Capital market implications of IFRS adoption in Azerbaijan: Evidence from the energy and banking sectors

The study aimed to assess the peculiarities of adopting International Financial Reporting Standards into the energy and banking sectors of the Republic of Azerbaijan. The goal was accomplished through the mixed methods research study involving the archival and policy document analysis and secondary data analysis of firm-level, market, and macroeconomic trends observed in 2015-2024. The study of evidence suggested that the Azerbaijan’s transition to the International Financial Reporting Standards was a transformative process that started in 1991, involved six milestones, and had not been completely accomplished by the year 2025. The secondary data analysis revealed that transition to the universally accepted standards was associated with improvements in the national banking and energy segments taking the form of a 104% rise in Return on Assets, a 37% increase in Return on Equity, and a 78% growth in Earnings per Share. The mentioned accomplishments were contributed to the growing investors’ confidence preconditioned by increased accuracy and transparency of the financial reporting processes. It was found that adoption of the International Financial Reporting Standards caused resistance, especially from small and medium-sized enterprises. It was suggested to mitigate the resistance and support the transformative processes through institutionalised continuous professional training, centralised digital compliance monitoring, strengthened audit quality and independence, and linking reporting standards compliance with capital market incentives. The findings can be used to enhance competitiveness of the Azerbaijani energy and banking segments and their further integration into the global trade