Influence of Corporate Disclosures on Financial Performance of Companies Listed in Securities Exchanges in East Africa

Abstract

With the decline in the financial performance of listed companies in East Africa and the rising trend of corporate failure in both global and local perspective. Stakeholders are increasingly becoming more concerned of the financial performance of their firms. This study aimed to find out whether corporate disclosure can be used to address the decline in financial performance and corporate failures. Therefore, this study sought to examine the influence of corporate disclosure on financial performance among companies listed in East Africa. Specifically, the study sought to examine the influence of financial disclosure, risk disclosure, social disclosure and governance disclosure on financial performance of companies listed in East Africa. The study was hinged on agency, stewardship, legitimacy and signalling hypothesis theories. The study adopted both descriptive and correlation design. Purposive sampling was used to select the 51 listed companies in Nairobi securities exchange in Kenya, 11 companies quoted in Uganda securities exchange, 3 companies which are quoted in Rwanda Securities Exchange as well as 15 companies listed in Daresaalam securities exchange from 2006 to 2015. Secondary data was collected through the use of document check index retrieved from annual audited financial statements. Regression diagnostic and panel data diagnostic tests were carried out, correlation analysis was used to show the strength of the relationship and regression analysis showed the nature of the relationship between independent and dependent variables. Results of the study revealed that there was a positive and significant relationship between financial disclosure, governance disclosure, risk disclosure, social disclosure and financial performance of listed companies in East Africa. It was concluded that there is need for listed companies to enhance their level of information disclosure so as to minimize monitoring and agency cost and ultimately steer superior performance.