Effect of Quality of Financial Information on Investment Decision Attributes Of Devolved Government Units in Coastal Region in Kenya

Abstract

The purpose of government devolution is to enhance public service delivery and accountability in tax payer funds expenditure. The constitution of Kenya through articles 175 (b), 203 (1) (i), and 174 (b) sets the manner in which county governments can raise revenues to execute their mandates including raising funds from internal sources. One of the avenues for raising funds from internal sources is undertaking investments. The county governments undertake investments through mostly developmental budgets in their finance budgets. These investments are undertaken in order for the county governments to raise funds, reduce costs associated with their operations and or improve service delivery.  However, the quality of the Investment decisions by county governments has sometimes been challenged as lacking value for money. The auditor general and the controller of budgets have additionally questioned the funds expenditure in diverse counties across the country. This study sought to examine the influence of financial information relevance, reliability, comparability and completeness on Investment decisions within selected county governments. The study was guided by prospect theory and loss aversion theory. The study used descriptive research design with the target population compromising 72 chief officers from Tana River, Mombasa, Kwale, Kilifi, Taita-Taveta, and Lamu counties. The study found that financial information relevance, financial information reliability, financial information comparability, and financial information completeness positively influence the Investment decisions within county governments individually. In addition, the study found that financial information comparability has greater influence on Investment decisions within county governments followed by financial information relevance, financial information reliability, and financial information completeness. The study recommended that county governments align financial information to ensure that their financial needs are accomplished from the investment and that the ministry of finance conducts regular trainings in devolved units to ensure that county government officials are able to make safer returns projections through utilization of quality financial information.