Navigating governance and accounting reforms in Saudi Arabia's emerging market: impact of audit quality, board characteristics, and IFRS adoption on financial performance

Kateb, Ines; Belgacem, Ines

doi:10.1057/s41310-023-00193-5

Cited by 8 publications

(5 citation statements)

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“…Several crucial contextual factors may elucidate this observation within the unique context of Saudi Arabia. First and foremost, the transition to IFRS, in accordance with regulatory theory emphasizing the influence of regulatory changes on organizational behavior (Moran, 1986), has engendered substantial costs for companies (Kateb and Belgacem, 2023). This regulatory move toward IFRS aimed to align financial disclosure practices with international standards, thereby improving the accuracy and integrity of financial information.…”

Section: Resultsmentioning

confidence: 99%

“…However, it necessitated substantial regulatory reforms, including modifications to disclosure requirements and timelines, as mandated by the CMA in 2016. Adapting to IFRS imposed a learning curve and necessitated adjustments in disclosure procedures, adding to the complexity of the process (Kateb and Belgacem, 2023). Companies had to allocate considerable time and resources to data collection, analysis and presentation in accordance with the new standards.…”

Section: Resultsmentioning

confidence: 99%

“…, 2019; Agyei-Boapeah et al. , 2020; Kateb and Belgacem, 2023; Fullana et al. , 2021; Dayanandan et al.…”

Section: Methodsunclassified

“…It assumes a value of one during the post-IFRS adoption period and zero otherwise. This method has been extensively used and validated in earlier studies analyzing the impact of mandatory IFRS adoption on various aspects of accounting research (Eng et al, 2019;Agyei-Boapeah et al, 2020;Kateb and Belgacem, 2023;Fullana et al, 2021;Dayanandan et al, 2016). Consequently, our final sample comprises two distinct periods: the pre-IFRS period and the post-IFRS period.…”

Section: Moderating Variable: Ifrs Adoptionmentioning

confidence: 99%

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Reporting lag in the GCC region: exploring the nexus of earnings management and IFRS transition

Kateb

2024

IJAIM

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Purpose The purpose of this study is to delve into the complex interplay between earnings management (EM), the International Financial Reporting Standards (IFRS) implementation and the reporting lag (RL) within the specific context of the Gulf Cooperation Council (GCC) region, with a particular emphasis on the Saudi context, offering insights into their influence on financial reporting practices. Design/methodology/approach Using a panel data set of 135 Saudi companies over an eight-year period, covering four years before and after the mandatory adoption of IFRS in 2017, this study investigates the Saudi financial reporting landscape. It uses interaction moderation analysis to explore variable effects and includes robustness analyses to validate the findings. Findings The findings reveal three key outcomes. First, they challenge conventional expectations by showing no significant impact of discretionary accruals (DACC) on RL, contrary to established accounting theories. This deviation is attributed to unique market characteristics within the GCC region, including family-owned businesses, government involvement and distinct regulations, with specific insights relevant to Saudi Arabia. Second, an unexpected positive association between IFRS adoption and RL in Saudi Arabia emerged. Several contextual factors contribute, including transition costs, compliance expenses, institutional dynamics and reconciling IFRS with local Shariah principles. Most importantly, IFRS adoption significantly reduced RL, especially for companies with high DACC levels. This highlights IFRS’s transformative role, emphasizes aligning EM with international standards for investor confidence and mitigating nonconformity risks in the GCC region’s business landscape. Practical implications The research findings carry significant practical implications for companies operating within the GCC region, accentuating the strategic imperative of timely financial reporting to bolster credibility, align with international standards and fortify investor confidence. Moreover, regulators and policymakers are urged to consider tailoring accounting regulations to accommodate the distinctive GCC context, thereby adeptly addressing the intricacies stemming from the interplay of EM, IFRS adoption and RL dynamics in the region. Originality/value This study adds to the current body of literature by highlighting the significant moderating influence of IFRS transition on the nexus between DACC and RL. It underscores the crucial role of this global accounting framework in reshaping financial reporting practices.

