VOLUNTARY DISCLOSURES AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS LISTED ON NAIROBI SECURITIES EXCHANGE IN KENYA
VOLUNTARY DISCLOSURES AND FINANCIAL PERFORMANCE OF MANUFACTURING FIRMS LISTED ON NAIROBI SECURITIES EXCHANGE IN KENYA
George Ndirangu Maina - Master of Science in Finance, Department of Commerce and Economic Studies, School of Business and Entrepreneurship, Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya
Dr. Gichana James Ongwae, PhD - Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya
Dr. Hesbon Otinga, CPA. PhD - Jomo Kenyatta University of Agriculture and Technology (JKUAT), Kenya
ABSTRACT
Insufficient disclosure of the company's operations has exposed shareholders to the threat of manipulated profits, as evidenced by the increasing incidents of scandals, frauds, suspensions, and even delistings. Disclosures are crucial in tackling problems related to information asymmetry and agency costs within firms. Voluntary disclosures surpass mandatory ones, presenting a more favorable outlook of the company and its prospects to investors. The main objective was to find out the relationship between voluntary disclosures and financial performance of listed manufacturing firms in Nairobi Securities Exchange. Specifically the study aimed at establishing the relationship of financial information disclosure and financial performance of manufacturing firms listed on Nairobi Securities Exchange, evaluate the relationship between forward-looking information disclosure and financial performance of manufacturing firms listed on Nairobi Securities Exchange, to assess the relationship between value-added statement disclosure and financial performance of manufacturing firms listed on Nairobi Securities Exchange and to assess the relationship between non-financial information disclosure and financial performance of manufacturing firms listed on Nairobi Securities Exchange. The study relied on secondary data available for the findings. The observations used were from the year 2018 to 2022 and the population comprised of 8 companies listed in NSE under manufacturing and allied. Descriptive and inferential statistics was conducted to analyze the data collected. Correlation and regressions analysis was conducted as the analytical tools to enable interpretation of the relationship of the study selected variables. The analysis was conducted using STATA 15. The results indicated that financial information disclosure (β=0.405377, P=0.006), Forward-looking information disclosure (β=0.334582, P=0.029) and Value-added statement disclosure (β=0.11397, P=0.014) investment decision has positive and significant relationship while non-financial information disclosure (β=0.163917, P=0.073) had insignificant positive relationship on financial performance of listed Manufacturing firms at NSE. Voluntary disclosure significantly accounted for 40.32% variance in financial performance of listed manufacturing firms at NSE. The study concluded that voluntary disclosure has positive relationship on financial performance of listed manufacturing firms at NSE. The study therefore recommended listed manufacturing should adhere to provisions stipulated by International financial reporting standards and ensure that all relevant financial information is appropriately disclosed to stakeholders. In addition, there is need to increase the level of voluntary disclosure in regard to financial information so as to foster positive firm performance. These can be achieved by examining the various indicators of financial liquidly and making the information more clearly to the common investor with no financial knowledge. The study also recommended that listed firms should demonstrate how non-financial information is linked to the financial aspect of their firms. Therefore, to the policy makers, the study recommends that they should develop and implement policies to improve non-financial information disclosure.
