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

Abstract

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.