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Section: Resultsmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

“…, 2019; Agyei-Boapeah et al. , 2020; Kateb and Belgacem, 2023; Fullana et al. , 2021; Dayanandan et al.…”

Section: Methodsunclassified

Section: Moderating Variable: Ifrs Adoptionmentioning

confidence: 99%

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Reporting lag in the GCC region: exploring the nexus of earnings management and IFRS transition

Kateb

2024

IJAIM

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“…Further validation is offered by Lipton and Lorsch (1992), who highlight that informal interactions during frequent board meetings foster both effectiveness and unity within the board. To gauge this effectiveness, the present study incorporates three distinct characteristics: board size (Kateb et al , 2023), the degree of board independence and the frequency of board meetings (Kateb and Belgacem, 2023).…”

Section: Methodsmentioning

confidence: 99%

Ethical governance and the board’s moderating role in Zakat avoidance effects on firm value in muslim nations

Kateb,

Ftouhi

2023

JFRC

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Purpose This paper aims to examine the impact of Zakat avoidance on firm value and investigates how board characteristics moderate this relationship within the context of Saudi Arabia, a Muslim nation. Design/methodology/approach Using panel data from 2009 to 2020, encompassing 78 nonfinancial firms listed on the Saudi Stock Exchange, this study constructs an enhanced measure of Zakat avoidance that integrates insights from tax avoidance research, Shariah principles and the regulations of the Zakat, Tax and Customs Authority. This research uses empirical techniques, including panel data regressions and interaction analysis to investigate how board characteristics may influence this relationship. Findings Descriptive analysis reveals pervasive Zakat compliance, underscoring the effectiveness of Saudi Arabia’s robust Zakat system. Regression results indicate a positive association between Zakat payment and firm value. Remarkably, board characteristics exhibit no significant link to Zakat avoidance, emphasizing the potency of the Zakat system and religious adherence. However, the moderation analysis reveals that board independence and meeting frequency positively moderate the relationship between Zakat avoidance and firm value. Practical implications The study emphasizes the vital importance of upholding Zakat obligations to cultivate trust among stakeholders and amplify firm value. It advocates for governance frameworks that foster vigilant oversight and independence, ultimately enhancing a firm’s overall worth. Furthermore, the study’s findings provide valuable insights for corporate leaders, investors, policymakers and society as a whole, facilitating the promotion of ethical financial conduct and driving holistic economic development. Originality/value This research introduces novel insights by scrutinizing the intricate interplay of Zakat avoidance, board dynamics and firm value within the context of a culturally distinctive emerging economy. The development of a distinct Zakat avoidance metric, along with comprehensive empirical assessment, contributes to the originality of the study. Moreover, the investigation into the moderating influence of board characteristics adds value to the existing body of knowledge.

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The bridge to quality financial reporting: Audit committees’ mediating role in IFRS implementation for emerging markets

Kateb

2023

J Corp Accounting Finance

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This study aims to examine the impact of International Financial Reporting Standards (IFRS) adoption on financial reporting quality in Saudi Arabia, with a specific focus on the mediating role of effective audit committees (ACs) and the specific characteristics of ACs that have a negative correlation with earnings management (EM) practices. The research collected financial data from 92 listed firms spanning the period from 2012 to 2020 encompassing both the years before and after the IFRS adoption in 2017. . The study used regression and rigorous mediation analysis based on the Baron and Kenny (1986) approach to investigate the relationship between IFRS adoption, ACs, and EM. The findings indicate that IFRS adoption has a negative and significant impact on EM practices. Additionally, the study found that AC expertise is positively influenced by the IFRS adoption, while the AC size has a positive correlation with EM levels. The study further revealed that AC expertise has a negative correlation with EM levels and fully mediates the relationship between IFRS adoption and EM. The research's findings carry significant practical implications for a range of stakeholders. Regulators and policymakers in Saudi Arabia should consider the positive impact of IFRS adoption on financial reporting transparency and accountability when evaluating their regulatory framework. Firms can strengthen their corporate governance practices by focusing on the recruitment and training of AC members with robust financial and accounting backgrounds. This emphasis on AC quality, rather than size, is crucial to mitigating EM practices and enhancing the effectiveness of IFRS implementation. Lastly, investors and analysts can utilize these findings to assess the reliability of financial statements and identify firms with robust governance structures. Furthermore, the study contributes to the discourse on financial reporting and governance dynamics in emerging markets, offering insights for future research and policy discussions.

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Navigating governance and accounting reforms in Saudi Arabia's emerging market: impact of audit quality, board characteristics, and IFRS adoption on financial performance

Cited by 8 publications

References 100 publications

Reporting lag in the GCC region: exploring the nexus of earnings management and IFRS transition

Reporting lag in the GCC region: exploring the nexus of earnings management and IFRS transition

Ethical governance and the board’s moderating role in Zakat avoidance effects on firm value in muslim nations

The bridge to quality financial reporting: Audit committees’ mediating role in IFRS implementation for emerging markets

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