Title: The Effect Of Financial Liability Disclosures On The Market Returns Of Manufacturing Firms Listed On The Nairobi Securities Exchange (Nse) Over The Period 2012 To 2022 In Kenya
Authors: Wickliffe Otera Maranga
Volume: 9
Issue: 6
Pages: 76-83
Publication Date: 2025/06/28
Abstract:
This study examines the effect of financial liability disclosures on the market returns of manufacturing firms listed on the Nairobi Securities Exchange (NSE) over the period 2012 to 2022. Using a positivist research philosophy and a mixed-methods approach, the study analyzed secondary data from eight firms through descriptive, correlational, and causal statistical techniques. Findings revealed significant financial obligations in trade payables, dividend payables, bank overdrafts, and noncurrent liabilities, highlighting liquidity challenges and financial leverage. While trade payables appeared to support cash flow management, reductions in dividend payables adversely affected retained earnings and overall firm performance. Regression analysis showed a weak but statistically significant positive relationship between liability disclosures and market returns, with liability disclosures explaining only 1.7% of the variation in returns. A unit increase in liability disclosures corresponded to a modest increase in market returns, leading to the rejection of the null hypothesis of no effect. The study concludes that although liability disclosures affect market returns, their impact is limited compared to other financial information. It recommends that firms maintain liabilities below assets to mitigate insolvency risks and encourages policymakers to incentivize comprehensive liability disclosures to foster transparency and investor confidence. Future research should further investigate the role of different liability types and contextual factors in shaping market returns.