Accruals Quality and Firm Value of Non-Financial Listed Firms in the Nairobi Securities Exchange

Authors

  • Shadrack K. Ronoh
    PhD Student, Department of Accounting & Finance, School of Business & Economics, Moi University
  • Prof. Josphat Cheboi Yegon
    Department of Accounting & Finance, School of Business & Economics, Moi University
  • Prof. Lucy Rono
    Department of Accounting & Finance, School of Business & Economics, Moi University

Abstract

Purpose: The primary objective of this study was to examine the effect of accruals quality on firm value among non-financial firms listed on the Nairobi Securities Exchange (NSE). The study was anchored on the Signaling Theory and Information Asymmetry Theory, which emphasize the importance of transparent and reliable financial reporting in influencing investor perception and firm valuation.


Methodology: The study adopted a positivist research philosophy and employed an explanatory longitudinal research design. The target population comprised 40 non-financial firms listed on the NSE, of which 33 met the inclusion criteria for the period 2015–2024. Using 330 firm-year observations, secondary data were obtained from audited financial statements and company reports. Data were analyzed using descriptive statistics and panel regression models in STATA software to determine the relationship between accruals quality and firm value.


Findings: The results indicated that accruals quality had a negative and statistically significant effect on firm value among non-financial firms (β = –2.408, p < 0.000). This finding suggests that lower-quality accruals reduce investor confidence and diminish firm value by signaling potential inefficiencies or opportunistic financial reporting.


Conclusion: The study concludes that poor accruals quality undermines firm value by eroding investor trust and distorting the credibility of financial information. Therefore, maintaining high-quality financial reporting and robust internal control systems is critical to preserving market confidence and firm performance.


Value: This study contributes to corporate finance and accounting literature by providing empirical evidence on the link between financial reporting quality and firm valuation in emerging markets. It recommends that regulatory bodies such as the Capital Markets Authority (CMA) and the Institute of Certified Public Accountants of Kenya (ICPAK) strengthen compliance monitoring and enforcement of accounting standards. Furthermore, corporate managers should adopt ethical accounting practices and enhance internal governance mechanisms to foster transparency, accountability, and long-term value creation.