be adjudged as a test of the semi-strong form efficiency of the stock market.

Similar to other relevant announcements such as mergers and acquisition, CEOs suspension, dividend, stock split, devaluation and regulatory / policy change among others; event study approach has also been used to study stock price reaction to the announcement of major policy change by the central government. For instance, Ricci (2015) investigated the impact of European Central Bank monetary policy announcements on the stock price of large European Banks using the event methodology. This methodology entails a technique of empirical financial research that permits a researcher to assess the financial impact (positive or negative) of a particular sudden event (announcement) (MacKinlay, 1997; Rao & Sreejith,

2014) on a company‟s share price. The assessment is usually for a definite event window-i.e. a time period around the day of announcement.

Format: MS Word

Chapters: 1 - 5, Preliminary Pages, Abstract, References.
Delivery: Email

No. of Pages: 115

NB: The Complete Thesis is well written and ready to use. 

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Masters Project Topics in Accounting and Finance

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