Impact of Compliance with the International Financial Reporting Standard IFRS No. 9 on Financial Risk Reduction in Banks Listed on the Palestine Stock Exchange

Abstract

Purpose - This study empirically investigates the impact of compliance with International Financial Reporting Standard (IFRS) No. 9 on reducing financial risks in the banks listed on the Palestine Stock Exchange.
 Design/methodology/approach – The sample of study consists of all financial statements of the banks for the period 2015-2021 that met the study’s criteria. A simple linear regression test was used to examine the study’s hypotheses.
 Findings - The findings of the study show a correlation between the compliance with IFRS No. 9 and the mitigation of financial risks in the banking sector. The study shows an adverse effect of the compliance with IFRS No. 9 on reducing credit and capital risks in the banks under study. It also found that there was an insignificant effect of the compliance with IFRS No. 9 on the reduction of exchange rate and interest rate risks in those banks, while the study observed a positive effect of the compliance with IFRS No. 9 on reducing liquidity risk in those banks.
 Recommendation - The study recommended the necessity to develop and cultivate the banks’ human resources and work on increasing the awareness of the users of financial statements. The study also underscored the need for banks to bolster their capital reserves to meet the expected increase in provisions stipulated within IFRS No. 9.
 Originality/value: Our research highlights the importance of underscored of banks to bolster their capital reserves to meet the expected increase in provisions stipulated within IFRS No. 9. and reducing financial risk in those banks