Audit Committee Attributes, Firm Characteristic and Financial Reporting Quality of the State-owned Commercial Enterprises in Kenya

Abstract

Purpose of Study: The purpose of the study was to establish the moderating effect of firm characteristics on the association between audit committee attributes and financial reporting quality of state-owned commercial enterprises in Kenya.

Methodology: The study applied secondary data extracted from annual reports and audited financial statements of state-owned commercial enterprises in Kenya for the period between 2008 and 2018 using data capture forms. Several statistics and diagnostic tests were conducted to test the hypotheses including panel data regression models. Baron and Kenny (1986) approach was adopted to test for moderating effect of firm characteristics on the association between audit committee attributes and financial reporting quality. 

Findings: The results reveal that firm characteristics had no significant moderating effect on relationship between audit committee attributes and financial reporting quality of state-owned commercial enterprises in Kenya. However, the results also indicated that firm liquidity had statistically and significantly influenced the relationship between audit committee independence and financial reporting quality.

Implications: The study focused on the state-owned commercial enterprises in Kenya and therefore, the results might not be representative for the all state-owned entities. Additional studies may be conducted incorporating all state-owned entities for a true reflection on the results. Further, the study also narrowed its data between 2008 and 2018 period. Future studies could be done for all state-owned entities including prior period before 2008.  

Keywords: Audit Committee Attributes, Firm Characteristics, Financial Reporting, State-owned Commercial Enterprises