The relationship between IPSAS adoption and perceived levels of corruption: Does political stability matter?

Mounira Hamed-Sidhom,Nadia Loukil

doi:10.22495/cocv19i1art2

Abstract

The paper aims to examine the relationship between International Public Sector Accounting Standards (IPSAS) adoption and the perceived level of corruption in developing countries. It also attempts to inspect the mediating effect of political stability on this relationship. We follow the methodology used by the International Federation of Accountants (IFAC) to assess country adoption status and we apply a panel regression analysis to 57 developing countries over the 2016–2019 period. Our findings suggest that country’s decision to adopt IPSAS cannot shortly lead to a reduction of its corruption perceived level. In addition, we make evidence that the level of corruption does not matter on the relationship between the IPSAS adoption and the corruption perceived level. We find also that political stability, while decreases corruption, doesn’t contribute to enhance the effect of IPSAS adoption on the perceived corruption level. This paper provides insights into the role of IPSAS adoption to countries’ corruption levels. It will be of interest to accounting standard-setters, regulators, and policymakers in countries that are transitioning to or considering International Public Sector Accounting Standards. It will also be of interest to regulators and policymakers, multilateral institutions in their effort to fight corruption

Highlights

Corruption has been a phenomenon of life since antiquity
Whatever the level of political stability, International Public Sector Accounting Standards (IPSAS) adoption has no significant effect on corruption level
Given the prior evidence on the beneficial effect of International Financial Reporting Standards (IFRS) adoption on corruption reduction, we argue that decision to move forward to IPSAS can negatively affect the country’s level of corruption

Summary

Introduction

Corruption has been a phenomenon of life since antiquity. It is defined broadly as the use of public office for unauthorized private gain (Shleifer & Vishny, 1993). It is the “abuse of discretionary power by bureaucratic officials advancing their own interests by engaging in unauthorized rent-seeking activities” Corruption has harmful effects, including weakening social institutions, diverting funds from food, health care, poverty alleviation or education projects, and slowing economic growth (Rodriguez, Siegel, Hillman, & Eden, 2006). Corruption can be defined as the abuse of authority for private benefit (Rodriguez et al, 2006). A large literature exists on its determinants and consequences and ways to constrain it (e.g., Ades & Di Tella, 1996; Fisman & Svensson, 2007; Tanzi, 1998; Treisman, 2007)

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