IFRS compliance, corporate governance and financial reporting quality of GSE-listed non-financial firms

Deborah Esi Gyanba Mbir,Otuo Serebour Agyemang,George Tackie,Mac Junior Abeka,Collins G Ntim

doi:10.1080/23311975.2020.1759856

Abstract

The adoption of International financial reporting standards (IFRS) has been presented in several empirical literature as a factor that could improve the quality of financial reports. However, Ghana has not attained the desired levels of financial reporting quality after the adoption of IFRS. Literature reveals that lack of proper enforcement of these high-quality standards may result in limited compliance and will undermine the effectiveness of these standards in terms of attaining high-quality financial reports. This study therefore argues that the relationship between IFRS compliance and reporting quality revolves around some enforcement mechanisms like corporate governance structures. In view of that, by using random effect estimation technique, this study examined the role of corporate governance in the relationship between IFRS compliance and the reporting quality of firms listed on the Ghana Stock Exchange (GSE). The study found that the right corporate governance mechanisms will enhance the positive effect of IFRS compliance on reporting quality. This study further recommends that to gain an appreciable level of public confidence in the annual reports of firms listed on the GSE, the audit committee’s independence and the board’s independence should be strengthened to ensure that management does not only adopt IFRS, but that the standards are actually complied with.

Highlights

Corollary to the 2007 financial crisis, many countries have heightened the importance of ensuring accountability and transparency in financial transactions
Our study examines the relationship between International Financial Reporting Standards (IFRS) compliance and financial reporting quality, as well as the moderating role of corporate governance structures in the relationship between IFRS compliance and financial reporting quality of firms listed on the Ghana Stock exchange from the period 2013–2017
Summary Our study sought to examine the role of corporate governance in the relationship between IFRS compliance and the level of financial reporting quality of firms listed on the Ghana stock exchange

Summary

Introduction

Corollary to the 2007 financial crisis, many countries have heightened the importance of ensuring accountability and transparency in financial transactions. In consequence of the potential benefits of high-quality financial reports, strategies aimed at enhancing the quality of financial reports have become imperative to international accounting organisations as well as governments of developing countries (see Elkins & Entwistle, 2018; Hellman et al, 2018; IASB, 2019a; Ofoegbu & Odoemelam, 2018). One of such strategies that have been adopted by several countries worldwide and has dominated accounting literature is IFRS adoption. We present a review of theoretical and empirical literature on IFRS, corporate governance structures and financial reporting quality. The paper presents a summary, conclusion and implications for policy and practice

Literature review and hypothesis development

Variables and measurement

Findings

Summary and conclusions