EFFECT OF CORPORATE GOVERNANCE CHARACTERISTICS ON QUALITY OF FINANCIAL DICLOSURE BY COMMERCIAL AND SERVICE COMPANIES IN KENYA

Abstract

Notwithstanding a stringent legal framework, corporate governance in Kenya persists in deteriorating. Numerous corporations have been defined by scandals. Directors have engaged in unlawful or disingenuous conduct against their shareholders. This is concerning, particularly given that several of the listed companies were deregistered. The collapse of Uchumi Supermarkets followed purported manipulation of financial records amounting to Ksh 1.04 billion. The main objective of the study was to establish the effect of corporate governance characteristics on quality of financial disclosure by Commercial and Service Companies in Kenya. The study had the following specific objectives to determine the effect of board accountability on quality of financial disclosure by Commercial and Service Companies in Kenya, to examine the effect of shareholder rights on quality of financial disclosure by Commercial and Service Companies in Kenya, to assess the effect of corporate behaviour on quality of financial disclosure by Commercial and Service Companies in Kenya and to determine the moderating effect of firm size on the relationship between corporate governance characteristics and quality of financial disclosure by Commercial and Service Companies in Kenya.. The study adopted descriptive and correlational research design. The target population was commercial and service companies departments in charge of financial statements making thus accounting and finance giving 145 stakeholders of which sample size was 106 utilized. The stratified and basic random sampling techniques were employed. Closed-ended questions were employed for primary data collection. A pilot research was executed at Nairobi Business Ventures Ltd. The researcher employed Cronbach’s Alpha to assess reliability at a threshold of 0.7. Establish validation through the application of multiple factor analyses, employing variable rotation, and excluding variables with a factor loading below 0.4. Descriptive statistics, including frequencies, percentages, measures of central tendency and dispersion, as well as inferential statistics such as regression and Pearson’s correlation analysis, were calculated using SPSS version 23. Data was presented as tables and figures. There was a positive significant influence of board accountability, shareholder rights and corporate behaviour on financial disclosure among Commercial and Service Companies in Kenya. Firm moderates the relationship between Commercial and Service Companies’ financial disclosure and corporate governance. The study concludes that board accountability is a viable measure in ensuring quality of financial disclosure. Shareholder rights significantly influences financial disclosure of Commercial and Service Companies by ensuring Commercial and Service Companies adhere to owner’s rights. Corporate behaviour is a significant predictor of financial disclosure of Commercial and Service Companies, since it helps in building a well accountable organization. Firm size as a new initiative to boost Commercial and Service Companies growth path as far as corporate governance and financial disclosure is concerned. The study recommendations that Commercial and Service Companies should formulate feasible board accountability policies that guides board on financial disclosure. Commercial and Service Companies should adhere to shareholder rights requirements as stipulated by law to avoid non disclosure tendencies in the organizations. Commercial and Service Companies should enact feasible corporate behavior that guides and caution against unethical practices that may compromise financial disclosure. Commercial and Service Companies should embrace viable firm size initiatives as possible such as market share goals and profitability.