Effect of Audit Committee Characteristics and Earnings Management of Firms Listed in Nairobi Securities Exchange
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Abstract
Purpose: The primary objective of this study was to analyze the effect of Audit Committee Characteristics on earnings management and to investigate the moderating role of ownership structure in this context.
Material/methods: The study adopted an explanatory design, targeting the 60 firms listed on the Nairobi Securities Exchange. A census technique was utilized, capturing data from the 45 firms that have consistently operated on the Exchange from 2005 to 2012. The study relied on secondary data collected through content analysis and analyzed using descriptive and inferential statistics. Hypotheses were tested using a multiple regression model.
Findings: The findings indicated that audit committee independence and audit committee tenure had no significant effect on earnings management. However, the audit committee size was found to have a significant positive effect on earnings management.
Conclusion: The study concluded that specific characteristics of the audit committee, particularly its size, significantly influence earnings management among firms listed on the Nairobi Securities Exchange.
Value: The study underscores the need for improvements in corporate governance codes in Kenya, suggesting that such enhancements could help reduce earnings management and prevent potential collapses of listed companies. This adds value to ongoing discussions and policymaking in corporate governance and financial regulation.
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