Determinants of IFRS compliance in Africa: analysis of stakeholder attributes

Purpose: This paper examines the drivers of companies’ compliance with IFRS using the stakeholder salience theory. Research Methods: We have used panel data from 205 companies to examine the IFRS compliance level across 13 African countries. Our study has also established the relationship between stakeholders’ attributes and firms’ compliance with IFRS. Findings: On IFRS compliance, we found that the average compliance score among the companies over the period was 73.09% with a minimum score of 62.86% and maximum of 85.61%. We found a significant positive association between audit committee competence (ACC) and compliance and found the same for chartered accountants on board (AOB). There is less compliance with the latest standards, such as IFRS 3, 7, and 13. Also, IAS 17, 19, 36, and 37 are problematic across the sample. We also found that compliance has been increasing over the years. Practical implications. For companies, our studies provide empirical evidence on the importance of having chartered accountants’ corporate boards as well as competent audit committees involved in ensuring high compliance with IFRS. Our findings also provide valuable information for professional accounting organizations on the role of its members (chartered accountants) in the effectiveness of IFRS compliance. Value/Contribution: This study complements and updates prior studies on IFRS compliance with findings from Africa, a region that has been neglected in the literature. It provides empirical evidence on the importance of chartered accountants sitting on corporate boards in ensuring high compliance with IFRS

IFRS 9 implementation and bank risk

In this paper, we investigate the impact of IFRS 9 – Financial instruments on bank risk. Using a sample of 666 banks across 61 countries for the period 2016–2019, we find a decrease in bank risk following the implementation of IFRS 9. This implies that the forward-looking loan loss provisioning, mandated under IFRS 9, facilitates a reduction in bank risk. We find this effect to be more pronounced for riskier banks, suggesting that the implementation of IFRS 9 is a sign of effective regulation for banks rather than a manifestation of regulatory overreach. We also find the effect to be greater for banks in countries with stronger accounting regulatory enforcement and high banking supervision intensity. Overall, our results, which are robust to different estimation techniques, including multi-level hierarchical regressions and entropy balancing estimations, show that increased transparency and timely recognition under IFRS 9 reduce bank risk

Convergence to IFRS: a comparative analysis of accounting standards in India

This study has employed summative content analysis to measure de-jure harmonisation between the Indian converged International Financial Reporting Standards (Ind.AS) and IFRS under the headings definition terms, measurement and recognition, and presentation and disclosures. There are significant differences between Ind.AS and IFRS in measurement/recognition and presentation/disclosure. The convergence index shows that Ind.AS has removed about 86% of the difference between the existing local GAAP (AS) and IFRS. The most interesting difference between Ind.AS and IFRS is that Ind.AS provides options where IFRS does not, while IFRS also provides options where Ind.AS does not. However, most of the differences between IFRS and Ind.AS are time and transaction-specific likely to be undertaken by large companies; hence, it may not reflect in financial statements of small-medium enterprises. The study makes a methodological contribution by introducing a convergence index which measures how a country has to bridge the gap between local GAAP and IFRS

Does the impact of IFRS on audit fees differ between early and late adopters?

Objective/Purpose: We examine whether the impact of IFRS on audit fees differs between early and late adopters. Data/Methodology: We employ robust econometric estimation on a sample of 314 firms from both early and late IFRS adopting countries Findings: We find that IFRS is positively and significantly associated with an increase in audit fees for early adopters, but the impact is very weak for late adopters and insignificant in some cases. The results on auditing time suggest that increase in audit fees around IFRS adoption is due to increase in audit reporting lags. After accounting for pre and post years, we find that the relationship between IFRS and audit fees, as well as audit time for late adopters, is significant only in the adoption year. However, early adopters experience a significant increase in audit fees and audit time in the transition year to one-year post-adoption. Policy implication: Our findings imply that countries that are yet to adopt IFRS are less likely to experience a significant increase in audit fees audit time. Hence is probable that the benefit of IFRS will outweigh the cost. Originality/Value. The results, therefore, suggest that early adopters paid a premium for been the first users of IFRS, which is consistent with any innovation. Our study provides new insights by demonstrating that the consequences of IFRS differ between early and late adopters. Keywords; Africa, audit fees, audit reporting lags, early adopters, late adopters, IFR

The effect of corruption on microfinance loan portfolio: A semiparametric analysis

In this paper, we examine the extent to which corruption affects the loan portfolio of microfinance institutions (MFIs). We employ robust econometric estimation on a sample of 507 MFIs across 63 countries from 2005 to 2018. Our results show that corruption is negatively associated with the loan portfolio. However, in semiparametric analysis, we find that lower‐level corruption is beneficial to increase the loan portfolio while higher‐level corruption is detrimental. The results imply that it is not just corruption that matters as far as its effect on MFIs\u27 loan portfolio is concerned; what matters is the degree of corruption. In further analyses, we find that corruption reduces both the number of active borrowers and average loan per borrower indicating that corruption reduces both coverage and amount of credit extension. The results suggest that the effect of corruption on the loan portfolio is gender‐sensitive. Corruption facilitates an increase in loans to female borrowers. Our results are robust to alternative variable measurements and different identification strategies, including two‐stage least square

The relationship between the adoption of International Public Sector Accounting Standards and sources of government financing: Evidence from developing countries

We examine the association between the adoption of International Public Sector Accounting Standards (IPSAS) and the level of government financing in the context of developing countries. We draw upon signalling theory, robust econometric techniques and a sample of 54 developing countries over a 13-year period. Our results show that adopting IPSAS is significantly associated with increased financing from international sources and foreign aid. In contrast, there is no significant association for the case of domestic credit. Our results are more pronounced for developing countries that have adopted accrual-based IPSAS than for those that have adopted cash-based IPSAS. Finally, we find that the association between IPSAS and government financing remains similar regardless of the country’s level of institutional quality. Our evidence implies that there is a benefit of increased debt financing after adopting IPSAS, indicative of the incremental signal international capital providers place on the availability of IPSAS-based public sector financial reports

Impact of XBRL adoption on financial reporting quality: a global evidence

Purpose: In this paper, we examine the effect of XBRL adoption on financial reporting quality at the country-level (developing and developed countries). Design/methodology: We use data from 98 developed and developing countries between 2005-2018. We collected data from various sources such as the World Economic Forum, World Development Indicators, World Governance Indicators and XBRL website. Finding: Our results show that XBRL is associated with an increased financial reporting quality. However, the relationship is stronger in developing countries than in developed countries. We also find that the results remain the same after accounting for years of XBRL experience and the effect of accounting globalisation. The results are consistent with the assumption that XBRL formatted financial statements improve information efficiency through increased searching efficiency, quality of display, and comparability. Our results are robust to alternative econometric modifications such as controlling for country, year effects and endogeneity. Implications: Our results can potentially assist the XBRL promoters and regulators in expeditiously assessing the benefits of XBRL and advocating its adoption by many countries. Our findings offer more motivations for regulators around the world to mandate this new filing standard format. Originality: This study contributes to the literature by providing empirical evidence on the consequences of XBRL at the country-level. The present study provides evidence on an important question of whether the XBRL, new information technology in the accounting field, can play a useful role in improving financial reporting

Energy resource melioration and CO2 emissions in China and Nigeria: Efficiency and trade perspectives

Circular economy is one effective strategy to achieve a healthy environment and efficient use of resources. In this study, the trade relationship between China and Nigeria is used to establish how circular economy ameliorates climate change. On the basis of CO2 emissions, data from 1991 to 2014 are obtained and measures for energy efficiency in the mining and extractive-related sectors from energy intensity are derived using Fisher ideal index decomposition. This study utilizes panel-corrected standard error, feasible generalized least squares, autoregressive distribute lag bound, and Bayesian VAR models. These techniques suggest that energy efficiency in the mining and extractive-related sector and the circular economy have not translated into CO2 emission reduction in both countries. However, economic growth, energy use (non-renewable energy), and clean energy substitution (renewable energy) are essential factors in mitigating CO2 emissions. Given such evidence, resource melioration for energy consumption and economic growth have indispensable roles in reducing CO2 emissions

Corporate governance and voluntary disclosures in annual reports: a post-International Financial Reporting Standard adoption evidence from an emerging capital market

Purpose The purpose of this paper is to provide an empirical evidence concerning the influence of Corporate governance and voluntary disclosures in annual reports: a post-International Financial Reporting Standards adoption evidence from an emerging capital market. Design/methodology/approach Data were collected from the annual reports of all 22 listed non-financial firms over a five-year period. Using content analysis, the audited annual reports of the firms were scored on the extent of overall and four specific types of voluntary disclosures made. The panel data obtained were analyzed using a generalized ordinary least squares regression model. Findings The findings of the study show that voluntary disclosures among the firms are low even after the adoption of IFRS. Corporate governance attributes of board size and board leadership structure are significant determinants of the extent of voluntary disclosures made by the firms. However, board independence and auditor type exhibit only a significant positive effect on voluntary financial and forward-looking information disclosures. Research limitations/implications Firms’ voluntary information disclosure and governance variables were restricted to those in annual reports, which may partially reflect the reality of firms’ disclosure and governance practices. Practical implications The present study offers useful insights to regulators of the capital market to strengthen monitoring of firms to ensure strict adherence to corporate governance best practice guidelines as a means of improving information environment. Originality/value This study is one of the very few ones in Africa, especially in the context of Ghana Stock Exchange, to use post-IFRS data and examine a disaggregated voluntary disclosure by firm

Collapse of Big Banks in Ghana:Lessons on Its Corporate Governance

Funding: National Natural Science Foundation of China (No. 71371087) Abstract The news that two indigenous banks, UT and Capital Bank have been taken over by GCB Bank has come as a shock to many Ghanaians, as just a year ago, Capital Bank was adjudged the Best Growing Bank, and Best Bank in Deposits & Savings at the15th Edition of Ghana Banking Awards while UT Bank was adjudged best bank in 2011 by the same institution. UT bank is one of Ghana’s most celebrated brands, after it evolved from a micro-finance company into a successful bank.The study reveals the weak compliance to common Corporate Governance practices within the two banks. Specifically, the two banks had small board size as compared to the standard size of the banking industry. Also, the boards did not have enough committees to discharge its operation. The independence of the boards was also impaired as in most of the directors are executives and the non-executive directors have a close relationship with the promoters and executives. Keywords: Corporate Governance, Collapse, Commercial Banks, Board of Directors DOI: 10.7176/RJFA/10-10-04 Publication date:May 31st 201