EFFECT OF CORPORATE DISCLOSURE ON FINANCIAL PERFORMANCE OF FIRMS LISTED ON NAIROBI SECURITIES EXCHANGE, KENYA

Abstract

Investors today are more cautious when making decisions on matters investment. They request to be equipped with information for them to be able to make informed decisions on where to put their money. This trait has been attributed to a decline in financial performance and the rising trend of corporate failures both locally and globally. The study was aimed at determining whether corporate disclosure had an effect on financial performance of companies listed on Nairobi Securities Exchange, Kenya. The specific objectives that were used in the research were: to establish the effect of social accounting disclosure, risk disclosure and financial disclosure on financial performance of firms listed on Nairobi Securities Exchange. The research was also aimed at determining the moderating effect of firm size on the relationship between corporate disclosure and financial performance of firms listed on Nairobi Securities Exchange. The researcher used three theories namely: Signalling theory, Agency theory and the stakeholder theory. The research adopted a longitudinal research design. The researcher targeted all firms listed on NSE. Purposive sampling was used in the research to select the 42 listed companies that had a complete set of data over a six year period (2013-2018).Secondary data was collected using a disclosure check index retrieved from annual financial statements of the listed firms. Diagnostic tests were carried out and correlation analysis used to show the strength of the relationship between the independent and dependent variables. Data was analysed using descriptive and inferential statistics with the aid of STATA software. Results of the study revealed that social accounting disclosure and risk disclosure had a negative insignificant effect on financial performance therefore the null hypothesis were accepted. Financial disclosure had a positive significant effect on financial performance of companies listed on NSE.The null hypothesis for the third objective was therefore rejected. The study recommended that listed companies should enhance the level of financial information disclosure so as to realise superior financial performance and also reduce agency costs. This study will be of great importance to stock market partakers who will be able to make fundamental analysis on the effect of corporate disclosure on financial performance of listed firms on NSE. .