Does the adoption of IFRS promote emerging stock markets development? Evidence from MENA countries

Abstract

The purpose of this study is to investigate the effects of IFRS adoption on MENA’s emerging stock markets and to shed some light on the macro-economic determinants which have had an important influence on stock market development. The empirical study is conducted using a balanced panel data from 14 Middle Eastern and North African region countries. Econometrics issues are based on estimations of two random effects specifications. We find that the adoption of IFRS affects positively and significantly stock market development. This paper has some policy implications for MENA region countries. In order to promote stock market development in the region, it is important to encourage non-adopting countries to harmonise their accounting standards with IASB’s ones. Most existing empirical literature has focused largely on the consequences of IFRS at the firm-level. In this paper, we examine the country-level association between IFRS adoption and stock market development. This paper aims at making an in-depth analysis of 14 MENA countries’ financial markets in order to assess how they can improve their capital markets, and hence, be of benefit to the global investor.