The Relationship Between Financial Reporting Quality and Investment Decision Making of Firms Listed at the Nairobi Securities Exchange
Abstract
The main objective of the study was to establish the effect of financial reporting quality on
investment decisions of firms listed at NSE. While earnings management, conservative
accounting and accrual quality were the independent variable, firm size was the control
variable and investment decision was the dependent variable. The study was guided by
agency theory, stakeholder theory, and the signaling effect theory. The study adopted
correlational design with quantitative approach targeting 64 listed firms at the Nairobi
Securities Exchanged (NSE). Census was used and thus all the listed firms were included in
the study. The findings were that earnings management (p<0.05), conservative accounting
(p<0.05), accruals quality (p<0.05) and firm size (p<0.05) were all significant. The study
concludes that financial reporting quality significantly influences investment decision. The
study recommends that finance managers of the listed firms in Kenya should try to minimize
incidences and practices of earning quality management so as to support informed decision
making among investors. The board of directors being the oversight body on behalf of
investors should establish strong internal control systems among listed firms that would
minimize earnings management thus allowing investors and shareholders to make rationale
and informed investment decisions.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
The following license files are associated with this item: