FINANCIAL REPORTING DIMENSIONS, GOVERNMENT POLICIES AND FINANCIAL PERFORMANCE OF FIRMS LISTED IN NAIROBI SECURITIES EXCHANGE

Abstract

Financial reporting dimensions play a crucial role in providing users and regulatory agencies with insights into a company‟s financial health. However, there has been a declining trend in the return on assets (ROA) among listed firms. Despite the importance of accurate financial reporting for investor confidence and financial performance has been declining. Therefore, the main objective of study was to examine how financial reporting dimensions affect financial performance as moderated by government policies. The specific objectives were: to establish the effects of balance sheet reporting on financial performance of listed firms in Kenya at NSE; to assess the effect of income statement reporting on financial performance of listed firms in Kenya at NSE; to evaluate effect of cash flow statement reporting on financial performance of listed firms in Kenya at NSE; to determine the effect of statement of shareholder‟s Equity reporting on financial performance of listed firms in Kenya at NSE; and to investigate the moderating role of government policies on financial reporting dimensions and financial performance. The study anchored on the main theory of Accounting Conservatism as it supported by Value Relevance

Accounting and shareholders theory. Positivism research philosophy was adopted. Cross- sectional research design was used. The data was obtained from 13 listed sectors. A target

population of 57 firms was used as per NSE handbook of 2023. Stratified sampling technique was used to derive a sample of 49 listed firms. A Structured data collection sheet was employed to extract secondary data from the firm‟s financial statements for the period of 2018 to 2023 using panel data. Data was analyzed by use of descriptive statistics methods where output would be means, minimum, maximum, standard deviations, and percentages, while inferential statistics included correlation and panel regression analysis was used to draw inferences about the results. Hypothesis was tested using p-values (p<.05) from panel regression coefficient tables. The results were presented in form of tables. Correlation analysis indicated a weak negative relationship (r = -0.4023) between cash flow statement reporting and financial performance at a 95% confidence level or p values (p<0.05). The study concluded that changes in cash flow reporting tend to have an inverse effect on financial performance. There was a weak but positive relationship (r = 0.4165) between shareholder‟s equity statement reporting and financial performance at a 95% confidence level or at p values (p<0.05). The study recommended that financial reporting enhance transparency and accountability, reducing information asymmetry between management and shareholders. Balance sheet reporting dimensions and shareholders changes in equity reporting had a statistically significant effect on financial performance while income statement reporting and cashflow statement reporting a statistically insignificant effect on financial performance of listed firms. The study recommended that firms should focus on balance sheet reporting to boost investor confidence. Management should ensure efficient utilization of its assets to maximize its financial performance. The listed firms should ensure that there is effective implementation of government policies so as it to moderate financial reporting dimensions using income and cash flow statements on performance.