Effect of Prudential Accounting on the Market Value of Formal Manufacturing Firms in Kenya

Prudential accounting plays an integral role in fostering financial performance and reporting quality of any organization. The objective of this study was to determine the effect prudential accounting on the market value of formal manufacturing firms in Kenya. The relationship between the dependent and the independent variables was moderated by firm size. Stakeholder theory was used in supporting this study. This study adopted the descriptive research design. The used the stratified random sampling technique in sample size determination. The sample size for this study comprised of 294 formal manufacturing companies out of the total population of 1,105 formal manufacturing in Kenya. The study used both primary and secondary quantitative data which was collected using questionnaires and data observation schedules. The Statistical Package for Social Science Version 23.0 was used in data analysis. The p-value of 0.000 which was less than 0.05 confirmed that prudential accounting has a significant positive effect on the market value of the formal manufacturing firms in Kenya. The p value of 0.186 which was greater than 0.05 on the moderated relationship between Prudential Accounting and firm size against market value, confirmed that firm size has no significant moderating effect on the relationship between prudential accounting and firm market value. The research therefore recommends that formal manufacturing firms should focus on strengthening their prudential accounting practices, because they significantly affect their market value.