The Effect of Financial Reporting Quality on Value of Firms Listed at the Nairobi Securities Exchange

Abstract

The study aimed to measure financial reporting quality index by firms listed at the NSE and to establish the kind of association that exists between value of the firm and financial reporting quality index. Value of the firm was the dependent variable for the study and financial reporting quality index, firm size, profitability and dividend policy were the predictor (independent) variables of the study. Descriptive research design was adopted as a research methodology. The study was census in nature that looked at all the listed firms at the NSE and therefore no sampling was done. Data that were used for analysis were obtained from annual reports of listed firms at the NSE; these data were obtained from respective websites of these firms. For every listed firm five observations were made i.e. the study used data for last five financial periods for all the companies (2014 to 2018) financial periods. Descriptive, correlation and regression analysis were carried out using Statistical Package for Social Sciences (SPSS). Study results revealed that the mean value for financial reporting quality index of firms listed at the NSE was 0.6792. This implies that on average financial reports produced by listed firms at the NSE conforms to qualitative characteristics of accounting information at the rate of 67.92%. The correlation results also conducted in the study revealed existence of a very strong positive association between value of the firm and financial reporting quality index; this was supported by a Pearson correlation coefficient of 0.948.