Document Type : Original Research


Department of Accounting and Finance, Pioneer International University, Nairobi, Kenya


This study sought to address the effects of earnings quality on the financial performance of Non-financial firms listed at the Nairobi Securities Exchange(NSE). Three attributes of earnings quality; predictive value, feedback value, and earnings accruals quality, were adopted as measures of earnings quality. The study adopted returns on assets (ROA) to measure financial performance. A 5-year data (2018-2022) for the 44 non-financial firms listed in the Nairobi Securities Exchange were obtained from secondary data sources. The data were analyzed using Stata 17, and the findings showed that accrual quality and feedback value exhibited a significant positive relationship with financial performance. The predictive value of the earnings revealed an insignificant negative relationship with financial performance. The model was significant at a 10% significance level with a coefficient of 0.492. This implies that earnings quality constructs significantly and positively affect the performance of Kenyan public-listed non-financial firms. The findings of this study have important implications for users of financial information in ascertaining the importance of earnings quality on the performance of Kenyan public non-financial firms. This study is also beneficial to standard setters in Kenya that view the earnings quality as an indirect indicator of the quality of financial reporting standards that have been issued.


Main Subjects


©2023 The Author(s). This is an open access article distributed under the terms of the Creative Commons Attribution (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, as long as the original authors and source are cited. No permission is required from the authors or the publishers.

Lee, H. Y., Mande, V., & Son, M. (2015). Are earnings announced early of higher quality? Accounting and Finance, 55(1), 187–212.
Mahmud, R., Ibrahim, M. K., & Pok, W. C. (2009). Earnings Quality Attributes and Performance of Malaysian Public Listed Firms. SSRN Electronic Journal, 1–25.
Akle, Y. A. (2011). the Relationship Between Corporate Governance and Financial Reporting Timeliness for Companies Listed on Egyptian Stock Exchange "an Empirical Study ." Internal Auditing & Risk Management, 2(2), 81–90.
Anuar, K., & Wan Ismail, W. A. (2014). Earnings Quality Construct and Measures in Empirical Accounting Studies. International Conference on Governance & Strategic Management (ICGSM), 2014, 0.
Barth, M. E., Beaver, W. H., & Landsman, W. R. (2001). The relevance of the value relevance literature for financial accounting standard setting: another view,, (2001). The relevance of the value relevance literature for financial accounting standard setting: another view, Journal of Accounting and Economics, 31(1), 77–104.
Barua, A. (2006). Using the FASB's Qualitative Characteristics in Earnings Quality Measures. Retrieved from Available at SSRN 815784.
Bilinski, P. (2014). Do analysts disclose cash flow forecasts with earnings estimates when earnings quality is low? Journal of Business Finance and Accounting, 41(3–4), 401–434.
Callen, J. L., Khan, M., & Lu, H. (2013). Accounting Quality, Stock Price Delay, and Future Stock Returns* Accounting Quality, Stock Price Delay, and Future Stock Returns. Contemporary Accounting Research, 30(1), 269–295.
Dechow, P., Ge, W., & Schrand, C. (2010). Understanding earnings quality: A review of the proxies, their determinants and their consequences. Journal of Accounting and Economics, 50(2–3), 344–401.
Dechow, P. M., & Schrand, C. M. (2008). Earnings Quality.
Dufour, Y., & Steane, P. (2006). Competitive paradigms on strategic change: mapping the field and further research development. Strategic Change, 15(3), 129.
Francis, J., Olsson, P., & Schipper, K. (2008). Earnings Quality. Foundation and Trends in Accounting, 1(4).
Klimczak, K. M. (2009). Testing Value Relevance of Accounting Earnings in Emerging Markets. SSRN Electronic Journal.
Lee, H. Y., Mande, V., & Son, M. (2015). Are earnings announced early of higher quality? Accounting and Finance, 55(1), 187–212.
Lee, J. (2012). The role of accounting conservatism in firms' financial decisions, 1–54.
Liu, G., & Sun, J. (2015). Did the Mandatory Adoption of IFRS Affect the Earnings Quality of Canadian Firms? Accounting Perspectives, 14(3), 250–275.
Martínez-Ferrero, J. (2014). Consequences of financial reporting quality on corporate performance. Evidence at the international level* Consecuencias de la calidad de la información financiera en el rendimiento financiero. Evidencia para el ámbito internacional. Estudios de Economía, 41(1), 49–88.
Perotti, P., & Wagenhofer, A. (2007). Earnings Quality Measures and Excess Returns Earnings Quality Measures and Excess Returns, (December 2011), 1–47.
Perotti, P., & Wagenhofer, A. (2014). Earnings quality measures and excess returns. Journal of Business Finance and Accounting, 41(5–6), 545–571.
Pronobis, P., Schwetzler, B., Sperling, M., & Zuelch, H. (2006). Paul Pronobis/Bernhard Schwetzler/Marco Sperling/Henning Zuelch , 1–42.
Ranjan Kumar Mitra. (2016). The association between earnings quality and firm-specific return volatility Evidence from Japan. Review of Accounting and Finance, 15(3), 294–316.
Šodan, S. (2015). The Impact of Fair Value Accounting on Earnings Quality in Eastern European Countries. Procedia Economics and Finance, 32(15), 1769–1786.
Sun, Q., Yung, K., & Rahman, H. (2012). Earnings quality and corporate cash holdings. Accounting and Finance, 52(2), 543–571.
Venter, E. R., Emanuel, D., & Cahan, S. F. (2014). The value relevance of mandatory non-GAAP earnings. Abacus, 50(1), 1–24.
Alexandridis, G., Antypas, N., Gulnur, A., & Visvikis, I. (2020). Corporate financial leverage and M&As choices: Evidence from the shipping industry. Transportation Research Part E: Logistics and Transportation Review, 133, 101828.
Dang, H. N., Nguyen, T. T. C., & Tran, D. M. (2020). The impact of earnings quality on firm value: The case of Vietnam. Journal of Asian Finance, Economics and Business, 7(3), 63-72.
Elaoud, A., & Jarboui, A. (2017). Auditor specialization, accounting information quality and investment efficiency. Research in International Business and Finance, 42, 616-629.
Gujarati, D. (2009). N., and Dawn C., Porter,(2009). Basic econometrics, 5, 1-15.
Han, S., Rezaee, Z., & Tuo, L. (2020). Is cost stickiness associated with management earnings forecasts? Asian Review of Accounting, 28(2), 173-211.
Kimouche, B. (2020). The Persistence of Accounting Accruals Components: An Empirical Study of Some Algerian Companies. مجلة معهد العلوم الإقتصادیة, 23(2), 1413-1432.
Nagarajan, V., Mohanty, P., & Khatua, A. (2023). Financing effects of corporate diversification: A review. Review of Managerial Science, 17(7), 2555-2585.
Pirveli, E. (2020). Earnings persistence and predictability within the emerging economy of Georgia. Journal of Financial Reporting and Accounting, 18(3), 563-589.
Svabova, L., Kramarova, K., Chutka, J., & Strakova, L. (2020). Detecting earnings manipulation and fraudulent financial reporting in Slovakia. Oeconomia Copernicana, 11(3), 485-508.