The Mediating Role of IFRS Implementation on the Relationship between Cultural Dimensions and Accounting Practices of the Multinational Companies Operating in Tanzania

Chacha Ryoba, Henry Chalu

Abstract


This paper examines the mediation role of International Financial Reporting Standards (IFRS) implementation at the firm level on the influence of cultural dimensions (power distance, individualism, uncertainty avoidance, masculinity, long-term orientation, and indulgence) on accounting practices of the multinational companies (MNCs) operating in Tanzania. Data was gathered from 209 accountants, auditors, finance managers, and directors of the MNCs. Hypotheses were tested using Ordinary Least Square (OLS) regression based on Hayes PROCESS macro tool. The study results reveal that the IFRS implementation negatively mediates the influence of power distance and masculinity on the accounting practices of the MNCs. Conversely, the results show that IFRS implementation positively mediates the influence of uncertainty avoidance, long-term orientation, and indulgence on the accounting practices of the MNCs. These results indicate that enhanced implementation of IFRS may increase the influence of uncertainty avoidance, long-term orientation, and indulgence; while suppressing the influence of power distance and masculinity on accounting practices. The results suggest that cultural factors should be considered alongside the implementation of IFRS when examining accounting practices within MNCs. The findings contribute to our understanding of the interplay between cultural dimensions, IFRS implementation, and accounting practices in the context of MNCs operating in Tanzania.

Full Text:

PDF

References


Abata, M. A. (2015). The Impact of International Financial Reporting Standards (IFRS) Adoption on Financial Reporting Practice in the Nigerian Banking Sector. Journal of Policy and Development Studies, 9(2), 169–184.

Ali, A., Akbar, S., & Ormrod, P. (2016). Impact of international financial reporting standards on the profit and equity of AIM listed companies in the UK. In Accounting Forum , 40(1), 45-62.

Alina, C. M., Cerasela, S. E., & Cristina, D. M. (2017). Culture and Accounting Practices. Ovidius University Annals, Economic Sciences Series, 17(1), 435-438.

Akman, N. H. (2011). The effect of IFRS adoption on financial disclosure: does culture still play a role?. American International Journal of Contemporary Research, 1(1), 6–17.

Almagtome, A. and Khaghaany, M. (2017), “The Impact of National Culture and Political Instability on Sustainability Reporting: A Comparative Study”.

Ball, R. (2016). IFRS–10 years later. Accounting and Business Research, 46(5), 545–571.

Bhattacherjee, A. (2012). Social Science Research: principles, methods, and practice: Textbooks Collection. Book 3. Retrieved from https://digitalcommons.usf.edu/oa_textbooks/3/

BOT (2021). List of Licensed Institutions. Retrieved from https://www.bot.go.tz/BankSupervision/Institutions

Borker, D. R. (2013). Is there a favorable cultural profile for IFRS?: an examination and extension of Gray's accounting value hypotheses. International Business & Economics Research Journal (IBER), 12(2), 167–178.

Chanchani, S., & Willett, R. (2004). An empirical assessment of Gray's accounting value constructs. The International Journal of Accounting, 39(2), 125–154.

Chariri, A. (2017). Financial reporting practice as a ritual: Understanding accounting within institutional framework. Journal of Economics, Business and Accountancy Ventura, 14(1), 107–135

Contractors Registration Board (CRB). (2020). Contractor’s Directory. Retrieved from http://www.crb.go.tz/contractors?combine=&field_registration_number_value=&field_class_tid=36&field_types_of_contractor_tid=All&field_cocategory_tid=35

Confederation of Tanzania Industries (CTI). (2017). Annual Report for 2016/2017. Dar es Salaam, Tanzania

Darwish, M. A. (2014). The Role of Cultural Dimensions in Shaping the Generally Accepted Accounting Practices in Palestine (Doctoral dissertation, Al-Azhar University-GAZA). Retrieved from http://dstore.alazhar.edu.ps/xmlui/bitstream/handle/123456789/2342/20102894.pdf?sequence=1&isAllowed=y

DiMaggio, P. J., & Powell, W. W. (1983). The Iron Cage Revisited : Institutional Isomorphism and Collective Rationality in Organisational Fields. American Sociological Review, 48(2), 147–160

Dobler, M., Lajili, K., & Zéghal, D. (2016). Risk disclosures and cultural values: A research note. Research Journal of Finance and Accounting, 7(18), 53-61.

