School of Business and Economics

Corporate Sustainability disclosures, audit committee financial expertise and earnings management among firms listed In East Africa Community

Wed, 01 Jan 2025 00:00:00 GMT

Corporate Sustainability disclosures, audit committee financial expertise and earnings management among firms listed In East Africa Community Kabiru, Charles Githinji Earnings managements have been rampant among listed firms in East Africa such as NBK, Uchumi limited, Kakuzi, CMC, Tanga cement company limited, Tanzania Cigarette company, New vision group Uganda, Equity bank Uganda, Uganda Clays Limited, Heritage Oil and Gas Ltd. Studies also show that managers could engage in corporate sustainability disclosures practices to gain the trust of both internal and external stakeholders by satisfying their interests and fostering long-term relationships. Studies that have reported relationship on corporate disclosures such as sustainability reporting and earnings management in their firms are inconclusive and mixed. Therefore, this study sought to investigate whether audit committee financial expertise moderates the relationship between corporate sustainability disclosures and earnings management among listed firms in East Africa. The specific objectives were to examine the effect of; economic, social and environmental disclosures on earnings management. Additionally, the study determined whether audit committee financial expertise moderates the relationship between economic, social and environmental disclosures on earnings management. The study was anchored on the positivism paradigm. The study was grounded on agency theory, stakeholder theory, and legitimacy theory. This study adopted both explanatory and longitudinal research design. The target population consisted of all 122 listed firms in East Africa partner states. Panel data for the period 2013 -2023 was used. The study employed secondary and quantitative data that were extracted from annual financial reports with the aid of a data collection schedule. Data was analyzed using both inferential and descriptive statistics. The study adopted multiple hierarchical regression model. The results of the multiple regression model were used to test the hypotheses. The study established that the economic disclosures (β = 0.082, ρ -value <0.05) and environmental disclosures (β= 0.066, ρ<0.05) had a positive and significant effect on earnings management while social disclosures (β = 0.084, ρ -value <0.05) had a negative and significant effect on earnings management with an R-square of 94.99 percent. Further, the study found that audit committee financial expertise moderated the relationship between economic disclosures (β = 1.125, ρ -value <0.05) and social disclosures (β = 0.775, ρ -value <0.05) with an R squared of 94.98 percent. Based on the results, the study concluded that audit committee financial expertise moderated the relationship between corporate sustainability disclosures and earnings management. The findings have several implications. Practitioners should focus on strengthening internal controls to ensure that economic and environmental disclosures are not used for earnings management. Given the study's findings, practitioners should place a greater emphasis on social disclosures. Companies can adopt global reporting standards, such as the Global Reporting Initiative guidelines, to ensure consistency and comparability in their social responsibility reporting. Practitioners should facilitate regular training sessions for audit committee members to keep them updated on the latest developments in financial reporting and governance.

Energy consumption, economic growth, financial development, institutional quality and carbon emissions in sub-saharan Africa

