The Investigation of the relationship between fraud risk management practices and firm value on Kenya listed companies
Date
2021
Authors
Moindi, Enock Nyagwencha
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
All organizations can be victims of fraud incidents in one way or another. Listed companies play a key role in the economic development of a country. The study investigated the relationship between the Fraud risk management practices and fim1 value of the listed companies in the Nairobi Security exchange, Kenya. Fraud risk management practices are part of the governance function of an organization that looks at the management of fraud risks in a company with the intention of mitigating, detecting and responding to the risks before occurring, when they occur and after occurring. The study collected data by use of a 5-point Linkert -scale questionnaire. The data on firm value (Tobin’s Q) from the audited financial statements of the companies as provided on the 2017-2018 investor handbook by NSE was collected. Confirmatory factor analysis was conducted to test for construct validity of the data. The correlation findings revealed a positive and significant relationship between fraud risk management practices (corporate governance fraud risk practice, Preventive FRMP and Responsive FRMP) and firm value (Tobin's Q). Other correlation findings indicated that detective FRMP and firm value show a positive but not significant relationship. The regression findings established that corporate governance fraud risk management practices have a positive and significant effect on firm value. But preventive, detective and responsive fraud risk management practices have a positive and not significant effect on fi1m value. While the relationship between firm size and firm value is negative and significant. The leverage and firm age have a positive and not significant effect on firm value. The study recommends an enhanced adoption of a devoted board and top management review of fraud incidents, whistleblowers, having an effective fraud department, implementing anti-fraud policy and a comprehensive ethics program. Other recommendations include; enhanced training on fraud risks, enhanced performance appraisal of fraud prevention, enhanced whistleblowing hotline system, progressive sanctions, disclosing the results of internal investigation to the regulator, prosecution of the fraud offender and recovery of the stolen funds.
Description
A Thesis submitted in fulfillment for the degree of Master of Commerce at Strathmore University