Title

International financial reporting standards compliance and information asymmetries: The role of enforcement authority and audit quality

Source of Publication

International Journal of Applied Business and Economic Research

Abstract

This paper aims to investigate whether firms operating in Gulf Co-operation Council (GCC) countries with International Financial Reporting Standards (IFRS) compliance enforcement authority vis-à-vis countries without IFRS compliance enforcement authorities exhibit cross-sectional differences in proxy for information asymmetries and market liquidity. In addition, the study examines whether firms operating in the GCC countries that require firms to be audited by two or more auditors vis-à-vis countries that do not require firms to be audited by two or more auditors exhibit cross-sectional differences in proxy for information asymmetries and market liquidity. Using trading volume as a measure of information asymmetries and market liquidity, I find that information asymmetriesare lower for firms operatingin countrieswith IFRS compliance enforcement authority than firms operating in countries without IFRS compliance enforcement authority. I also find that information asymmetries are lower for firms operating in countries that require firms to be audited by two or more auditors than for firms operating in countries that do not require firms to be audited by two or more auditors. The findings of this study suggest that the merit of IFRS is optimal if institutions such as enforcement authorities and auditors enforce adherence to IFRS and provide assurance that financial statements comply with IFRS.This study shed light on the fundamental accounting questions using samples drawn from firms located in countries in the GCC that are often ignored by accounting researchers. Thus, this study helps to widen our knowledge of accounting practices around the globe and understand the accounting and economic issues compared to samples drawn from developed and mature markets.

Document Type

Article

First Page

3993

Last Page

4010

Publication Date

1-1-2016

Author First name, Last name, Institution

Abiot Tessema, Zayed University
Jagadish Dandu, Zayed University

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