IDEAS home Printed from https://ideas.repec.org/a/eee/jiaata/v38y2020ics1061951820300069.html
   My bibliography  Save this article

Diffusion theory, national corruption and IFRS adoption around the world

Author

Listed:
  • El-Helaly, Moataz
  • Ntim, Collins G.
  • Al-Gazzar, Manar

Abstract

International financial reporting standards (IFRS) have been widely adopted around the world. However, while there is a lot of evidence on the economic consequences of IFRS adoption (e.g. foreign direct investments; development of financial markets; financial accounting quality; access to capital; and stock market liquidity), especially at the firm-level, few studies examine the national factors that may impede or facilitate the adoption of IFRS at the country-level. This paper seeks to make two new contributions to the extant international accounting literature by examining the influence of national corruption on the (i) speed and (ii) extent of IFRS adoption around the world. Relying on Rogers’s (1962) theory on diffusions of innovation (i.e. Early Adopters, Early Majority, Late Majority, and Laggards), this study uses data relating to 89 non-European Union countries over the 2003–2014 period. Our proposition is based on theoretical and empirical evidence that suggests that country-level IFRS adoption decisions are a function of a country’s institutional environment, including the level of corruption. The findings show that the level (control) of corruption is negatively (positively) associated with a country’s (i) speed and (ii) extent of IFRS adoption.

