Tribal affiliations, political and government positions of directors and earnings quality in Kenya

Abstract

Purpose – This study examines the influence of directors' tribal affiliations, an indigenous informal institutional feature, on the accounting quality of companies listed on the Nairobi Securities Exchange (NSE), Kenya. Design/methodology/approach – The study employs earnings quality as a proxy for accounting quality and hand-collected details of 870 directors, covering 97% of NSE-listed companies, to determine their tribal, political affiliations and other attributes. Findings – The findings reveal a negative association between tribal affiliations and earnings quality, which is counteracted by directors' parliamentary and government roles. This suggests that tribal ties may negatively influence firm transparency, but such influence is mitigated when board members have political or governmental affiliations. Research limitations/implications – This study uses single-year data. However, the comprehensive coverage of the NSE and the limited variability in director characteristics suggest that this is unlikely to limit the study's conclusions. Additionally, kinships through tribal affiliations, religion or race are context-dependent. Therefore, the application of the findings to other contexts requires the consideration of the idiosyncrasies of those contexts. Practical implications – This study has implications for understanding the influence of indigenous directors on the boards of companies in a developing country on the quality of accounting information those companies produce. Originality/value – The study advances the understanding of the influence of informal institutions by demonstrating the impact of tribal ties in a developing market, on the effectiveness of accountability structures that underpin high-quality financial reporting in agency frameworks. International accounting research often emphasises broad national factors such as culture or religion and often ignores director-specific, indigenous contexts. This study uniquely examines the influence of indigenous tribal affiliations of directors, on accounting quality.