An assessment of user perceptions on the usefulness of corporate annual reports of listed companies in Kenya

Abstract

The purpose of this study was to examine the perceived importance and usefulness of corporate annual reports in Kenya. In addition, the study determined the factors affecting usefulness of corporate annual reports of listed companies in Kenya. It attempted to find the useful sources of information to users. An explanatory and descriptive research design was adopted for this study. The Primary data was collected through questionnaires that were administered to investment managers, lenders and Chief Financial Officers of the listed companies in Kenya. Descriptive statistics were used to determine the useful sources of information to users. In addition, simple regression analysis was used to determine the relationship between personal factors and usefulness of annual reports. In addition, a chi square test was done to identify if any of the personal factors had a relationship with usefulness. The analysis indicated that the user groups surveyed in the study rely mainly on information from the annual reports of listed companies in Kenya for making investment decisions. Further, the analysis also revealed that respondents found the traditional annual reports most useful in making informed decisions. These traditional statements include income statement, balance sheet and cash flow statements. The Auditor’s report was also perceived to be of importance. The least ranked items in the annual reports included notes to financial statements and chairman’s statement. In terms of the qualitative features used to measure usefulness of annual reports, timeliness, credibility, adequacy and relevance were found to be associated with usefulness. However, understandability was found not to be associated with usefulness of annual reports. The regression analysis revealed personal factors (gender, age, highest educational qualification, experience, accounting and financial qualification and type of user) had no significant relationship with usefulness of annual reports. However, the chi square tests revealed work experience, type of user and age were significant and had an association with usefulness. The findings may give some indications to researchers, preparers and policy makers. For example, policy makers may need to think about what kind of information to be included in the annual reports. The study attempted to fill the knowledge gap regarding the usefulness of annual reports of listed companies in Kenya.