Suggested Citation

  • El-Helaly, Moataz & Ntim, Collins G. & Al-Gazzar, Manar, 2020. "Diffusion theory, national corruption and IFRS adoption around the world," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:jiaata:v:38:y:2020:i:c:s1061951820300069
    DOI: 10.1016/j.intaccaudtax.2020.100305
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1061951820300069
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intaccaudtax.2020.100305?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ray Ball, 2016. "IFRS -- 10 years later," Accounting and Business Research, Taylor & Francis Journals, vol. 46(5), pages 545-571, August.
    2. Jamie Collins & Klaus Uhlenbruck & Peter Rodriguez, 2009. "Why Firms Engage in Corruption: A Top Management Perspective," Journal of Business Ethics, Springer, vol. 87(1), pages 89-108, June.
    3. Robert M. Bushman & Joseph D. Piotroski & Abbie J. Smith, 2004. "What Determines Corporate Transparency?," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 207-252, May.
    4. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    5. Everett, Jeff & Neu, Dean & Rahaman, Abu Shiraz, 2007. "Accounting and the global fight against corruption," Accounting, Organizations and Society, Elsevier, vol. 32(6), pages 513-542, August.
    6. Ray Ball, 2006. "International Financial Reporting Standards (IFRS): pros and cons for investors," Accounting and Business Research, Taylor & Francis Journals, vol. 36(S1), pages 5-27.
    7. Antonio Argandoña, 2007. "The United Nations Convention Against Corruption and its Impact on International Companies," Journal of Business Ethics, Springer, vol. 74(4), pages 481-496, September.
    8. Christian Leuz, 2003. "IAS Versus U.S. GAAP: Information Asymmetry–Based Evidence from Germany's New Market," Journal of Accounting Research, Wiley Blackwell, vol. 41(3), pages 445-472, June.
    9. Ding, Yuan & Jeanjean, Thomas & Stolowy, Herve, 2005. "Reply to discussion of "Why do national GAAP differ from IAS? The role of culture"," The International Journal of Accounting, Elsevier, vol. 40(4), pages 359-362.
    10. De George, Emmanuel T. & Li, Xi & Shivakumar, Lakshmanan, 2016. "A review of the IFRS adoption literature," LSE Research Online Documents on Economics 67599, London School of Economics and Political Science, LSE Library.
    11. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
    12. Alexios Kythreotis, 2015. "The Interrelation among Faithful Representation (Reliability), Corruption and IFRS Adoption: An Empirical Investigation," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 8(1), pages 25-50, August.
    13. Holger Daske & Luzi Hail & Christian Leuz & Rodrigo Verdi, 2008. "Mandatory IFRS Reporting around the World: Early Evidence on the Economic Consequences," Journal of Accounting Research, Wiley Blackwell, vol. 46(5), pages 1085-1142, December.
    14. Houqe, Muhammad Nurul & Monem, Reza M., 2016. "Reply to the Discussion of “IFRS Adoption, Extent of Disclosure, and Perceived Corruption: A Cross-Country Study”," The International Journal of Accounting, Elsevier, vol. 51(3), pages 382-384.
    15. Mohsin Habib & Leon Zurawicki, 2002. "Corruption and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 291-307, June.
    16. Ahmed Riahi-Belkaoui & Fouad K. AlNajjar, 2006. "Earnings opacity internationally and elements of social, economic and accounting order," Review of Accounting and Finance, Emerald Group Publishing, vol. 5(2), pages 189-203, May.
    17. Ball, Ray & Kothari, S. P. & Robin, Ashok, 2000. "Corrigendum to "The effect of international institutional factors on properties of accounting earnings"; [Journal of Accounting and Economics 29 (2000) 1-51]," Journal of Accounting and Economics, Elsevier, vol. 30(2), pages 241-241, October.
    18. Houqe, Muhammad Nurul & Monem, Reza M. & Zijl, Tony van, 2016. "The economic consequences of IFRS adoption: Evidence from New Zealand," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 27(C), pages 40-48.
    19. Ding, Yuan & Hope, Ole-Kristian & Jeanjean, Thomas & Stolowy, Herve, 2007. "Differences between domestic accounting standards and IAS: Measurement, determinants and implications," Journal of Accounting and Public Policy, Elsevier, vol. 26(1), pages 1-38.
    20. Prather-Kinsey, Jenice, 2006. "Developing countries converging with developed-country accounting standards: Evidence from South Africa and Mexico," The International Journal of Accounting, Elsevier, vol. 41(2), pages 141-162.
    21. Tunyi, Abongeh A. & Ntim, Collins G., 2016. "Location Advantages, Governance Quality, Stock Market Development and Firm Characteristics as Antecedents of African M&As," Journal of International Management, Elsevier, vol. 22(2), pages 147-167.
    22. Holger Daske & Luzi Hail & Christian Leuz & Rodrigo Verdi, 2013. "Adopting a Label: Heterogeneity in the Economic Consequences Around IAS/IFRS Adoptions," Journal of Accounting Research, Wiley Blackwell, vol. 51(3), pages 495-547, June.
    23. Ding, Yuan & Jeanjean, Thomas & Stolowy, Herve, 2005. "Why do national GAAP differ from IAS? The role of culture," The International Journal of Accounting, Elsevier, vol. 40(4), pages 325-350.
    24. Naomi Soderstrom & Kevin Jialin Sun, 2007. "IFRS Adoption and Accounting Quality: A Review," European Accounting Review, Taylor & Francis Journals, vol. 16(4), pages 675-702.
    25. Karthik Ramanna & Ewa Sletten, 2009. "Why do countries adopt International Financial Reporting Standards?," Harvard Business School Working Papers 09-102, Harvard Business School, revised Mar 2009.
