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INFLUENCE OF DIGITAL FINANCIAL REPORTING ON INVESTMENT DECISIONS IN NIGERIAN CAPITAL MARKETS

Abstract

The rapid advancement of digital technologies has significantly transformed corporate financial reporting practices and the dissemination of financial information in capital markets worldwide. In Nigeria, listed companies increasingly utilize digital financial reporting platforms, including corporate websites, integrated reporting systems, eXtensible Business Reporting Language (XBRL), online annual reports, and electronic disclosure portals provided by the Nigerian Exchange Group (NGX) and other regulatory agencies. Digital financial reporting has enhanced the accessibility, timeliness, comparability, and dissemination of financial information, thereby improving communication between companies and investors. As capital market participants increasingly rely on real-time financial information to make investment decisions, digital reporting has become an essential mechanism for promoting transparency, reducing information asymmetry, and strengthening investor confidence. However, despite the increasing adoption of digital financial reporting technologies in Nigeria, concerns remain regarding the quality, reliability, transparency, and effective utilization of digitally disclosed financial information. In addition, differences in investors' financial literacy may influence how digital financial reports are interpreted and incorporated into investment decisions. Against this background, this study investigates the influence of digital financial reporting on investment decisions in the Nigerian capital market while examining the mediating role of financial information transparency and the moderating role of investor financial literacy.The study is anchored on Signaling Theory, Information Asymmetry Theory, and the Technology Acceptance Model (TAM). Signaling Theory posits that organizations use transparent and timely financial disclosures to signal their financial strength, corporate governance quality, and future growth prospects to investors. Information Asymmetry Theory explains that high-quality financial reporting reduces the information gap between corporate managers and investors, thereby facilitating more efficient investment decisions. The Technology Acceptance Model further explains how investors' perceived usefulness and ease of accessing digital financial reporting platforms influence the utilization of financial information in decision-making. Guided by these theoretical perspectives, the study seeks to determine the direct influence of digital financial reporting on investment decisions, assess whether financial information transparency mediates this relationship, and examine whether investor financial literacy moderates the influence of digital financial reporting on investment decisions within the Nigerian capital market.A quantitative research design will be adopted using a structured questionnaire administered to individual investors, institutional investors, stockbrokers, portfolio managers, financial analysts, accountants, investment advisers, fund managers, and other capital market professionals actively participating in the Nigerian capital market. To complement the survey data, secondary information may be obtained from the annual reports and digital disclosure platforms of companies listed on the Nigerian Exchange Group (NGX), as well as regulatory publications issued by the Securities and Exchange Commission (SEC), the Financial Reporting Council of Nigeria (FRCN), and other relevant institutions. A stratified random sampling technique will be employed to ensure adequate representation of different categories of investors and market participants. Data analysis will involve descriptive statistics to summarize respondents' demographic characteristics and perceptions, while Structural Equation Modeling (SEM) will be employed to examine the direct, mediating, and moderating relationships among the study variables. The reliability and validity of the measurement model will be assessed using Cronbach's Alpha, Composite Reliability (CR), Average Variance Extracted (AVE), and Confirmatory Factor Analysis (CFA). Additional diagnostic tests will be conducted to evaluate model fitness and ensure the robustness of the empirical findings.The study anticipates that digital financial reporting will have a significant positive influence on investment decisions by improving the timeliness, accessibility, completeness, comparability, and reliability of financial information available to investors. The availability of digital reporting platforms is expected to reduce delays in financial information dissemination, facilitate rapid analysis of corporate performance, improve investment confidence, and support informed portfolio allocation decisions. Furthermore, financial information transparency is expected to mediate the relationship between digital financial reporting and investment decisions. Transparent financial information characterized by accuracy, completeness, consistency, relevance, and faithful representation is anticipated to strengthen investor confidence, reduce uncertainty, minimize information asymmetry, and improve the quality of investment analysis. Consequently, financial information transparency is expected to serve as the mechanism through which digital financial reporting enhances investment decision-making.Furthermore, investor financial literacy is expected to moderate the relationship between digital financial reporting and investment decisions. Investors with higher levels of financial knowledge, accounting literacy, digital competency, and analytical skills are expected to interpret digital financial reports more effectively, evaluate corporate performance more accurately, and make better-informed investment decisions. Financially literate investors are more likely to distinguish between relevant and irrelevant financial information, assess investment risks appropriately, and utilize digital reporting tools efficiently. Conversely, investors with lower levels of financial literacy may encounter difficulties in interpreting complex financial disclosures, resulting in suboptimal investment decisions despite increased access to digital financial reports. Therefore, investor financial literacy is expected to strengthen the positive relationship between digital financial reporting and investment decision-making by enhancing the effective utilization of disclosed financial information.This study is expected to make significant theoretical and empirical contributions to the literature on accounting, finance, capital markets, and information systems by integrating financial information transparency as a mediating variable and investor financial literacy as a moderating variable into the relationship between digital financial reporting and investment decisions within the Nigerian capital market. Unlike previous studies that primarily examined the direct effects of financial reporting on investor behavior, this research provides a more comprehensive framework by explaining the mechanism through which digital reporting influences investment decisions and identifying the investor characteristics that enhance its effectiveness. 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, policymakers, financial analysts, accounting professionals, and digital reporting platform providers regarding the importance of improving financial information transparency and promoting investor financial literacy to maximize the benefits of digital financial reporting. The study will also offer evidence-based recommendations for strengthening digital corporate reporting standards, enhancing investor education programmes, improving market transparency, and fostering greater efficiency, confidence, and sustainable development within the Nigerian capital market.

Keywords: Digital financial reporting, investment decisions, Nigerian capital market, financial information transparency, investor financial literacy, accounting information systems, digital disclosure, mediation, moderation, Structural Equation Modeling (SEM).