International Financial Reporting Standards and financial performance in Kenya’s banking industry

Abstract

The adoption of IFRS has shaped the landscape of financial reporting around the globe in a way that ensures uniformity, transparency, and comparability of financial statements. This study looks at how IFRS adoption impacted the financial performance of the banking industry in Kenya, with a keen interest in financial disclosure, transparency, and timeliness of reporting. A longitudinal study was conducted from the year 2019 to 2023 with a focus on publicly listed banks in Kenya. The analysis method employed simple and multiple regression and correlation analyses to find the possible relationship between IFRS adherence and financial performance, with the financial performance being measured by Return on Assets (ROA). From the findings, transparency had the biggest positive influence on financial performance, followed by financial disclosure, whereas timeliness had a minor effect. Further, the study demonstrates that while adoption aids investor confidence and corporate governance, high compliance costs and varied regulations continue to provide a challenge to the banks. This paper posits that there is a strong need for policymakers together with the financial institutions involved to strengthen IFRS strategy with respect to implementation so as to achieve sustainable financial stability on the Kenyan banking sector and its improved reporting practices.