ORCID Profile
0000-0002-2217-3944
Current Organisations
Charles Darwin University
,
United States International University
,
Strathmore University Strathmore Business School
,
Sara Lee H&BC Africa
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Publisher: Emerald
Date: 05-09-2016
Abstract: This paper aims to examine the impact of compliance with corporate governance (CG) guidelines during the period 2002-2014 on firm financial performance and firm value of Kenyan-listed companies. Using panel data of 520-firm year’s observations between 2005 and 2014, the authors test the hypothesis that compliance with CG guidelines issued in 2002 by Capital Markets Authority (CMA) improved firm financial performance and firm value. Compliance with CG Index which is an aggregate of all the CG guidelines is positively and significantly related to firm performance and firm value. Board evaluation is also positively and significantly related to firm performance. The findings suggest that CG guidelines are associated with firm financial performance and firm value. The authors provide evidence on the relationship between CG practices and firm financial performance and firm value in Kenya. Second, the authors provide evidence on board evaluation which has not been tested before in a “comply or explain” environment. Finally, they evaluate how CMA 2002 CG guidelines steered firm financial performance and firm value over its life cycle from 2002 to 2014. These results are important to CMA and other CG regulators and boards in their efforts to improve CG practices in the region.
Publisher: Emerald
Date: 29-11-2018
DOI: 10.1108/IJOEM-09-2017-0342
Abstract: The purpose of this paper is to examine the determinants of the use of loan loss provisions (LLPs) to smooth income by banks in South Africa. More specifically, the authors examine the influence of ownership, IFRS disclosure rules and economic fluctuation on the income smoothing behaviour of South African banks while controlling for the traditional determinants of bank income smoothing via LLPs. The study employs fixed effect regression methodology to estimate the determinants of discretionary LLPs. The authors find that South African banks do not use LLPs to smooth income when they are: under-capitalised, have large non-performing loans and have a moderate ownership concentration. On the other hand, income smoothing is pronounced when South African banks are rather more profitable during economic boom periods, well-capitalised during boom periods and is pronounced among banks that adopt IFRS and among banks with a Big 4 auditor. The authors also find that banks use LLPs for capital management purposes, and bank provisioning is procyclical with economic fluctuations. Bank supervisors in South Africa should monitor the bank provisioning practices in South Africa closely to ensure that LLPs are not used as a substitute for bank capital. Banks in South Africa should not use sufficient provisioning as a substitute for sufficient bank capital. Second, the evidence for procyclical bank provisioning shows that provisioning by South African banks reinforce the current state of the economy and might compel bank supervisors in South Africa to consider the adoption of a dynamic provisioning system that is already adopted by bank supervisors in Spain, Peru, Uruguay, Colombia and Bolivia. Bank income smoothing is an important issue because it has implications for banking stability and accounting transparency. There are few studies on bank income smoothing for emerging economies particularly in Africa where there are substantial differences in ownership and accounting rules. This is the first South African study to examine the influence of disclosure rules, ownership and economic cycle fluctuations on bank income smoothing behaviour via LLPs.
Publisher: IGI Global
Date: 2016
DOI: 10.4018/978-1-4666-9876-5.CH009
Abstract: This chapter is aimed at examining the impact of IFRS convergence and revisions on the financial statements of companies listed in East Africa. This was achieved by determining whether firms report losses (LNEG) when they occur (timely loss recognition) or report small positive income (SPOS) or whether incomes reported exhibit variability in net income (NI) over time. Simultaneously, the chapter tests whether there is any influence of corporate governance on these three measures which are considered indicators of financial reporting quality. Four models applying GLS random effects are applied on 520 firm year observations for firms listed in Nairobi Securities Exchange (NSE) between 2005 and 2014. The result shows that a positive coefficient on frequency of large losses reported in the finding interpreted as firms with converged and revised IFRS recognize large losses (LNEG) as they occur. The findings also show a negative coefficient on small positive income (SPOS) interpreted as firms applying non-converged and revised standards manage earnings towards small positive amounts more than firms applying converged standards. The post convergence\\revisions are significant for Chi, R2 and the residual which suggest that variability in net income (NI) improved in the post convergence period while corporate governance show insignificant mixed coefficient with the three indicators.
