The Determinants of Forward-looking Disclosures in Interim Reports for Non-financial Firms: Evidence from a Developing Country

David Mathuva


This paper examines the determinants of the forward-looking disclosures (FLD) in the interim financial reports (IFRs) of non-financial firms listed on the Nairobi Securities Exchange (NSE). Data were collected from a total of 91 firm-year observations for the mid interim periods between 2009 and 2011. A FLD score was developed for each firm in the sample based on the firm’s disclosure of forward-looking statements in its IFR. The results indicate that firms with higher debt, better performance, higher capital investment and with more concentration of foreign investment tend to have more FLDs in their IFRs. Conversely, cross listed firms are associated with lower FLDs, implying that cross listed firms provide lower forward-looking information compared to non-cross listed firms. Results show a high degree of FLD for better performing firms and firms with higher financial risk. This study contributes to literature by providing evidence to which financial reporting incentives contribute to FLDs in a developing country where enforcement is weak. As a conclusion, the paper recommends firms to provide comprehensive FLDs in future to effectively mitigate informational asymmetries between the management and owners of the firms, especially firms with more concentrated foreign ownership.


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