2.6 Factors Affecting The Adoption Of Empirical Evidence
2.2.6 Factors Affecting the Adoption of IFRS- Empirical Evidence
In a broader view, a set of accounting standards as part of accounting systems is continuously influenced by several differing institutional factors where that set of standards operates. These factors include culture (e.g. in regards to the implementation of IFRS in the Arab world, it could be complicated to harmonize accounting standards to those of western civilizations- Sanchez (2015)), enterprise ownership and activities, finance and capital markets, economic growth and development, accounting regulation, legal system, social system, political system, accounting profession, accounting education and research, inflation, and international factors put it in a simpler sentence: …show more content…
The relative quality of extant governance institutions refers to the ability of these institutions to facilitate the efficient allocation of capital in an economy (Ramanna & Sletten, 2009). Ramanna & Sletten (2009) also argue that, in countries where the quality of the existing governance institutions is relatively high, IFRS adoption is likely to be less attractive. High quality institutions represent high opportunity and switching costs to adopting international accounting standards. The opportunity costs arise because in adopting IFRS, countries forgo the benefits of any past and potential future innovations in local reporting standards specific to their economies. The switching costs arise because countries with well-developed governance institutions are likely to have well developed capital markets, and thus more market participants needing retraining in IFRS. Ramanna & Sletten (2009) also established that the more powerful countries like the United States are less likely to adopt IFRS because they do not want to cede power or control to an international …show more content…
Zehri & Chouaibi (2013), based on the empirical evidence of their research, concluded that the developing countries most favorable to the adoption of IFRS are those having a high economic growth rate, a high level of education and common law based legal system. The other variables, relevant to their model: culture, the existence of a capital market, the political system and internationality, has turned out to have no significant impact on the decision to adopt IFRS in developing
In a broader view, a set of accounting standards as part of accounting systems is continuously influenced by several differing institutional factors where that set of standards operates. These factors include culture (e.g. in regards to the implementation of IFRS in the Arab world, it could be complicated to harmonize accounting standards to those of western civilizations- Sanchez (2015)), enterprise ownership and activities, finance and capital markets, economic growth and development, accounting regulation, legal system, social system, political system, accounting profession, accounting education and research, inflation, and international factors put it in a simpler sentence: …show more content…
The relative quality of extant governance institutions refers to the ability of these institutions to facilitate the efficient allocation of capital in an economy (Ramanna & Sletten, 2009). Ramanna & Sletten (2009) also argue that, in countries where the quality of the existing governance institutions is relatively high, IFRS adoption is likely to be less attractive. High quality institutions represent high opportunity and switching costs to adopting international accounting standards. The opportunity costs arise because in adopting IFRS, countries forgo the benefits of any past and potential future innovations in local reporting standards specific to their economies. The switching costs arise because countries with well-developed governance institutions are likely to have well developed capital markets, and thus more market participants needing retraining in IFRS. Ramanna & Sletten (2009) also established that the more powerful countries like the United States are less likely to adopt IFRS because they do not want to cede power or control to an international …show more content…
Zehri & Chouaibi (2013), based on the empirical evidence of their research, concluded that the developing countries most favorable to the adoption of IFRS are those having a high economic growth rate, a high level of education and common law based legal system. The other variables, relevant to their model: culture, the existence of a capital market, the political system and internationality, has turned out to have no significant impact on the decision to adopt IFRS in developing