Publisher: Wiley
Date: 20-08-2013
DOI: 10.1002/JCAF.21889
Publisher: Emerald
Date: 11-03-2019
DOI: 10.1108/AJEMS-10-2017-0266
Abstract: The purpose of this paper is to examine the extent of bank earnings smoothing during mandatory International Financial Reporting Standards (IFRS) adoption in Nigeria, to determine whether mandatory IFRS adoption increased or decreased income smoothing among Nigerian banks. The authors employ panel regression methodology to estimate the association between loan loss provisions (LLPs) and bank earnings. The authorse find that the mandatory adoption of IFRS is associated with lower earnings smoothing among Nigerian banks, which implies that Nigerian banks do not use LLPs to smooth reported earnings during the mandatory IFRS adoption period. The authors find evidence for earnings smoothing via LLP during voluntary IFRS adoption. Earnings smoothing is not significantly associated with listed and non-listed Nigerian banks during voluntary and mandatory IFRS adoption. Overall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of LLPs estimate by discouraging Nigerian banks from influencing LLPs for earnings smoothing purposes during the mandatory IFRS adoption. The findings of this paper are relevant to the debate on whether IFRS reporting improves the quality of financial reporting among firms in Nigeria. Overall, the findings indicate that mandatory IFRS adoption improves the informativeness and reliability of LLPs estimate by discouraging Nigerian banks from influencing LLPs estimates to smooth earnings during the period of mandatory IFRS adoption. The implication of the study is that IFRS has higher accounting quality than local GAAP in Nigeria as it improves the quality and informativeness of accounting numbers (LLPs and earnings) reported by Nigerian banks during the period examined. This study is the first attempt to focus on income smoothing during mandatory IFRS adoption in Nigeria.
Publisher: Emerald
Date: 13-05-2019
DOI: 10.1108/JAAR-02-2018-0030
Abstract: The purpose of this paper is to investigate whether banks use commission and fee (CF) income to manage reported earnings as an income-increasing or income smoothing strategy. The authors employ the regression methodology to detect real earnings management. The authors find that banks use CF income for income smoothing purposes and this behaviour persists during recessionary periods and in environments with stronger investor protection. The implication of the findings is that bank non-interest income which achieves ersification gains to banks is also used to manipulate reported earnings. The findings show that real earnings management is prevalent among banks in Africa. Further research into earnings management should examine real earnings management among non-financial firms in developing regions. From an accounting standard setting perspective, the evidence suggests the need for national/international standard setters to adopt strict revenue recognition rules that ensure that banks or firms report the actual fees they make, and to discourage banks from delaying (or deferring) the collection of fee income to manage or smooth reported earnings opportunistically. This study contributes to the positive accounting theory (PAT) literature which examines the accounting and non-accounting decisions that influence managers’ choice of accounting methods in financial reporting. Extending the PAT, the authors show that certain conditions can incentivize managers to engage in earning management such as during recessions and weak institutional quality or weak investor protection.
Publisher: Emerald
Date: 14-08-2017
DOI: 10.1108/JAEE-11-2014-0062
Abstract: The purpose of this paper is to examine the relative value relevance of accounting information arising from the adoption of converged and revised International Accounting Standards (IAS)/International Financial Reporting Standards (IFRS) in East Africa. The research applies “same firm year” design for identification of the effects of changes in accounting standards. A model similar to Ohlson’s price model and random-effects GLS are used to estimate R 2 of the regressions of share prices on book values and earnings. The results show that accounting information prepared from revised and converged IAS/IFRS display higher value relevance and also increased following the revision and convergence of IAS/IFRS. The cross-product term is more significant in the post-revision/convergence period thus providing further evidence for increased value relevance after the revision of IAS/IFRS. The results are robust to various models and show that value relevance in East Africa is relatively lower than that of the developed markets. The current study provides empirical evidence that value relevance increases with converged/revised IAS/IFRS based on quasi natural experimental setting in East Africa. The authors also extend the debate on whether value relevance is relevant in emerging markets, which are regarded as imperfect markets with few regulations, weak enforcement and limited sources of information. The results may be useful to accounting preparers, regulators, investors, standard setters and countries seeking to adopt IAS/IFRS in developing countries.
Publisher: IGI Global
Date: 2016
DOI: 10.4018/978-1-4666-9876-5.CH003
Abstract: The purpose of this chapter is to review the consequences of IFRS adoption by reviewing circumstances under which the benefits and costs accrue to firms, countries and the world. Notwithstanding, all issues raised about the consequences, IFRS adoption has had positive consequences and no wonder nearly 120 countries around the world and significant markets have adopted it. The chapter contributes to our understanding of the importance of IFRS and its effects and it is important to regulators and parties involved with world economic stability.
