Effect of integrated financial reporting on the value of firms listed at the Nairobi Securities Exchange

Abstract

This research project investigated the effect of integrated financial reporting on the value of firms listed at the Nairobi Securities Exchange (NSE). The specific research objectives were: to determine the effect of financial capital reporting, manufactured capital reporting, intellectual capital reporting, human capital reporting, social capital reporting and environmental capital reporting on firm value of companies listed at the NSE, and to establish the moderating impact of firm size on the association between integrated financial reporting and value of NSE listed firms and to establish the joint effect of integrated financial reporting capitals on value of companies listed at the NSE. The study was based on four theories; signaling effect theory, agency theory, stakeholder theory and institution theory. The study adopted descriptive research design. The research used both primary data and secondary data. The secondary data was gotten from Capital Market Authority (CMA) Library, individual firm’s annual financial reports and websites then captured in a data collection sheet. Data was obtained from a total of 62 firms listed at the NSE with data ranging from 1st January, 2016 to 31st December, 2020. To attain the research objectives and to test the hypothesis, regression analysis was utilized. The research instrument was imperilled to validity and reliability tests to guarantee that the instrument measures what it purports to measure and it can yield consistent results. Diagnostic tests were also conducted to guarantee that the regression analysis assumptions are not violated. Both simple linear and multiple linear regression model were utilized to test the effect of each independent variable on the dependent and the combined effect on the dependent variable respectively. The findings of this study may be important to inform on the usage and role of IFR, as well form policy that can be used by academics, investors and financial market regulators. The study further discovered that there was a positive and significant link between financial capital reporting and the value of firms listed at the NSE. The study further established that firm size had moderating effect on the link between integrated financial reporting and value of companies listed at the NSE. The study concludes that integrated financial reporting has positive relationship with value of firms listed at the NSE. The research thus recommended that the managements of firms listed at the NSE should strive to adopt the various integrated financial reporting in enhancing the value of their firms.