Abstract
The purpose of this study is to verify the impact of international financial reporting standards (IFRS) adoption on the quality of accounting performance and efficiency of investment decisions in the Saudi business environment as an emerging economy. In this study, content analysis approach is adopted for examining the annual reports of Saudi companies listed in Saudi stock exchange market during two periods: the pre-adoption of IFRS period during the year of 2016 and the post-adoption of IFRS period during the period 2017-2018. The study uses accounting information, accounting conservatism, earning management as alternative variables of accounting performance quality. In addition to accounting profit quality, liquidity and cost of capital are also used as alternative variables for the efficiency of investment decisions. The study finds that there was a positive impact of IFRS adoption on the quality of accounting performance, since it was positively related to both the qualitative characteristics of information and accounting conservatism, while it was negatively related to earning management. IFRS also improves the efficiency of investment decisions, as it was positively related to both profit quality and liquidity while it was negatively related to cost of capital.
Highlights
Several accounting studies have confirmed that the adoption of international financial reporting standards (IFRS) has contributed to improve the quality of information provided to different categories of users by providing relevant, understandable and highly reliable information (Defond, 2019), in addition to, making the accounting data of companies comparable with the data of other companies for different periods (Drobetz et al, 2019)
Concerning the relationship between IFRS and the quality of accounting performance, the results show a positive correlation between the adoption of IFRS and each of the qualitative characteristics of accounting information, transparency and accounting conservatism, where the value of coefficient correlation was positive for each indicator
This study aimed to measure the impact of adoption IFRS on the quality of accounting performance and the efficiency of investment decisions for Saudi joint stock companies
Summary
Several accounting studies have confirmed that the adoption of IFRS has contributed to improve the quality of information provided to different categories of users by providing relevant, understandable and highly reliable information (Defond, 2019), in addition to, making the accounting data of companies comparable with the data of other companies for different periods (Drobetz et al, 2019). The main objective of this research is to analyze the impact of mandatory adoption of IFRS on the quality of accounting performance and the efficiency of investment decisions of Saudi Public Shareholding Companies. The results of this study may provide useful information to the bodies regulating, organizing and responsible for the adoption and development of IFRS all over the economic sector in Saudi business environment. The main motivations of this research are that emerging markets need to keep pace with developed markets concerning to IFRS adoption to improve the quality of accounting information, where these markets suffer from increasing discrepancy in information, less compliance with laws, regulations and publications that regulate accounting profession. The research gap that requires further investigation to analyze and measure the feedback of adopting IFRS on the quality of accounting performance and efficiency of investment decisions. The research problem can be identified by the following questions: What is the impact of IFRS adoption on the quality of accounting performance? What is the impact of IFRS adoption on the efficiency of investment decisions?
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