    26. Arvind K. Jain, 2001. "Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 71-121, February.
    27. Ball, Ray & Kothari, S. P. & Robin, Ashok, 2000. "The effect of international institutional factors on properties of accounting earnings," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 1-51, February.
    28. Sanjeev Gupta & Hamid Davoodi & Rosa Alonso-Terme, 2002. "Does corruption affect income inequality and poverty?," Economics of Governance, Springer, vol. 3(1), pages 23-45, March.
    29. DeFond, Mark & Hu, Xuesong & Hung, Mingyi & Li, Siqi, 2011. "The impact of mandatory IFRS adoption on foreign mutual fund ownership: The role of comparability," Journal of Accounting and Economics, Elsevier, vol. 51(3), pages 240-258, April.
    30. Alvaro Cuervo-Cazurra, 2006. "Who cares about corruption?," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(6), pages 807-822, November.
    31. Christensen, Hans B. & Hail, Luzi & Leuz, Christian, 2013. "Mandatory IFRS reporting and changes in enforcement," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 147-177.
    32. Bhattacharya, Utpal & Daouk, Hazem & Welker, Michael, 2003. "The World Price of Earnings Opacity," Working Papers 127185, Cornell University, Department of Applied Economics and Management.
    33. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
    34. Ball, Ray & Robin, Ashok & Wu, Joanna Shuang, 2003. "Incentives versus standards: properties of accounting income in four East Asian countries," Journal of Accounting and Economics, Elsevier, vol. 36(1-3), pages 235-270, December.
    35. Houqe, Muhammad Nurul & Easton, Samuel & van Zijl, Tony, 2014. "Does mandatory IFRS adoption improve information quality in low investor protection countries?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 23(2), pages 87-97.
    36. Houqe, Muhammad Nurul & Monem, Reza M., 2016. "IFRS Adoption, Extent of Disclosure, and Perceived Corruption: A Cross-Country Study," The International Journal of Accounting, Elsevier, vol. 51(3), pages 363-378.
    37. Mr. Vito Tanzi & Mr. Hamid R Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 1997/139, International Monetary Fund.
    38. Charles JP Chen & Yuan Ding & Chansog (Francis) Kim, 2010. "High-level politically connected firms, corruption, and analyst forecast accuracy around the world," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(9), pages 1505-1524, December.
    39. Mazzi, Francesco & Slack, Richard & Tsalavoutas, Ioannis, 2018. "The effect of corruption and culture on mandatory disclosure compliance levels: Goodwill reporting in Europe," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 31(C), pages 52-73.
    40. Joanne Horton & George Serafeim & Ioanna Serafeim, 2013. "Does Mandatory IFRS Adoption Improve the Information Environment?," Contemporary Accounting Research, John Wiley & Sons, vol. 30(1), pages 388-423, March.
    41. John Preiato & Philip Brown & Ann Tarca, 2015. "A Comparison of Between-Country Measures of Legal Setting and Enforcement of Accounting Standards," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 42(1-2), pages 1-50, January.
    42. Mr. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Working Papers 1998/063, International Monetary Fund.
    43. Anwer S. Ahmed & Michael Neel & Dechun Wang, 2013. "Does Mandatory Adoption of IFRS Improve Accounting Quality? Preliminary Evidence," Contemporary Accounting Research, John Wiley & Sons, vol. 30(4), pages 1344-1372, December.
    44. Bushee, Brian J. & Leuz, Christian, 2005. "Economic consequences of SEC disclosure regulation: evidence from the OTC bulletin board," Journal of Accounting and Economics, Elsevier, vol. 39(2), pages 233-264, June.
    45. Samuel Fosu & Albert Danso & Henry Agyei-Boapeah & Collins G. Ntim & Emmanuel Adegbite, 2020. "Credit information sharing and loan default in developing countries: the moderating effect of banking market concentration and national governance quality," Review of Quantitative Finance and Accounting, Springer, vol. 55(1), pages 55-103, July.
    46. Peter D. Wysocki, 2004. "Discussion of Ultimate Ownership, Income Management, and Legal and Extra‐Legal Institutions," Journal of Accounting Research, Wiley Blackwell, vol. 42(2), pages 463-474, May.
    47. Emmanuel T. De George & Xi Li & Lakshmanan Shivakumar, 2016. "A review of the IFRS adoption literature," Review of Accounting Studies, Springer, vol. 21(3), pages 898-1004, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paula Silva, Ana & Fontes, Alexandra & Martins, Adelaide, 2021. "Perceptions regarding the implementation of International Financial Reporting Standards in Portugal and Brazil," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 44(C).
    2. Riaz, Zahid & Ray, Pradeep & Ray, Sangeeta, 2022. "The impact of digitalisation on corporate governance in Australia," Journal of Business Research, Elsevier, vol. 152(C), pages 410-424.
    3. Janet Cereola, Sandra & Dynowska, Joanna, 2022. "The impact of IFRS-8, segment reporting, on the disclosure practices of Polish listed companies," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    4. Elad, Charles & Shah, Neeta & Agyeman, Charles, 2023. "Accounting classification in the era of International Financial Reporting Standards: The case of Africa," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 51(C).
    5. Deqiang Deng & Chenchen Ye & Fan Wu & Yijing Guo & Hao Li & Changsheng Wang, 2023. "Effect of organizational ethical self-interest climate on unethical accounting behaviour with two different motivations in China: the moderating effect of Confucian ShiZhong Thinking," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-13, December.
