Examining the Impact of Vulnerability and the Law of Justice on the IFRS Adoption Decision

Khandokar Istiak (), John Reid Cummings, Robert Forrester and Macy Adams
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Khandokar Istiak: Department of Economics, Finance and Real Estate, University of South Alabama, Mobile, AL 36688, USA
John Reid Cummings: Department of Economics, Finance and Real Estate, University of South Alabama, Mobile, AL 36688, USA
Robert Forrester: Department of Finance, Midwestern State University, Wichita Falls, TX 76308, USA
Macy Adams: University of South Alabama, Mobile, AL 36688, USA

JRFM, 2024, vol. 17, issue 9, 1-16

Abstract: We investigate the impact of vulnerability and the law of justice indicators on the decision to adopt International Financial Reporting Standards (IFRS) by 133 countries. Applying robust Logit and Probit models to 2021 cross-sectional data, we find that the absence of corruption, state illegitimacy, a well-functioning civil justice system, and insufficient public services are helpful for IFRS adoption. On the other hand, results show that a country’s uneven economic development and human rights violations are detrimental to IFRS adoption. Our research confirms that requiring higher standards for financial and accounting reporting in the media, allocating sufficient budget amounts to support an equitable civil justice system, and coordinating efforts to reduce or eliminate economic inequality may help IFRS adoption. We argue that highlighting the positive benefits of IFRS adoption and the commensurate constructive policy outcomes may add the emphasis needed to convince governmental leaders to move toward IFRS adoption.

Keywords: International Financial Reporting Standards (IFRS); IFRS adoption; law of justice; vulnerability (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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