AN INSTITUTIONAL PERSPECTIVE ON INTERNATIONAL FINANCIAL REPORTING STANDARDS ADOPTION IN DEVELOPING COUNTRIES

A set of accounting standards does not develop in a vacuum. Political, economic, and social aspects of the jurisdiction in which a set of standards operates reciprocally influence these standards. The fact that the International Financial Accounting Standards (IFRS) has become a globalized set of accounting standards, marked by the use of the standards in more than 120 countries, raises an important question. What factors could significantly influence countries ? decisions to adopt IFRS? This paper investigates the relationship between the decisions of developing countries to adopt IFRS and those countries^ institutional contexts. Using linear regression and logit model to analyze a sample of 46 developing countries ? decisions to adopt or not to adopt IFRS and by drawing upon DiMaggio and Powells (1983) Institutional Isomorphism theory, this paper reveals that IFRS adoption is significantly related to social pressures of isomorphic changes which contradicts the current mainstream belief that adoption is highly associated with its corresponding economic benefits. It hints that the decision of developing countries to adopt IFRS is motivated more by social pressures of legitimacy, than it is by economic reasoning.

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