Firm Characteristics and the Level of IFRS Compliance and Disclosure in GCC Countries

This study aimed to measure the level of adoption of the disclosure requirements of International Financial Reporting Standards (IFRS) for non-financial listed companies in Gulf Cooperation Council (GCC) markets. The study contributes to the existing literature by providing new, comprehensive evidence regarding IFRS compliance and factors that might influence the level of compliance via its examination for all non-financial firms and for all accounting standards. The study further explored the impact of firm characteristics on IFRS compliance. We employed a self-constructed disclosure index comprising 379 IFRS mandatory disclosure requirements. A cross-sectional analysis was implemented to test the proposed research hypotheses. We found that the level of compliance varies among GCC countries, with companies operating in the UAE having the highest level of compliance. We also found that leverage and the quality of the external auditor had a significant impact on the level of compliance with IFRS by the targeted companies. This indicates that companies with a high leverage ratio are more encouraged to comply with IFRS disclosure requirements in order to provide sufficient information to the users of financial statements to enable them to evaluate their debt repayment ability. Further, our findings demonstrated that companies audited by one of the Big Four audit companies have a high level of IFRS adoption. However, the results were not indicative of any significant relationship between firm size, industry type, profitability and liquidity and the level of compliance with IFRS. In this work, the theoretical and practical implications of our results are discussed