African Development Finance Journal

An empirical Investigation of the Risk Return Relationship for Listed Manufacturing firms in Nigeria

Henry I Onwere — 2025-06-05

This study investigates the relationship between various dimensions of risk and stock returns among listed manufacturing firms in Nigeria from 2012 to 2023. Using a panel data regression framework, the study examines how systematic risk, total risk, and firm-specific financial indicators influence firm value, proxied by Tobin’s Q. The findings reveal that systematic risk has significantly negative impacts on stock returns, reflecting investor aversion to market-wide volatility. In contrast, total risk captured through firm-specific volatility shows a positive association with firm value, indicating speculative investor behavior or perceived growth opportunities in volatile firms. Additionally, leverage, liquidity, and exchange rate volatility negatively affects stock valuation, while firm size also exhibits an inverse relationship. Return on assets (ROA), however, was not a significant predictor of stock performance, suggesting weak investor confidence in accounting profitability. Based on these findings, the study recommends strategic risk management, improved financial reporting, and optimization of capital structure, and policy support for listed manufacturing firms.

Keywords: Systematic Risk, Tobin’s Q, Total Risk, Returns

Challenges and Mitigation Measures towards Revenue Collection in Singida Municipal Council a focus on transit Permits with Forest Receipts Success

James Daniel Chindengwike — 2025-06-05

The study's objective was to evaluate the challenges and mitigation measures towards revenue collection in Tanzanian local government authorities: a focus on transit permits with forest receipts success. The challenges which employed to the study are transparency and accountability, corruption and merged system. The study was employed the both quantitative and qualitative approach as design, interview and documentary analysis was employed. Thematic and comparative analysis was used to analyses the data from protagonists. The findings of the business study showed that corruption, accountability, and transparency can all affect Tanzanian local government officials' capacity to collect taxes, particularly when it comes to transit permits with forest receipts. The business study came to the conclusion that Singida Municipal Council must ensure that the factors that impact revenue such as a lack of qualified staff, inattentive management, dishonest revenue collectors, and a refusal to pay revenue are resolved because the Council's failure to implement various development projects had a negative impact on all service sectors. The report suggested that Singida Municipal Council create appropriate revenue collection plans that take into account all available revenue streams.

Keywords: Revenue Collection, Transit Permits, Forest Receipts

Effect of Board Characteristics on Readability of Financial Statements of Kenyan Listed Companies

James N Ndegwa — 2025-06-05

Readable information enables users of financial statements make good informed financial decisions. However, if firm financial performance is poor management who are responsible for financial statement preparation may obfuscate financial statements to hide the poor performance. This research set out to investigate whether board and firm characteristics are related readability of financial statements of Kenyan listed firms as measured by Flesch readability ease scores. The population and sample of 59 companies listed in the NSE over a 5 year period between years 2013 to 2018. Panel data regression model was employed and the findings indicated that female directors and board size have a significant and positive effect on the readability of financial statements while file size had a significant and negative effect on the readability of financial statements of Kenyan listed companies. Regulators should thus encourage firms to increase the number of women in boards and also increase the board sizes and reduce the size of financial statements to boost the readability of financial statements.

Keywords: Readability; Financial Statements; Obfuscation; Board; Firm Characteristics

Effect of Internal Control Environment and Internal Audit Function on Financial Performance of Insurance Companies in Kenya

Abel Manas GEKE — 2025-06-05

This study investigated the impact of the internal control environment and internal audit function on the financial performance of insurance companies in Kenya. A total of 58 insurance companies were selected, and the study adopted both correlational and descriptive research designs. Data analysis was conducted using multiple regression to examine the relationship between the variables. The findings revealed that a strong internal control environment, alongside an effective internal audit function, significantly contributes to improved financial performance in the insurance sector. The study concludes that robust internal control environment and internal audit function are essential for enhancing accountability, risk management, and operational efficiency. The study recommends that insurance companies establish dedicated government audit units. These units should work in close collaboration with internal audit departments to ensure seamless integration of government policies into internal control frameworks. This approach would strengthen regulatory compliance and support sustainable financial performance in the industry.

Keywords: Internal Control Environments, Internal Audit Function, Financial Performance, Companies, Internal Control Systems

Long term Impact of Information Communication Technology on Corridors Performance - A Case Study of Central Corridor

Flory Okandju Okonge — 2025-06-05

Transport corridors play a crucial role in facilitating regional trade and economic integration. The Central Corridor, connecting the Port of Dar es Salaam to several landlocked countries, has increasingly adopted Information and Communication Technology (ICT) solutions to enhance logistics efficiency, trade facilitation, and sustainability. This study examines the long-term impact of ICT on corridor performance using a mixed-methods approach. Qualitative analysis, conducted through NVivo, explores policy frameworks and stakeholder perspectives, while quantitative assessment, using Structural Equation Modeling (SEM), evaluates ICT’s effects on logistics efficiency, economic growth, and trade facilitation. Findings indicate that ICT adoption significantly improves corridor performance by reducing transit delays, enhancing cargo tracking, and streamlining customs clearance. However, challenges such as regulatory misalignment, infrastructure disparities, and cybersecurity risks hinder full ICT integration. The study highlights the need for continuous investment in digital infrastructure, policy harmonization, and stakeholder collaboration to maximize ICT’s long-term benefits. These insights contribute to the broader discourse on digital transformation in transport corridors and provide policy recommendations for sustainable corridor management.

