Analysis of the impact of financial, institutional and cultural factors on IFRS adoption: evidence from the non-EU Union countries

Abstract

Purpose: This study aims to analyse the drivers of the shift towards the global adoption of International Financial Reporting Standards (IFRS) in 23 non-European Union countries over the period from 2001 to 2019. Design/methodology/approach: This study used various panel data models, including fixed effects panel Logit and Probit models for IFRS adoption status, and ordered panel data models for examining the extent and timing of IFRS adoption, accommodating the multifaceted nature of the dependent variable. Findings: The results suggest that countries with a high Anglo-Saxon cultural background, human development and strong legal enforcement, particularly in controlling corruption, are more likely to adopt IFRS fully and early. Notably, the extent of business disclosure in these countries impacts IFRS adoption status but does not significantly affect the extent or timing of adoption. Surprisingly, the findings reveal that countries with higher financial openness are less likely to adopt IFRS. Research limitations/implications: These results are relevant to standard setters and regulators in countries on the verge of adopting IFRS who are interested in financial, institutional and cultural factors and their impacts on IFRS adoption. Originality/value: This research stands out for its emphasis on the pivotal role of cultural and institutional nuances in shaping the trajectory of IFRS adoption within non-European Union countries, thereby broadening the accounting discourse.