Firm Characteristics and Quality of Financial Reporting of Agricultural Firms Listed at the Nairobi Securities Exchange, Kenya
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Date
2025-01
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Kenyatta University
Abstract
Agriculture plays an important role in ending extreme poverty and feeding the projected 9.7 billion people by 2050. Further statistics show that over 70% of Kenya’s population is employed in agricultural sector. It is further revealed that agricultural sector account for about 27% of the nation’s GDP. Because of its implications for employment, export earnings, and food security, the performance of this sector is the foundation of the nation’s economic well-being. Good financial reporting is critical in ensuring transparency, fostering accountability, and bolstering investor confidence within the sector. Even with the acknowledged importance of financial reporting, gaps still exist in empirical research exploring how firm characteristics influence quality of financial reporting (FRQ) among quoted agricultural companies. This inquiry sought to examine the effect of firma characteristics on FRQ of listed agricultural firms. Specifically, the study was carried out to ascertain the impact of profitability, leverage, growth, and liquidity on FRQ among listed agricultural firms. The data was obtained for the period spanning from 2019 to 2023. The project was hinged on agency theory, positive accounting theory, and signaling theory. The research followed a correlational study design to explore the set objectives. The target population constituted 7 listed agricultural firms. The sample size was obtained through a census of all the listed agricultural firms. The study employed secondary data obtained from company’s websites and audited financial statements to achieve the primary goal. Diagnostic tests such as linearity, normality, and homoscedasticity tests were done to determine the validity and reliability of the data. The data obtained was analyzed through both inferential statistics such as ANOVA regression and Pearson’s Correlation and descriptive statistics like standard deviation and mean. SPSS version 29 was used as the main tool of analysis. The study was guided by the ethical principles of privacy, confidentiality, integrity, and independence of the research. The results showed that firm growth, leverage, and profitability had weak negative effect on the FRQ. It was further revealed that liquidity positively and significantly influence FRQ. The study concluded that an increase in profitability, debt financing, and firm growth lowered FRQ while an increase in firm liquidity led to a higher FRQ. The study recommended that firms maintain strong liquidity positions because it is associated with better FRQ. Future research should determine the mediating role of corporate governance mechanisms on the relationship between firm characteristics and FRQ, and include other firms not listed at the NSE like private companies.
Description
A Research Project Submitted to School of Business, Economics and Tourism in Partial Fulfilment of the Requirement for Award of Degree of Masters in Business Administration (Accounting) of Kenyatta University, January, 2025
Supervisor:
1.Francis Gitagia