The Relationship Between Reporting Quality and Financial Performance of Companies Listed at Nairobi Securities Exchange

Abstract

The quality of financial reporting is assessed in terms of the underlying fundamental qualitative characteristics which include relevance and faithful representation and the enhancing qualitative characteristics which are understandability, comparability, verifiability and timeliness as defined in ‘An improved Conceptual Framework for Financial Reporting’ of the FASB and the IASB (2008). The provision of high-quality financial reporting information concerning economic entities, primarily financial in nature, useful for economic decision making is the primary objective of financial reporting. Compliance with financial reporting quality leads to improved financial performance in terms of liquidity ratios, solvency ratios, liquidity ratios as well as efficiency ratios. This will enable capital providers and other investors in making investment, credit and other important decisions enhancing overall market efficiency.