Publisher: Emerald
Date: 06-11-2017
DOI: 10.1108/JAEE-09-2016-0081
Abstract: The purpose of this paper is to examine whether voluntary corporate governance (CG) code issued in 2002 constrain earnings management (EM) among listed non-finance companies in Kenya. Using a panel data of 338-firm year’s observations between 2005 and 2014, the authors test the hypothesis that CG constrains EM in non-finance firms listed in Kenya. The authors regress discretionary accruals (DA) against a developed Corporate Governance Index (CGI). The overall results show that DA is not significantly related to CG suggesting the voluntary CG code does not deter EM in non-finance companies in Kenya. Evidence of income decreasing\\increasing accruals implies EM still exists among the listed firms. This suggests that policymakers may need to consider radical actions including alternative or new CG approaches and new institutions to improve the effectiveness of CG. This study extends existing studies by including composite CG as possible explanatory variable for constraining EM. The authors contribute to the debate by demonstrating that the voluntary CG code in Kenya is not effective in constraining DA and therefore the current initiatives by the regulator to change the current CG code are appropriately directed.
Publisher: Elsevier BV
Date: 09-2017
Publisher: Wiley
Date: 22-10-2020
DOI: 10.1002/JCAF.22475
Publisher: Emerald
Date: 02-07-2018
Abstract: The purpose of this study is to examine the capital market effects of corporate governance (CG) practices of a “comply or explain” environment on stock market liquidity in a frontier market. Using secondary data from Nairobi Securities Exchange, the liquidity position is analyzed using panel data random effects regression against CG guidelines. The results show a negative and significant relationship between CG compliance and stock market liquidity, suggesting that regulated CG practices improve market liquidity in Kenya. The results are remarkably robust to different measures of liquidity and supports agency and signaling theory. The authors provide evidence to show that security regulation improves stock market liquidity in a frontier market whose characteristics are thought not to favor regulation. Therefore, regulators and stakeholders could be motivated by the benefits of regulation, and this could lead to renewed effort to improve CG compliance. The findings show that security market regulation through CG guidelines can improve stock market liquidity in frontier markets. This offers regulators and policymakers a strong motivation to enhance security regulation to improve capital market confidence.
Publisher: American Geophysical Union (AGU)
Date: 10-2022
DOI: 10.1029/2021MS002954
Abstract: Many different emission pathways exist that are compatible with the Paris climate agreement, and many more are possible that miss that target. While some of the most complex Earth System Models have simulated a small selection of Shared Socioeconomic Pathways, it is impractical to use these expensive models to fully explore the space of possibilities. Such explorations therefore mostly rely on one‐dimensional impulse response models, or simple pattern scaling approaches to approximate the physical climate response to a given scenario. Here we present ClimateBench—the first benchmarking framework based on a suite of Coupled Model Intercomparison Project, AerChemMIP and Detection‐Attribution Model Intercomparison Project simulations performed by a full complexity Earth System Model, and a set of baseline machine learning models that emulate its response to a variety of forcers. These emulators can predict annual mean global distributions of temperature, diurnal temperature range and precipitation (including extreme precipitation) given a wide range of emissions and concentrations of carbon dioxide, methane and aerosols, allowing them to efficiently probe previously unexplored scenarios. We discuss the accuracy and interpretability of these emulators and consider their robustness to physical constraints such as total energy conservation. Future opportunities incorporating such physical constraints directly in the machine learning models and using the emulators for detection and attribution studies are also discussed. This opens a wide range of opportunities to improve prediction, robustness and mathematical tractability. We hope that by laying out the principles of climate model emulation with clear ex les and metrics we encourage engagement from statisticians and machine learning specialists keen to tackle this important and demanding challenge.
Publisher: Macrothink Institute, Inc.
Date: 03-12-2011
Abstract: AbstractThis study seeks to establish if the adoption of International Financial Reporting Standards (IFRS) in Kenya has been associated with higher accounting quality for listed companies. The International Accounting Standards Board (IASB), in its objectives and preamble, supposes that the beneficial effects from IFRS adoption include transparency, accounting quality and reduced cost of capital. Based on these assumptions, this study applied accounting quality measures earnings management, timely loss recognition and value relevance to find out whether the adoption of IFRS has led to improvements in accounting quality in companies listed in Kenya. The methodology is based on prior literature definition of metrics of accounting quality mainly earnings management, timely loss recognition and value relevance. The study differs from the previous ones by overcoming difficulties in controlling for confounding factors faced in previous studies which could have led to less reliable results. Three out of the eight metrics indicated that quality had marginally improved while five indicated that it had marginally declined. These mixed outcomes are very much in line with findings in other studies and the study contributes to the debate by explaining why accounting quality outcomes are still not consistent with IFRS promises in spite of improved test conditions. Key words: IFRS IAS accounting quality earnings management timely loss recognition
No related grants have been discovered for Erick Outa.