The Effect of Internal Controls on the Financial Performance of Firms Listed at the Nairobi Securities Exchange
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Date
2017Author
Ng'etich, William K
Type
ThesisLanguage
enMetadata
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Business entities generally belief that properly instituted systems of Internal Control improve the reporting process and give rise to reliable reports which enhances the accountability function of management of an organization. In these, listed firms have exhibited a lot pressure to enhance the effectiveness of internal controls. The purpose of this study was to establish the effect of internal control on the financial performance of firms listed on the Nairobi security exchange. This study adopted a descriptive research design. This study used secondary data obtained from Nairobi Securities Exchange statements the study adopted a regression analysis. Regression analysis was used to come up with the model expressing the relationship between the independent variables and the dependent variable (Financial Performance of Firms listed on the Nairobi Security Exchange). The findings revealed that control environment, risk assessment, control activities, information and communication, monitoring, leverage, liquidity and firm size were found to be satisfactory variables in explaining performance of firms listed under Nairobi Securities Exchange. This is supported by coefficient of determination also known as the R square of 59.9%. Results showed that control environment and firm performance are positively and significantly related, risk assessment and firm performance are positively and significantly related , control activities and firm performance are positively and significantly related , information and communication , monitoring, leverage , liquidity and firm size were also positively and significantly related to firm performance. This implies that a unit increase in any of the above variable will lead to a unit increase in firm performance. The study concluded that control environment, risk assessment, control activities, information and communication, monitoring, leverage, liquidity and firm size have positive relationship with firm performance. Based on the findings and conclusions of the study, the following recommendations were made; Internal control system was found to have a statistically positive effect on performance of firms listed under NSE hence there is need for the firms to improve on their internal control system by adopting a modern integrated financial reporting system. The system should be updated regularly so that it will be able to detect ever changing fraudsters‟ techniques based on the ever changing technological innovations. The study also found that there are some other determinants that affect financial performance of firms. Financial firms should also consider favorable level of liquidity, firm size and leverage since they were found to influence firm performance.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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