Wed, 01 Jan 2025 00:00:00 GMT

Energy consumption, economic growth, financial development, institutional quality and carbon emissions in sub-saharan Africa Kinuthia, Peter Mwai Global warming is arguably among the most pressing problems affecting almost all countries of the world—developed or developing due to its deleterious consequences on the environment. Global warming has often been attributed to carbon emissions onto the atmosphere, which has seen an astronomical increase in the last century. Renewable energy has gain significant attention during the last decade because it has been the fastest growing energy source in the world since the late 2000s. Despite this, a significant proportion of the existing studies emphasize energy consumption more, without disaggregating the discussion in line with both renewable and non-renewable energy sources. This leaves a gap in understanding how each type energy consumption affects carbon emission. Financial development, economic growth and Institutional quality have also been the focus of a heated debate between researchers and economists because institutions have a direct and indirect effect on the relationship between them and climate change. The aim of this study was to investigate the moderating role of institutional quality on the relationship between energy consumption, economic growth, financial development and carbon emissions in Sub-Saharan Africa. The specific objectives of the study were to establish whether: the two dimension of energy consumption; renewable and non-renewable energy consumption and economic growth, financial development have an effect on carbon emissions. Additionally, the study investigated whether institutional quality moderates the relationship between renewable energy consumption, non-renewable energy consumption, economic growth, financial development and carbon emissions. The study was guided by environmental Kuznets curve, energy transition and institutional theories. The study adopted explanatory and longitudinal research designs and used panel data to establish the casual relationship among the study variables. The target population comprised 48 countries in Sub-Saharan Africa. The inclusion/exclusion criteria were based on whether the country consistently had available data from 2000 to 2023 and this led to a final sample of 552 country year observations. Data was collected from world bank database and was analyzed using both descriptive and inferential statistics. The results of the regression model were used to test the hypotheses. The study established that renewable energy consumption (β =0.0342, ρ - value <0.05) non-renewable energy consumption (β= 0.0027, ρ<0.05) economic growth (β = 0.7026, ρ -value <0.05) and financial development (β= 0.0441, ρ<0.05) had a positive and significant effect on carbon emissions with an R-square of 94.46 percent. Further, the study found that institutional quality had an antagonistic moderation on the relationship between renewable energy consumption (β =-0.0075, ρ -value <0.05) non-renewable energy consumption (β= -0.0022, ρ<0.05) economic growth (β = -0.4327, ρ -value <0.05), financial development (β= -0.0378, ρ<0.05) and carbon emissions with an R-square of 95.14 percent. Generalized method of moment results confirmed the fixed effect model results. Based on the results, the study concluded that institutional quality moderated the relationship between renewable energy consumption, non-renewable energy consumption, economic growth, financial development and carbon emissions. The findings have several implications; policymakers should prioritize strengthening institutional quality through improved governance, regulatory frameworks, and transparency. Moreover, policymakers should integrate renewable energy with institutional reforms. This includes implementing strict emission controls on fossil fuel consumption and providing financial incentives for industries to shift towards cleaner energy alternatives. Financial development must be directed towards green investments. Future research could adopt a comparative approach by analyzing the relationship between energy consumption, economic growth, financial development, and carbon emissions in SSA relative to other regions, such as Europe, Asia, and America.

Climate change, institutional quality, foreign exchange rate, foreign direct investment and fiscal sustainability in sub- saharan Africa

Wed, 01 Jan 2025 00:00:00 GMT

Climate change, institutional quality, foreign exchange rate, foreign direct investment and fiscal sustainability in sub- saharan Africa Kinuthia, Rahab Wanjiku Fiscal sustainability refers to a government's ability to manage its finances in a way that ensures long-term stability, avoiding excessive debt accumulation while maintaining essential public services. It plays a crucial role in economic stability by fostering investor confidence, reducing vulnerability to external shocks, and supporting steady economic growth. In Sub-Saharan Africa it remains a significant hurdle despite numerous economic bailouts. The fiscal imbalance is majorly influenced by economic instability, weak institutional frameworks, and environmental factors. Though studies have addressed these issues separately, findings being mixed, a comprehensive analysis is lacking. Therefore, this study sought to examine the effect of climate change, institutional quality, foreign exchange rate fluctuations, and foreign direct investment (FDI) on fiscal sustainability in Sub Saharan Africa. The study was informed by Keynesian theory, debt overhang theory, institutional theory, and the Environmental Kuznets Curve (EKC) hypothesis. It was anchored in the positivism paradigm. The study used panel data to establish the casual relationship among the study variables. The research employed an explanatory and longitudinal research design, utilizing secondary data from the World Bank for the period 2000–2023. The target population comprised of 43 countries in Sub-Saharan Africa which resulted to 989 observations. The inclusion/exclusion criterion was based on whether the country consistently had available data from 2000 to 2023. Data analysis involved descriptive and inferential statistical methods, with a multiple regression model applied to test the hypotheses. Findings indicate that climate change (β=0.4098, ρ=0.000) and foreign exchange rate (β= 0.7773, ρ=0.000) positively influence fiscal sustainability, while institutional quality (β2= -0.0631, ρ =0.009) and FDI (β= -0.5381, ρ=0.000) have a negative impact. Generalized method of moment results confirmed the fixed effect model results. Based on the results, the study concluded that climate change, institutional quality, foreign exchange rate, and foreign direct investment significantly influence fiscal sustainability. These results have critical policy implications and underscore the need for targeted policy interventions. It urges policymakers/governments to prioritize investments in climate adaptation and mitigation strategies such as resilient infrastructure, sustainable agriculture, and renewable energy projects. These investments can reduce the long-term costs of climate-related disasters, stabilize revenue flows. Particularly enhancing agricultural resilience and seek international collaborations for climate financing and technical support. Conduct institutional reforms aimed at improving transparency, reducing corruption, and enhancing public financial management systems. Strengthening tax compliance, increasing revenue mobilization, and improving resource allocation are key strategies to ensure that governments can meet their fiscal obligations without undermining long-term development objectives. Reduce dependency on foreign-denominated debt; Countries should aim to minimize their exposure to foreign-denominated debt by developing domestic capital markets and issuing debt in local currencies whenever possible. To optimize fiscal benefits of FDI, governments may revise their strategies to draw investments that foster long-term growth and sustainable development. This entails concentrating on non-extractive sectors such as manufacturing, technology, and services, which are more probable to provide employment and substantially enhance local tax revenue. Moreover, debt transparencies to adhere to IMF framework with clear mechanisms for reporting and monitoring public debt to avoid unsustainable debt accumulation.

