Effect of Quality of Financial Reporting on Performance of Manufacturing Firms Listed in the Nairobi Securities Exchange in Kenya




Audit Committee Effectiveness, Financial Performance, Manufacturing Firms, Nairobi Securities Exchange, Kenya


Even though manufacturing firms in Kenya are of great value, there are inadequacies in financial performance. Kenyan Manufacturing firms are reporting losses, as evidenced by audit committee shortcomings and low earnings. The objective of the study was to determine the effect of audit committee effectiveness on the financial performance of manufacturing firms in Kenya. This study adopted a mixed research design with a target population of eight manufacturing firms listed at the Nairobi Securities Exchange (NSE), all of which were involved through the census. Secondary data was collected from financial statements between the 2015 and 2021 financial years. Data analysis involved descriptive and inferential statistics. Descriptive based on frequencies, percentages, and the mean. Pearson correlation results showed a weak but significant correlation between financial performance and audit committee effectiveness (ACE) (r=0.0355, p<0.05 and r=0.0858, p<0.05 for LN ACE 1& LN ACE2 respectively). This shows that the quality of financial reporting had significant effects on the performance of manufacturing firms listed in the Nairobi Securities Exchange in Kenya. Based on these findings, the study recommended that the number of auditors, as well as the stock owned by manufacturing firms, be enhanced for better income.


Albedal, F., Hamdan, A., & Zureigat, Q. (2020). Audit Committee Characteristics and Earnings Quality: Evidence from Bahrain Bourse. In book: Corporate Governance Models and Applications in Developing Economies (pp.23-49). 10.4018/978-1-5225-9607-3.ch002.


Business Daily Africa. (2015, January 4). Deloitte put on the spot over role in Mumias Sugar accounting scandal. Business Daily Africa. https://www.businessdailyafrica.com/bd/corporate/companies/deloitte-put-on-the-spot-over-role-in-mumias-sugar-accounting-scandal--2076550

Creswell, J. (2003). Research Design: Qualitative, Quantitative and Mixed Method Analysis (4ed). SAGE Publications.

Deloitte put on the spot over role in Mumias Sugar accounting scandal - Business Daily (businessdailyafrica.com)

Elghuweel, H., Ntim, K., Opong, B., & Avison, A. (2017). The effect of corporate governance attributes on accounting entrepreneurship intentions among university students in Gulf of Eden. The Journal of Asian Finance. Evidence in Brazilian family and non-family companies. Enfoque: ReflexaoContabil, 35(1), 35-53.

Government of Kenya (2021) Kenya Development Response to Displacement Impacts Project (IDA Credit No.6021-KE - State Department for Development of Arid and Semi-Arid Lands (ASALS)

Hamdan, A. (2020). The effect of accounting reservation in improving the quality of financial Journal of Business, 4(9), 1-22. http://ssrn.com/abstract-1673516

Kariithi, J., & Kihara, A. (2017). Factors Affecting Performance of Manufacturing Firms in Kenya: A Case of Pharmaceutical Firms in Nairobi County. Strategic Journal of business management (2)1-29.

Kariuki, S. N., Namusonge, G. S., & Orwa, G. O. (2015). Effect of financial reporting on Financial Performance of Kenya listed manufacturing firms. International Research Journal of Finance and Economics, 35(1), 28-41.

Kenya Association of Manufacturers. (2021) Manufacturing priority agenda. MPA 2021. Kenya Association of Manufacturers.

Khalifa, A., & Shafii, B. G. (2013). Accounting conservatism and the profitability of listed companies. International Research Journal of Finance and Economics, 38(1), 28-47.

Klai, N., & Omri, A. (2011). Corporate Governance and Financial Reporting Quality: The Case of the Tunisian Firms. International Business Research, 4(1), 158-166. 10.5539/ibr. v4n1p158.


Kothari, C. R. (2014). Research methodology: Methods and techniques (2nd Edition): New Delhi, India: New Age International (P) Limited.

Kungu, R. (2015). Accounting conservatism and national culture. International Journal of Accounting, Banking &Management, (1) no3.6 47-80.

Limperg, T. (1932). Inspired confidence theory. Theoretical study for auditing practices. New York: McGraw-Hill

Madawaki, A., & Amran, A. (2013). Audit Committees: How They Affect Financial Reporting in Nigerian Companies Journal of Modern. Accounting and Auditing, 9(8), 1070-1080

Mugenda, M., & Mugenda. A. (2018). Research methods quantitative and qualitative approaches. Nairobi, Kenya: African Center for Technology Studies.

Mugwe, P. (2018). Effectiveness of Audit Committee on the Performance of Commercial Banks in Kenya (Doctoral dissertation, United States International University-Africa).

Nairobi Stock Exchange (2020) Annual Reports and Financial Statements 2020. Bridging the gap in the African market.

Nasiri, H., & Ramakrishnan, G. (2020) Effectiveness of Audit Committee on the Performance of Manufacturing firms in Ethiopia. Journal of Emerging Trends in Economies and Management Science (JETEMIS) (6) 1-34.

NSE. (2021). Integrated Report and Financial Statements 2021. Nairobi Securities Exchange. https://www.nse.co.ke/wp-content/uploads/NSE-2021-Integrated-Report-and-Financial-Statements.pdf

Ojeka, S.A., Mukoro, D.O., & Kanu, C. (2015). Financial reporting disclosure enhance firm financial performance in Nigeria Manufacturing companies. Mediterranean Journal of Social sciences, 6(6), 332. http://dx.doi.org/10.5901/mjss.2015.v6n6p332


Okpala, B. (2015). Academy of Accounting and Financial Studies Journal, 23(3), 1-18 corporate insiders. Journal of Business Finance & Accounting, 47(3-4), 333-364. https://doi.org/10.1111/jbfa.12438

Tuuisandi, Y., & Pusitasari, E. (2015) Financial Reporting Before and After IFRS Adoption using NICE Qualities Characterizes Measurement. Proscenia Social and Behavioral Science


Wasan, D. P., & Mulchandan, B. P. (2019). Effects of quick ratio return on assets and exchange rates on stock returns. Am. J. Humanities Soc. Sci. Res, (4), 323-329.



How to Cite

Malimu, O. V., Ondiek, A., & Musiega, M. (2023). Effect of Quality of Financial Reporting on Performance of Manufacturing Firms Listed in the Nairobi Securities Exchange in Kenya. African Journal of Empirical Research, 4(2), 1–6. https://doi.org/10.51867/ajernet.4.2.9