The Relationship Between Social Accounting Reporting and Stock Returns of Companies Listed at the Nairobi Securities Exchange

Abstract

The study sought to establish the relationship between Social Accounting Reporting and Stock Returns of Companies listed at the Nairobi Securities Exchange. The Nairobi Securities Exchange had as at 1st October 2014 64 listed companies divided into 12 homogenous categories. The specific objectives of this study were to establish the relationship between the relationship between Environmental reporting and stock returns, human resource reporting and stock returns, community involvement and stock returns and product reporting and stock returns. This study is important because social accounting as a topic in Kenya is relatively new but is growing in importance. This study was bringing new information on the topic as the relationship between stock returns and social accounting in NSE has not been conducted. The review of literature showed that there has been extensive study on different aspects of Social Accounting and Financial Performance. The results however are not conclusive with some saying that there is a strong relationship while others say there is none. The study obtained secondary data for the period 2009-2013 from the annual reports of the NSE listed companies. It drew consideration from the NSE 20 share index companies. The data for the computation of stock returns was obtained from the NSE website. A content analysis was conducted on the annual reports based on the number of sentences written about each variable of social accounting. The data was analysed using the regression model. The findings revealed the existence of an insignificant relationship between Social Accounting and stock returns. The results also showed the existence of a significant relationship between stock returns and interest rates. The study recommended an investigation into the reasons why the investors in the Kenyan market do not give consideration to Social Accounting when making investment decisions. The study recommended further study on the reasons why the listed companies report on Social Accounting if it does not lead to increased stock returns.