Trustee board characteristics, portfolio diversification and financial performance of universities pension funds in Kenya

Wed, 01 Jan 2025 00:00:00 GMT

Trustee board characteristics, portfolio diversification and financial performance of universities pension funds in Kenya Njuguna, David Maina The stewardship of retirement savings portfolios and their corresponding capital deployments is of global interest. The pension funds under the board of trustees have been reporting low assets to GDP ratio contribution as well as poor financial performance depicted by low and unpredictable return on assets especially in Kenya. The purpose of this study was to examine the mediating effect of portfolio diversification in the relationship between pension fund board characteristics and financial performance of Universities pension funds in Kenya. The study was guided by the following objectives to: assess the effects of board size; gender diversity, and financial expertise on financial performance; examine the effect of board size, gender diversity and financial expertise on portfolio diversification and; determine whether portfolio diversification mediates the relationship between board size, gender diversity and financial expertise and financial performance of Universities pension funds. The study was grounded on the Modern Portfolio Theory, Agency Theory and Stewardship Theory. A positivism research paradigm was adopted for this study. The research adopted an explanatory research design. Panel data from 26 university pension funds which met the inclusion criteria between 2015 and 2022 with a total of 208 observations were analyzed using both descriptive and inferential statistical techniques. Secondary data was sourced from the audited annual returns from the Retirement Benefits Authority by the Schemes trustees after whom document analysis was done. Prior studies have examined how board characteristics influence financial performance especially in the corporate world. However, there is limited research that has investigated whether this relationship operates through portfolio diversification and particularly within university pension funds. This study has addressed this gap by testing the mediating role of portfolio diversification on the financial performance of Universities Pension funds. “The study findings revealed that: board size had a positive effect on Financial performance (β = 0.1306, ρ<0.05); gender diversity had a positive effect on financial performance ((β = 0.1306, ρ<0.05) and financial expertise had a positive effect on financial performance (β = 0.1123787, ρ<0.05). On testing whether board characteristics under study had an effect on portfolio diversification (Mediator) the study findings indicated that: board size had a negative effect on portfolio diversification (β = -0.2879, ρ<0.05); Gender diversity had negative but significant impact on portfolio diversification (β = -0.0259, ρ<0.05 and financial expertise (β = 0.0122, ρ<0.05), financial expertise had a positive and significant effect on portfolio diversification (β = 0.0981, ρ<0.05). regression results for portfolio diversification on financial performance showed that portfolio diversification had a positive and significant effect on financial performance (β = 0.2654451, ρ<0.05). Mediation analysis results revealed that: portfolio diversification does not mediate the relationship between board size and financial performance (Z = -0.636); Portfolio diversification partially mediates the relationship between gender diversity and financial performance (Z = 3.213) and portfolio diversification partially mediates the relationship between financial expertise and financial performance (Z = 2.880). The study concluded that board size, gender diversity, and financial expertise significantly enhance the financial performance of university pension funds; financial expertise improves portfolio diversification; while gender diversity and board size showed mixed effects. Portfolio diversification positively influenced performance but partially mediated the effects of gender diversity and financial expertise. The study recommends that university pension funds ensure optimal board size, promote gender diversity, and prioritize financial expertise among trustees for better performance. Boards should also adopt strategic portfolio diversification aligned with fund objectives.