Earnings Management and Financial Performance of Companies Listed With Nse in Kenya.

Abstract

Earnings management activities have become a technique utilized by many institutions in today’s business operations. Despite the concept being applied wrongly by some companies which has led to the collapse of major firms like Worldcom, Enron among others, a number of other companies has used the EM practices to enhance the firms’ performance. The main object of this research focused on assessing the impact of EM on the performance of public limited companies within Kenya. This research used earnings management as its independent variable and the financial performance as the dependent variable. Capital availability, size of the firm and profitability applied as control items. The research study applied descriptive research design. 13 sampled companies within NSE as at 31st December, 2020 were used as the population of the research study. The project used the data from secondary sources obtained from the reported financial information and other individual companies’ periodic reports. This research study used stratified sampling approach and the data analysis was done using correlation and multiple regression analysis. The SPSS software was deployed in the evaluation of the research in relation to the goal of the research. The research established that the relationship between EM and financial performance of the listed companies is positive. In summary the research work discovered a positive and significant relationship between earnings management, size of the firm and profitability amongst companies quoted within NSE.