The Effect of Voluntary Disclosure on Stock Returns of Companies Listed at the Nairobi Securities Exchange
Abstract
Managers execute their steward role of managing the affairs of the organizations on
behalf of the shareholders. They are therefore required to report their conduct and
practices to them periodically. To protect the shareholders, financial and accounting
standards board regulators, auditors and governments conduct an oversight role and act as
watchdogs to guard against any misconduct by the managers. As such, there is specific
financial information that is statutorily required to be reported.
However, business organizations have over the years reported financial and non information
to the shareholders and the general public. Included in their reporting are
voluntary disclosures,some of which are not statutorily required to be reported. Notably,
every release of information by an organization has got some cost implication to the firm
and therefore the value addition of such voluntary disclosure ought to be evaluated.
This study sought to establish the effect of voluntary disclosures on stock returns of
companies listed in the Nairobi Securities Exchange. Using a content analysis of annual
reports of companies composing the NSE 20 Share Index, the study sought to establish
the effect of voluntary disclosures such as; business data,analysis of business data,
forward-looking information and information about management and
shareholders,individually and jointly on stock returns.
The findings revealed that there is no relationship between voluntary disclosures and
stock returns.Through SPSS analysis, the study obtained a coefficient of determination of
0.171 and a Pearson Product Moment coefficient of correlation of 0.029 (near to 0.00) for
the multiple linear regression model representing the relationship between voluntary
disclosures and stock returns of the companies. Hence, only 17.1% of the data points
would be mapped ona linear plot. The Pearson Product Moment (correlation coefficient)
obtained was 0.03 depicting no relationship between voluntary disclosures and stock
returns.The results of the study confirmed the findings established elsewhere by Zareian
and Hail in other markets.
Citation
Degree of Masters of Business AdministrationPublisher
University of Nairobi School of Business
Description
A research project report submitted in partial
fulfillment of the requirements for the award of
Master of business administration degree,
University of Nairobi