Cross-country determinants of IFRS for SMEs adoption

Abstract

Purpose The purpose of this study is to identify the influence of environmental and institutional factors on the adoption of the International Financial Reporting Standard for small and medium-sized entities (IFRS for SMEs). This study used the neo-institutional theory and the economic theory of networks to explain why countries choose to adopt IFRS for SMEs. Design/methodology/approach This study is based on logistic regression analysis to investigate 177 countries, including 77 jurisdictions that adopted IFRS for SMEs between 2009 and 2015. Findings The findings confirm that the adoption of IFRS for SMEs is significantly related to law enforcement quality, culture, trading networks and economic growth. At the institutional level, coercive and normative isomorphism was found to be positively associated with IFRS for SMEs adoption. The results show also that the quality of the audit has no significant effect on the adoption of IFRS for SMEs. However, the joint effect of the quality of audit and quality of law enforcement is significantly related to the adoption of IFRS for SMEs. Practical implications The study contributes to a better understanding of the factors influencing the implementation of IFRS for SMEs standard across the globe and could be used to predict a country’s decision to adopt this standard. Originality/value This study contributes to the literature on international accounting harmonization by examining both environmental and institutional factors that influence the adoption of IFRS for unlisted private companies.

IAS/IFRS in Jordan: Adoption, Implementation and Determinants

“…This result is in line with the argument of Ionaşcu et al [68] and the findings of several prior studies [e.g. 56,57,61,62,78,64,63]. Similarly, the results also show a positive and significant (t= 2.288, p= 0.026) relationship between LOLEBO and ADLEVL.…”

“…Sharairi [64] found that local institutions have significantly contributed to the adopting of IFRS by Islamic banks. Damak-Ayadi, Sassi and Bahri [63] also found that legal enforcement power has positively and significantly impacted the accounting standards adoption. Accordingly, it can be hypothesized:…”

“…Mande [62] also found that the need for external investments forced some African countries to adopt international standards [see also , 21]. In the same context, Damak -Ayadi, Sassi and Bahri [63] found that foreign aid has a major impact on IFRS adoption. Similarly, Sharairi [64] found that international institutional pressure is also an important and critical factor in adoption IFRS.…”

Determinants of Voluntary International Financial Reporting Standards Adoption in Poland

“…IFRS (Pichler et al, 2018). Greater practical knowledge of IFRS among foreign board members increases their acceptance (Damak-Ayadi et al, 2020).Thus, it is hypothesized that:…”

“…However, there are no contributions verifying the determinants of voluntary IFRS adoption in Central and Eastern European (CEE) countries. Researchers focused on the determinants of voluntary IFRS adoption at a company level (Bassemir, 2018;Andre et al, 2012), at a country level (Hope et al, 2006;Pais & Bonito, 2018, Damak-Ayadi et al, 2020Salem et al, 2017;Zahid and Simga-Mugan, 2019), and both at a company and country level mostly in high developed countries. The literature does not cover the different CEO and supervisory board characteristics, which could have a potential impact on voluntary IFRS adoption.…”