Keywords: Transport corridors, ICT adoption, logistics efficiency, trade facilitation, digital infrastructure, economic growth, regulatory alignment, cybersecurity, structural equation modeling (SEM)

The Effect of Board Characteristics on the Fiancial Sustainability of Commercial State Corporations in Kenya

Robert O. Opanyi — 2025-06-05

Boards of directors serve as a critical link between shareholders and management, guiding strategy, oversight, and long-term financial health. Effective boards mitigate agency conflicts, enhance decision-making, and foster accountability. This study examines the impact of board characteristics and firm size on the financial sustainability of commercial state corporations, addressing gaps in corporate governance research. Using a quantitative, cross-sectional approach, 32 out of 46 commercial state corporations were analyzed. Results show a negative but non-significant relationship between board characteristics and financial sustainability, contrasting with prior studies that suggest effective boards enhance performance. Firm size had a positive but non-significant association with financial sustainability. In contrast, the interaction between board characteristics and firm size was marginally significant and negative, indicating potential inefficiencies in larger organizations. The findings reveal the complexity of financial sustainability in state corporations, suggesting that board characteristics and firm size alone are insufficient to explain outcomes. Further research is needed to explore additional factors and contextual gradations influencing financial sustainability in state-owned enterprises.

Keywords: Board Characteristics, Firm Size, Financial Sustainability, State Corporations

The Influence of Ostrich effect on Portfolio Returns among Individual Investors at Nairobi Securities Exchange

Korir Billy Kipng’eno — 2025-06-05

The purpose of this research was to analyze the effect of the ostrich effect on portfolio returns for Kenyan retail investors trading on the Nairobi Securities Exchange. The research used a descriptive correlational survey approach. The intended audience comprised of all the 1,680,901 individual local investors at the NSE as at the end of the year 2022 (CMA, 2022). To choose the sample for the investigation, basic random sampling was used. Individual local investors at the NSE as of December 31, 2022, are the unit of analysis. A sample size of 400 respondents was considered. The research findings depicted that respondents exhibited ostrich effect to a moderate extent. This was evidenced through investors avoiding bad news, inattention to new information, biased interpretation of information and forgetting and ignoring information presented. The study concluded that ostrich effect significantly affect portfolio returns. However, a small percentage of variations in portfolio returns was caused by ostrich effect as evidenced by the coefficient of determination. The study recommends that individual investors to refrain from succumbing to the ostrich effect and, in order to form informed judgments, to prioritize fundamental analysis of companies. The research also suggests that individual investors should avoid the biases created by the ostrich effect and instead look for knowledge on how to improve their investments by holding effective portfolios. Individual investors should avoid falling into the trap of underestimating their capacity to do investing research and make improvements to the assets in their portfolios.

Keywords: Ostrich effect, Portfolio returns, Efficient market hypothesis, Investor bias

An Assessment and Evaluation of Underwriting Factors that Affect Profitability of Crop Insurance: A case Study of the Zimbabwean Insurance Market

Mbakisi Dube — 2025-06-13

Abstract

This study evaluates the underwriting factors influencing the profitability of crop insurance in Zimbabwe, a sector facing significant viability challenges. Crop insurance worldwide is vulnerable to climate hazards such as hailstorms, strong winds, dry spells, and floods, which are becoming more frequent and severe due to climate change. Zimbabwe has experienced devastating effects from events like Cyclone Idai, leading to substantial claims that threaten the financial stability of insurers. The study's objectives are threefold: to identify and evaluate underwriting factors affecting profitability, to ascertain the relationship between these factors and business profitability, and to propose strategies to enhance the profitability of crop insurers. The research employed a mixed-methods approach, integrating qualitative in-depth interviews with managers of agriculture underwriting departments and quantitative surveys administered to senior-level employees in both claims and underwriting departments. Key factors identified include product pricing, underwriting capacity, and loss assessments. Findings reveal that loss assessments is the most influential factor. Accurate product pricing, underpinned by international models, and enhanced underwriting capacity, supported by reinsurance and government subsidies, are critical for improving profitability. Regression analysis further quantifies these relationships, indicating that improvements in product pricing and underwriting capacity significantly enhance profitability, whereas inaccuracies in loss assessments detract from it. The study concludes that crop insurance in Zimbabwe is largely unprofitable, with most crops and insurance products showing loss ratios exceeding 100%. To improve financial outcomes, the study recommends adopting accurate pricing models, building underwriting capacity, and implementing technological advancements in loss assessments.

Keywords: Crop insurance, Underwriting factors, Profitability, Climate hazards, Product pricing, underwriting capacity, Loss assessment

Tax Audit: Does it influence Voluntary Tax Compliance?

Erick Lusekelo Mwambuli — 2025-06-13

Abstract

This study examined the effect of tax audits specifically field audits, desk audits, registration audits, and back duty audits, influence tax compliance. A sample of 293 Tanzanian Tax Revenue Authority (TRA) officials were selected, and primary data was gathered through administered questionnaires. The research employed a cross-sectional design, utilizing both descriptive and inferential statistics. The impact of tax audits on tax compliance was analyzed using a multiple linear regression model. The results revealed that field and registration audits positively affected tax compliance, while desk and back duty audits had no significant impact. To enhance the effectiveness of field audits and registration audit on tax compliance, TRA supervisors should prioritize efficient planning, training, and establishing performance metrics for audits to enhance tax compliance. Tax officers should adopt a collaborative approach, educating taxpayers, maintaining thorough documentation, and encouraging open communication to improve voluntary compliance. Managers should integrate data systems, invest in digital platforms, and promote collaboration between audit teams to streamline processes and identify non-compliance trends. Periodic evaluations of audit results should help to refine strategies and ensure audits contribute effectively to tax compliance.

Keywords: Tax Audit, Tax Compliance, Field Tax Audit, Desk Tax Audit, Registration Tax Audit and Back Duty Tax Audit