Effect of Corporate Attributes on International Financial Reporting Standards Disclosure Level. Evidence from Kenya Listed Firms

Abstract

The increasing amount of focus on and the growing significance of the Nairobi Securities Exchange as an important avenue for trade has attracted foreign investments and increasingly encouraged local residents to invest in shares. Kenyan companies may engage in both mandatory and voluntary disclosure as a means to enhance the value of their stocks. However, little has been done to show various corporate attributes that might determine corporate International Financial Reporting Standards disclosure level. Therefore, the purpose of the study was to examine the effects of corporate attributes on International Financial Reporting Standards disclosure level by Kenyan firms listed on Nairobi Securities Exchange (NSE). The study specifically analyzed the effect of profitability, leverage, liquidity and company size on corporate International Financial Reporting Standards (IFRS) disclosure level. The study also examined whether profitability, leverage, liquidity and company size moderated by industry competitiveness effects on the level of International Financial Reporting Standards disclosure requirements. The study adopted explanatory research design in order to asses cause –effect relationship. A sample of 30 companies listed on the NSE was examined for a period of 5 years from 2007 to 2011. Secondary data was used in obtaining information from companies’ annual financial reports in the process of data collection. Descriptive statistics used in the study were means, standard deviations, skewness and kurtosis. Inferential statistics used was Pearson correlation, multiple regression and moderating multiple regression model. The findings showed that profitability, liquidity and company size had positive and significant effects on International Financial Reporting Standards disclosure level. However, leverage has no effect on IFRS disclosure level. Thus, the study concludes that profitability, liquidity and firm size affect IFRS disclosure level. The results provide empirical evidence to support the implementation of adequate mechanisms such as improving the profitability, liquidity and company’s size to ensure increase in IFRS. The study recommends that the accounting regulatory authority, the capital market authority, NSE and the government need to come up with standardized policies. Corporate policies and legal framework should guide and compel all firms to disclose IFRS as required by International Accounting Standards Board. These authorities should further ensure equal playing ground in industry competitiveness to ensure that the level of IFRS disclosure is not affected.

Keyword:Accounting Standards, Corporate Attributes Disclosure , International Accounting Standard , Competitiveness Company Size