Why Do African Countries Adopt IFRS? An Institutional Perspective

Abstract

We examine the institutional drivers of International Financial Reporting Standards (IFRS) adoption in Africa. The study covers all 54 African countries and relies on data from 2010 to 2015. Our results support the neo-institutional theoretical predictions that coercive, mimetic, and normative isomorphism influence IFRS adoption in Africa, although the circuits of isomorphic pressures differ from previous studies investigating adoption at the worldwide level and in emerging economies. Specifically, we find evidence of the influence by the World Bank and International Monetary Fund on African countries made subject to the Report on Observance of Standards and Codes — Accounting and Auditing program of assessment. We also found that the presence of global audit firms and the years of membership in the International Federation of Accountants are strongly associated with a country’s decision to adopt IFRS. Also, countries with a more structured and active professional accounting organization (PAO) are more likely to adopt IFRS. Our findings provide insights into the significant role played by local PAOs in the promotion of IFRS. Furthermore, we provide empirical evidence that the nature of the isomorphic pressures in Africa is different from those suggested in prior studies, reinforcing the view that IFRS adoption is primarily driven by social and political dimensions, rather than the economic dimension usually professed by IFRS proponents.

Transition From Local Accounting Standards to International Accounting Standards: A Comparison Between the Ohada Member Countries and Turkey

“…Indeed, the establishment of the BRVM (Regional Stock Exchange) in the UEMOA space in 1996, the pressure exerted by multinational firms, the IMF (International Monetary Fund) and the WB (World Bank) also played an important role in the convergence process of the SYSCOA/SYSCOHADA towards the IAS/IFRS in the late 1990s. Also, the partial adoption of these standards with the last revision of the SYSCOHADA in 2017 (Boolaky, Tawiah, & Soobaroyen, 2020;Degos et al, 2019;Elad, 2015).…”

“…However, multiple factors which might play significant roles in facilitating the transition towards the IAS/IFRS have been extensively examined and supported by several studies. Some of the main factors largely covered are: the role of culture, the education level and the existence of a financial market and other political and socio-economic factors which are either strongly or relatively tied to the adoption of IAS/IFRS by a given country (Alp & Ustundag, 2009;Boolaky et al, 2020;Chamisa, 2000;Chua & Taylor, 2008;Ding, Jeanjean, & Stolowy, 2005;HassabElnaby et al, 2003;Jeriji, 2009;Stainbank, 2014;Zeghal & Mhedhbi, 2006). Thus, we can assume that countries with an Anglo-Saxon background culture with a growing financial market are more likely to adopt earlier the IAS/IFRS.…”

“…Other factors behind the adoption the IAS/IFRS by several countries and specially emerging and developing ones are the ''coercive, mimetic, and normative isomorphism influence'' (Boolaky et al, 2020;Irvine, 2008). Those factors are explained by the pressure put on these countries to adopt the IAS/IFRS by international institutions such as the WB and the IMF.…”

“…Those factors are explained by the pressure put on these countries to adopt the IAS/IFRS by international institutions such as the WB and the IMF. Also, those factors can be explained by the years of membership in the International Federation of Accountants, the presence of global audit firm in those countries along with business partners and large multinationals which might push for more compliance with the IAS/IFRS (Boolaky et al, 2020;Dicko & Fortin, 2014;Irvine, 2008).…”

“…As for the OHADA countries, which for the most part still use loans granted by the IMF and the WB, institutions that back and encourage adoption of the IAS/IFRS, the transition process towards the IAS/IFRS can also be considered as the result of lobbying and requirement for loan granting from these institutions (Boolaky et al, 2020;Degos et al, 2019;Elad, 2015;Irvine, 2008;Jeriji, 2009). These factors are defined as ''institutional pressure'' (Dicko & Fortin, 2014;Irvine, 2008) which explain why some countries especially in Africa chose to adopt the IAS/IFRS.…”