Accounting Disclosures and Firm Value of Commercial Banks Listed on the Nairobi Security Exchange, Kenya
Loading...
Date
2019
Authors
Chebon, Nicolas Kipsang
Warui, Fredrick
Journal Title
Journal ISSN
Volume Title
Publisher
International Journal Corner
Abstract
The financial health, sustainability and soundness of banks is a basic requirement for the depositors and equally important
for the shareholders, employees, and the entire economy. Thus, regulators across the globe have made an effort to measure
the financial wellbeing of banks by requiring them to disclose information about their operations. External factors
including being stripped of licenses, deregulation, lack of information amongst the customers, homogeneity of the business,
connectivity amongst the banking sector affect the performance of the bank which is reflected in their value. The collapse
of three commercial banks over a short period of time focused the attention of regulator and policymakers on the
disclosures by commercial banks in Kenya. Investors have also demanded greater transparency particularly for firms listed
at the Nairobi Securities Exchange. Further, a review of the trends in the share prices of listed commercial banks and the
information released indicates contradictions. An analysis shows that in some instances the share prices recorded show
increases despite the company releasing negative information and/or vice-versa. This leads to the question of what is the
relationship between disclosures on the firm value. The aim of the study was to determine the effect of accounting
disclosure on the firm value of listed commercial banks in Kenya. The study was guided by four research objectives namely:
to determine the effect of accounting practices disclosures, risk information disclosures, hedging strategies disclosures, and
reserves disclosures on the firm value of listed commercial banks in Kenya. The value of the firm was measured using the
market based measurement Tobin’s Q. The study was anchored on the Decision Usefulness Theory, Signalling Theory, and
Positive Accounting Theory. The disclosure items were measured using an accounting disclosure index, which is a checklist
of different disclosure indicators included in the annual reports of the listed commercial banks. The accounting disclosure
consisted of 25 items. The study adopted a causal research design. The study sampled all the listed commercial banks. The
study established that accounting policies, risks, hedging strategies, and reserves had a positive and statically significant
effect on firm value of commercial banks listed on the Nairobi Securities Exchange.
Description
A research article published in The International Journal of Business & Management
Keywords
Hedging Strategies, Accounting Disclosures, Firm Value, Reserves, Risks, Tobin’s Q
Citation
The International Journal of Business & Management. Vol 7 Iss 11