Determinants of quality of financial reporting among semi -autonomous government agencies in Kenya

Abang’a, Albert Ochien’g
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Strathmore University
The study was conducted to establish the quality of financial reporting before and after the adoption of International public sector accounting standards (IPSAS- accrual) among semi-autonomous government agencies in Kenya, and to establish the influence of specific Semi-Autonomous Government agencies (SAGAs) characteristics on such quality. The specific SAGAs characteristics includes size of SAGAs, leverage, liquidity, audit committee size, profitability, and age of SAGAs. The research was conducted through pre-adoption (2011 to 2013) and post adoption (2014 to 2015) period. Data was analyzed using paired sample T-Test, descriptive statistics and stepwise regression analysis. The findings indicated that financial reporting quality improved after adoption of IPSAS. The regression results showed that the size of SAGAs as measured by log of assets, age of SAGAs, and liquidity are associated at statistically significant level to financial reporting quality. The implication of this study is that policy makers should stipulate strict adherence to IPSAS standards by practitioners so as to achieve quality of financial reporting. They should also recommend that larger units of SAGAs are broken down to smaller administrative units so that they can easily be administered to increase efficiency of administration. Implication by practitioners is to pay much attention on liquidity ratio since it has a positive association to financial reporting quality. They should also find ways to enable younger semi-autonomous government agencies establish systems in place to achieve financial reporting quality. There is a need for academic scholars to extend this research by examining other characteristics among SAGAs that may have influence on the quality of financial reporting. This study act as the foundation for future research by providing empirical evidence on financial reporting quality and its association to specific characteristics among SAGAs in Kenya. The study was limited to government Parastatals that apply IPSAS accrual method of accounting (SAGAs). This may make it difficult to generalize the findings to entire public sector. The study also included 3 years before adoption of IPSAS and two years post adoption. Three years before adoption and three years after adoption would have been more appropriate to study financial reporting quality. The study recommends future research to consider incorporating all public sector entities in the study of financial reporting quality as well as adding other variables that may influence quality reporting.
Thesis submitted in partial fulfillment for the requirements for the Degree of Master of Commerce (MCOM) at Strathmore University
Rational public choice theory, Agency Theory, Institutional Theory, International public sector accounting standards, Semi-autonomous government agencies