INFLUENCE OF CORPORATE GOVERNANCE ON DISCLOSURE QUALITY OF FIRMS LISTED IN NAIROBI SECURITIES EXCHANGE
Purpose of the study: The general research objective of the study was to determine the influence of corporate governance on disclosure quality of companies listed in Nairobi Securities Exchange. The specific objectives were to establish the effect of board size on disclosure quality of firms listed in NSE;, to examine the effect of board composition on disclosure quality of firms listed in NSE, to find out the effect of board frequency meeting on disclosure quality of firms listed in NSE and to establish the effect of board independence on disclosure quality of firms listed in NSE.
Problem statement: Majority of the companies registered in Nairobi Securities exchange have not been not been giving a full disclosure of information. For example, Uchumi Supermarkets made fraudulent payments to their suppliers and suspicious procurements of goods and services that led to huge losses of 1.9b by KPMG assessment that were covered up by false financial records to indicate a loss of 501 million. These false disclosures have led to losses to investors and thus they have increasingly been demanding information about corporate sustainability performance but when firms do not reveal all the financial information due to fears of reputation and ranking, they put stakeholders and investors at risk. These practices include truthfulness and full revelation of material details and data by the boards that govern these companies.
Study methodology: The target population was the all the 63 firms listed in the Nairobi Securities Exchange. This study adopted a census approach and thus all the 62 listed firms was used as unit of analysis. Source of data was secondary and was obtained from the existing companies’ financial statements and reports for the period 2013-2017.
Results of the study: Eviews software was used for analysis where descriptive statistics such as frequencies and percentages and inferential statistics such as correlation and regression analysis were generated. Board size had a positive coefficient of (0.010495, 0.000). Board composition had a positive coefficient of (0.012730, 0.8331). Board frequency meetings had a negative coefficient of (-0.013015, 0.000). Lastly, board independence had a positive coefficient of (0.316121, 0.000).
Conclusion: The study concluded that the number of board members was crucial in determination of corporate disclosures at the Nairobi securities exchange. Expansion of the board individuals enhances the ability of the board in observing and controlling administration activities. The study also concluded that board composition with more female members was suitable for enhanced corporate disclosure. The study concluded that board frequency meeting was not a significant aspect on corporate disclosure quality. Lastly, the study concluded that board independence was vital in determining of disclosure quality.
Recommendations: The study recommended that the boards and management of companies at Nairobi Securities Exchange the board of directors should lay down their strategic goals of the company and ensure that the prerequisites necessary in order to reach their goals. The study further recommended that boards to ensure relevant diversity at management levels, including setting specific goals and accounting for its objectives and progress made in achieving the objectives in the management commentary on the company’s annual report and/or on the website of the company.
Keywords: Corporate Governance, Disclosure Quality Listed Firms & Nairobi Securities Exchange.
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