Title: IFRS adoption, accounting transparency, and financial performance of common stocks in the MENA region

Authors: Said Elfakhani; Abdeljalil Ghanem

Addresses: Suliman S. Olayan School of Business, American University of Beirut (AUB), Bliss Street, Beirut, 1107-2020, Lebanon ' Suliman S. Olayan School of Business, American University of Beirut (AUB), Bliss Street, Beirut, 1107-2020, Lebanon

Abstract: This study examines the accounting transparency and financial performance under International Financial Reporting Standards ('IFRS') in seven Middle East and North African ('MENA') countries during the 2000-2015 period, which marked the early implementation of the standards in the region. Based on a sample of up to 148 firms, we regress return premiums on IFRS adoption, along with eleven performance variables. Under IFRS, well-established firms are larger, have lower excess returns, pay lower dividends, are more profitable, and less overvalued. These findings probably reflect better disclosure of quality information and transparency, i.e., less risk of asymmetry and uncertainty. When comparing the period before to after IFRS inception year within the country, we document an increase in firm size, sales and profitability, greater cash flows, and more reliance on leverage. Yet, these changes are coupled with greater variability in firm performance. These are important outcomes for regulators to consider when designing policies to enhance transparency, resource allocation, and the protection of stakeholders' interests.

Keywords: International Financial Reporting Standards; Middle East and North Africa; financial performance; information asymmetry; transparency.

DOI: 10.1504/JGBA.2022.131474

Journal for Global Business Advancement, 2022 Vol.15 No.5, pp.560 - 577

Received: 26 Apr 2023
Accepted: 09 May 2023
Published online: 13 Jun 2023 *

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