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Research Paper | Accounting | Volume 15 Issue 7, July 2026 | Pages: 1589 - 1596 | Kenya
Corporate Governance Practices and Aggressive Accounting: Moderating Effects among Firms Listed at the Nairobi Securities Exchange
Abstract: Aggressive accounting remains a major concern among publicly listed firms because it compromises the quality, reliability, and transparency of financial reporting. Financially distressed firms often engage in aggressive accounting practices such as premature revenue recognition, expense deferral, and reserve manipulation to conceal deteriorating financial conditions. This study examined the effect of financial distress signals on aggressive accounting among firms listed at the Nairobi Securities Exchange (NSE), with corporate governance practices investigated as a moderating variable. Specifically, the study evaluated the influence of liquidity signals, financial leverage signals, profitability signals, and operational efficiency signals on aggressive accounting. The study was anchored on Risk and Return Theory, Trade-Off Theory, Pecking Order Theory, Credit Risk Theory, and Positive Accounting Theory. A mixed-methods research design was adopted, utilizing both primary and secondary data from NSE-listed firms. Data were analyzed using descriptive statistics, correlation analysis, multiple regression analysis, and moderated regression analysis. Findings revealed that financial leverage and profitability signals significantly influenced aggressive accounting, while liquidity and operational efficiency signals exhibited insignificant effects. Corporate governance practices significantly influenced aggressive accounting directly; however, their moderating effect on the relationship between financial distress signals and aggressive accounting was statistically insignificant. The study concludes that financial leverage and profitability pressures are the primary drivers of aggressive accounting among NSE-listed firms. The study recommends strengthening governance mechanisms, enhancing financial monitoring systems, and enforcing stricter reporting standards to improve financial reporting quality and investor confidence.
Keywords: Aggressive Accounting, Corporate Governance, Earnings Management Emerging Market, Financial Distress Signals, Financial Reporting Quality, Leverage, Nairobi Securities Exchange, Profitability
How to Cite?: Timothy Kalume Kahindi, Dr. Isaac Otiende Ojung'a, Dr. Wahida Mahmud Bana, Dr. Gladys Micere Wamiori, "Corporate Governance Practices and Aggressive Accounting: Moderating Effects among Firms Listed at the Nairobi Securities Exchange", Volume 15 Issue 7, July 2026, International Journal of Science and Research (IJSR), Pages: 1589-1596, https://www.ijsr.net/getabstract.php?paperid=SR26718135659, DOI: https://dx.doi.org/10.21275/SR26718135659