EFFECT OF BOARD DIVERSITY AND AUDIT COMMITTEE ACTIVITIES ON FINANCIAL REPORTING QUALITY AMONG FIRMS LISTED IN NAIROBI SECURITIES EXCHANGE

Abstract

Globally, firms are currently facing issues related to corporate governance thus facing some challenges that include unreliable financial reporting. This is despite them having board of directors who are mandated to oversee ethical running of organizations. The link between board diversity and financial reporting quality of firms has attracted the attention of numerous scholars. However, some of the studies have so far been done in different sectors and locations and have reported conflicting results. Hence, there is need to conduct a  study to establish how board members’ diversity affect Financial Reporting Quality(FRQ) among firms listed in Nairobi Security Exchange(NSE) in  Kenya. The purpose of this study was to investigate the effect of board diversity and audit committee activities on FRQ of firms listed in NSE. The study objectives were on variables education and age diversity and their effect on FRQ. It was anchored on Resource Dependency Theory and the Upper Echelon Theory. The study employed a longitudinal research design. Census approach was used for all the 40 firms that remained consistently listed between 2011 and 2017. The data was collected using data collection sheet. Random Effect Model proved to be consistent under the Haussmann test and thus was used to analyze panel data. The study found a negative significant moderating effect of audit committee activities on the relationship between age diversity and FRQ. It was also found that a positive significant moderating effect of audit committee activities existed between education diversity and FRQ.