The study's main objective was to examine the relationship between board diversity and earnings quality of non-financial firms listed on the Nairobi Securities Exchange (NSE) and how ownership concentration acted as a moderator. As of December 31, 2020, the NSE had 39 non-financial firms listed. The secondary data was collected over a 13-year period (2008-2020). The study used a quantitative research design and positivist research philosophy. The data were analyzed using panel regression. It was put through diagnostic and specification tests. The study found that board diversity had a significant impact on non-financial firms' earnings quality, both with and without ownership concentration as a moderator. The moderator model outperformed the one without (ownership concentration). The study concludes that board diversity has a significant impact on non-financial firms traded on the NSE. The findings suggest that non-financial companies listed on the NSE should carefully examine the criteria used to define board diversity and its characteristics. Thus, boards will be more accountable to shareholders, reducing earnings manipulation. Keywords: Board diversity, Earnings quality, Non-financial firms.
Purpose: The main purpose of the study was to analyze the relationship between board size and the earnings quality of non-financial firms listed on the Nairobi Stock Exchange (NSE) and also determine the effect of board size on earnings quality with ownership concentration as moderating variable. Methods: A positivist research philosophy was adopted and a quantitative research design was employed. The target population of the study was the 39 non-financial companies listed in NSE as of 31st December 2020. Secondary data was the main source of information for the study. The data was s panel type of data based on a period of 13 years (2008-2020). Positivism research philosophy and quantitative research design were employed in the study. Data were analyzed based on the panel regression model. Both diagnostic and specification test for the model applied was conducted. Results: The study established that board size had a significant effect on the earnings quality of non-financial firms listed at the NSE in the presence and absence of ownership concentration as moderator. Further, the results showed that the model with a moderator was superior to that without a moderator. Implications: The non-financial firms listed in NSE should closely examine the criteria used in determining the size of the board and its composition to ensure that boards are more independent and diversified. This will reduce incidences of earnings manipulations and ensure that the directors are accountable to the shareholders which in turn will lead to improvement of investor confidence.
IntroductionGlobal corporate governance regulations place a strong emphasis on the independence of auditors and directors, with the expectation that this will improve protection for both shareholders and stakeholders (Ianniello, 2015). As an important part of corporate governance, the Audit Committee provides the board of directors with professional evaluations of top management actions, risk management, financial reporting quality, and internal audit. It also serves as a resource for board members. It communicates with external auditors on the board's behalf and ensures that the recommendations of external auditors are implemented. An internal control or internal audit department is a critical component of ensuring good corporate governance and is therefore required. Therefore, the audit committee is required in order to ensure that the bank's assets are protected and that good corporate governance principles are adhered to (Njanike et al., 2011).Audit committee independence has been a major global concern in corporate governance over the last decade (Tricker & Tricker, 2015), as it is the oversight mechanism that determines firms' financial performance as measured by reported earnings quality. According to Hermawan and Adinda (2012), the existence of an Audit Committee had no discernible effect on the quality of earnings. Klein (2002) discovered a negative correlation between audit committee independence and the quality of accruals, as well as an increase in erroneous accruals when the committee size was reduced. Anderson et al. (2004) discovered a correlation between audit committee independence and lower debt financing costs, but not between yield spreads and committee size.According to Adewumi et al. ( 2019), internal auditing is critical for ensuring sound corporate governance. Their study found that having useful internal audit functions as part of an internal control management system increases efficiency and effectiveness, reduces information asymmetry during decision making, and ensures internal financial
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