The implementation of IFRS9 in Gulf banks: using the GMM and the difference-in-differences with multiple time periods approaches

Murad Abuaddous

Journal of Islamic Accounting and Business Research, 2023, vol. 16, issue 1, 125-146

Abstract: Purpose - This paper aims to examine the impact of the mandatory adoption of (International Financial Reporting Standards [IFRS] 9) on loan provisions, nonperforming loans (NPL) and impairment loan loss in Gulf banks. This study also investigates potential variations in outcomes compared to prior models and explores the use of the Callaway and Sant’Anna (2021) estimator for difference-in-differences (DiD) with multiple time periods. Design/methodology/approach - The research is based on a sample of 53 Gulf banks covering the period from 2012 to 2020. The study analyzes the changes in loan provisions, impairment loss and NPL following the implementation of IFRS 9. It uses statistical analysis and the DiD method to compare the outcomes between the experimental group (treated by IFRS 9) and the control group (not treated). Findings - The findings reveal a statistically insignificant increase in loan provisions, impairment loss and NPL after the adoption of IFRS 9. These results align with previous studies and suggest that Gulf banks were proactive in anticipating and mitigating the impact of the new standard. The study also observes a synchronization of provisioning practices across Gulf countries and a certain level of consistency in recognizing loan losses. Practical implications - The practical implications of this study suggest that Gulf banks have successfully absorbed the impact of IFRS 9 and have implemented collaborative approaches. Originality/value - The study offers some new sight into IFRS9 outcomes in developing countries and opens the door for implementing a novel DiD estimation in future research studies.

Keywords: IFRS9; Nonperforming loans; Difference-in-differences with multiple time periods; Gulf banks; Expected credit losses (ECL) models; Generalized method of moments (GMM) (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:jiabr-07-2022-0178

DOI: 10.1108/JIABR-07-2022-0178

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