Firm Characteristics and Quality of Financial Reporting of Agricultural Firms Listed at the Nairobi Securities Exchange, Kenya
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Date
2024-09
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Abstract
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. 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 firm 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. The data
obtained was analyzed through both inferential statistics such as ANOVA regression and
Pearson’s Correlation and descriptive statistics. SPSS version 29 was used as the main tool of
analysis. 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
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Mmasi, D. K. Firm Characteristics and Quality of Financial Reporting of Agricultural Firms Listed at the Nairobi Securities Exchange, Kenya.