An Assessment of Financial Performance among Integrated Reporting Adopters Versus Non-Adopters on the Nairobi Securities Exchange

Abstract

This study assesses whether financial performance differs between Nairobi Securities Exchange listed firms that adopt integrated reporting and those that do not, and whether any differences emerge over time. Using a panel dataset of NSE-listed firms observed across multiple years with 2015 as the baseline, the study applies a year fixed-effects regression framework to control for time effects while testing whether IR adoption status explains variation in firm performance. Integrated reporting is operationalized as a binary indicator (adopter = 1; non-adopter = 0). Financial performance is captured using both accounting-based measures (return on assets, return on equity, net profit margin, and return on investment) and a market-based measure (firm value). The regression results show that IR adoption status is not a statistically significant predictor of firm value, net profit margin, return on equity, return on assets, or return on investment in the short run, indicating that adopters do not immediately outperform non-adopters. However, the year fixed effects reveal that several performance indicators improve progressively over time relative to the baseline year, suggesting that performance gains may accumulate gradually as firms gain experience with IR and strengthen internal alignment of strategy, risk management, governance, and reporting processes. The findings imply that integrated reporting is unlikely to deliver immediate financial benefits but may support longer-term improvements in performance trajectories. The study recommends that NSE firms focus on sustained and high-quality IR implementation and that regulators promote credibility and comparability to enhance value relevance.