    6. Piotr Luty & Milos Petkovic, 2021. "Does Adoption of Latest Modifications of IAS 16 Influence on Company’s Profitability? Evidence from European Companies," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 899-917.
    7. El-Helaly, Moataz & Ntim, Collins G. & Soliman, Mark, 2020. "The Role of National Culture in International Financial Reporting Standards Adoption," Research in International Business and Finance, Elsevier, vol. 54(C).
    8. Bayar Gardi & Mehmet Aga & Nabaz Nawzad Abdullah, 2023. "Corporate Governance and Financial Reporting Quality: The Mediation Role of IFRS," Sustainability, MDPI, vol. 15(13), pages 1-19, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eliwa, Yasser & Haslam, Jim & Abraham, Santhosh, 2021. "Earnings quality and analysts’ information environment: Evidence from the EU market," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 42(C).
    2. El-Helaly, Moataz & Ntim, Collins G. & Soliman, Mark, 2020. "The Role of National Culture in International Financial Reporting Standards Adoption," Research in International Business and Finance, Elsevier, vol. 54(C).
    3. Akisik, Orhan, 2020. "The impact of financial development, IFRS, and rule of LAW on foreign investments: A cross-country analysis," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 815-838.
    4. Liao, Lin & Yao, Daifei (Troy) & Kang, Helen & Morris, Richard D., 2020. "The impact of legal efficacy on value relevance of the three-level fair value measurement hierarchy," Pacific-Basin Finance Journal, Elsevier, vol. 59(C).
    5. Masahiro Enomoto, 2018. "Cross-Country Research on Earnings Quality: A Literature Review and Future Opportunities," Discussion Paper Series DP2018-06, Research Institute for Economics & Business Administration, Kobe University, revised Oct 2020.
    6. Tsalavoutas, Ioannis & Tsoligkas, Fanis & Evans, Lisa, 2020. "Compliance with IFRS mandatory disclosure requirements: A structured literature review," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 40(C).
    7. Houqe, Muhammad Nurul & van Zijl, Tony & Dunstan, Keitha & Karim, A.K.M. Waresul, 2012. "The Effect of IFRS Adoption and Investor Protection on Earnings Quality Around the World," The International Journal of Accounting, Elsevier, vol. 47(3), pages 333-355.
    8. Singgih Wijayana & Sidney J. Gray, 2019. "Institutional Factors and Earnings Management in the Asia-Pacific: Is IFRS Adoption Making a Difference?," Management International Review, Springer, vol. 59(2), pages 307-334, April.
    9. Hans B. Christensen & Luzi Hail & Christian Leuz, 2021. "Mandatory CSR and sustainability reporting: economic analysis and literature review," Review of Accounting Studies, Springer, vol. 26(3), pages 1176-1248, September.
    10. Bertrand, Jérémie & de Brebisson, Hélène & Burietz, Aurore, 2021. "Why choosing IFRS? Benefits of voluntary adoption by European private companies," International Review of Law and Economics, Elsevier, vol. 65(C).
    11. Houqe, Muhammad Nurul & Monem, Reza M., 2016. "IFRS Adoption, Extent of Disclosure, and Perceived Corruption: A Cross-Country Study," The International Journal of Accounting, Elsevier, vol. 51(3), pages 363-378.
    12. Christensen, Hans B. & Hail, Luzi & Leuz, Christian, 2013. "Mandatory IFRS reporting and changes in enforcement," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 147-177.
    13. Houqe, Muhammad Nurul & Monem, Reza M. & Tareq, Mohammad & van Zijl, Tony, 2016. "Secrecy and the impact of mandatory IFRS adoption on earnings quality in Europe," Pacific-Basin Finance Journal, Elsevier, vol. 40(PB), pages 476-490.
    14. Visani, Franco & Di Lascio, F. Marta L. & Gardini, Silvia, 2020. "The impact of institutional and cultural factors on the use of non-GAAP financial measures. International evidence from the oil and gas industry," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 40(C).
    15. Mazzi, Francesco & Slack, Richard & Tsalavoutas, Ioannis, 2018. "The effect of corruption and culture on mandatory disclosure compliance levels: Goodwill reporting in Europe," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 31(C), pages 52-73.
    16. De George, Emmanuel T. & Li, Xi & Shivakumar, Lakshmanan, 2016. "A review of the IFRS adoption literature," LSE Research Online Documents on Economics 67599, London School of Economics and Political Science, LSE Library.
    17. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    18. Aboud, Ahmed & Roberts, Clare & Mansour Zalata, Alaa, 2018. "The impact of IFRS 8 on financial analysts’ earnings forecast errors: EU evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 33(C), pages 2-17.
    19. Anagnostopoulou, Seraina C., 2017. "Accounting Quality and Loan Pricing: The Effect of Cross-country Differences in Legal Enforcement," The International Journal of Accounting, Elsevier, vol. 52(2), pages 178-200.
    20. Clarkson, Peter & Gao, Ru & Herbohn, Kathleen, 2020. "The relationship between a firm’s information environment and its cash holding decision," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(2).

    More about this item

    Keywords

    IFRS; National corruption; Diffusion of innovations theory; Macroeconomic factors; Legal origin;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jiaata:v:38:y:2020:i:c:s1061951820300069. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-international-accounting-auditing-and-taxation .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.