Quality of Financial Reporting and Financial Performance of Manufacturing Firms Listed in the Nairobi Securities Exchange in Kenya.

Abstract

Even though manufacturing firms in Kenya are of great value, there exists inadequacies in their Financial Performance. Kenyan Manufacturing firms are reporting losses as evidenced through accounting conservatism, audit committee shortcomings and low earnings. The purpose of this research was to evaluate how the veracity of financial reports would affect the NSE-traded companies' bottom lines. The key goals of this research were to examine the relationships between business profitability, accounting conservatism, audit committee size, and board size among Kenyan manufacturing enterprises. Eight companies trading on the NSE were the primary focus of this study's mixed-methods analysis. Financial statements were mined for secondary financial data covering the years 2015 through to 2021 by the use of document analysis tool. Descriptive statistics were used to analyze the data. These statistics include averages, medians, and percentages. Insights were gained from these examinations. Pearson correlation was used as the inferential statistical method. Financial results were found to be significantly positively correlated with accounting conservatism. The size of the board of directors and the quality of earnings were found to attenuate this association (p0.0001 and p0.035, respectively). The results of this investigation provide strong evidence against four key null hypotheses. The results guided the subsequent recommendations, which highlighted the need to hire more auditors and provide incentives for them to increase their investments and, by extension, their incomes. Utilizing inventory statements, debtor statements, and creditor statements can help businesses increase their profits. Monitoring cash inflows and outflows may be useful for manufacturing businesses in maintaining financial stability. The findings are significant because they show how important it is to assess the qualities and skills of board members to improve board effectiveness. The number of directors on a company's board has been shown to correlate positively with the efficiency of its management, according to studies.