Edeigba, J., Gan, C., & Amenkhienan, F. (2020). The influence of cultural diversity on the convergence of IFRS: evidence from Nigeria IFRS implementation. Review of Quantitative Finance and Accounting, 55(1), 105–121.

Egbunike, C. F., & Ogbodo, O. (2015). The influence of cultural values on accounting practice in Nigeria. Developing Country Studies, 5(3), 110–121.

Emeni, F. K., & Ugbogbo, S. N. (2014). Accounting frameworks and cross-cultural effects on accounting disclosure practices in Nigeria. Covenant Journal of Business and Social Sciences, 6(2), 48–69.

Fearnley, N., & Gray, S. (2015). National institutional factors and IFRS Implementation in Europe: The case of investment property companies. International Journal of Accounting and Information Management, 23(3), 271–288.

Field, A. (2013). Discovering Statistics Using IBM SPSS Statistics (4th ed.). SAGE Publications.

Gierusz, J., & Koleśnik, K. (2019). The influence of culture on disclosures in financial statements prepared under International Financial Reporting Standards. Zeszyty Teoretyczne Rachunkowości, 101(157), 111–132.

Gray, S.J. (1988). Towards a Theory of Cultural Influence on the Development of Accounting Systems Internationally. Abacus, 24(1), 1–15.

Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. L. (2014). Multivariate data analysis (7th ed.). Pearson Education Limited, Harlow, Essex.

Hamawandy, N. M., Omer, A. J., Kakil, R. M., & Qader, A. N. (2021). Perceived Challenges of IFRS Acceptance among Iraqi Firms: Do Benefit of IFRS matter. Review of International Geographical Education, 11(10), 1261–1280

Hasan, M. T., & Rahman, A. A. (2017). IFRS Adoption and earnings management: A review and justification of earnings management model for developing countries. ELK Asia Pacific Journal of Finance and Risk Management, 8(3), 43–60.

Hayes, A. F., Montoya, A. K., & Rockwood, N. J. (2017). The analysis of mechanisms and their contingencies: PROCESS versus structural equation modeling. Australasian Marketing Journal, 25(1), 76–81.

Heale, R., & Twycross, A. (2015). Validity and reliability in quantitative studies. Evidence-Based Nursing, 18(3), 66–67.

Hofstede, G., Hofstede, G. J. & Minkov, M. (2010). Cultures and Organisations: Software of the Mind (Rev. 3rd ed.). New York: McGraw-Hill

IFRS Foundation. (2018). Use of IFRS Standards around the world. Retrieved from https://www.ifrs.org/content/dam/ifrs/around-the-world/adoption/use-of-ifrs-around-the-world-overview-sept-2018.pdf

Irvine, H. (2008). The global institutionalization of financial reporting: The case of the United Arab Emirates. Accounting Forum, 32(2), 125–142)

Kaaya, I. D. (2014). The IFRS Application Status : Espousal or Convergence ? A Retrospective Pragmatic Review between India and Tanzania. The African Journal of Finance and Management, 23(1&2), 55–69.

Kaaya, I. D. (2019). Financial reporting and value relevance: Empirical evidence from Indian and Tanzanian listed firms. Business Management Review, 22(2), 100–118.

Khan, I.U., Usman, A., & Jan, M.F. (2021). Factors Affecting IFRS Adoption in Pakistan and Its Impact on Firm Performance. Multicultural Education, 7(11), 556–580

Khlif, H. (2016). Hofstede’s cultural dimensions in accounting research: A review. Meditari Accountancy Research, 24(4), 545–573.

Khlif, H., Ahmed, K., & Alam, M. (2020). Accounting regulations and IFRS adoption in francophone North African countries: the experience of Algeria, Morocco, and Tunisia. The International Journal of Accounting, 55(01), 2050004

Kroeber, A. L., & Parsons, T. (1958). The concepts of culture and of social system. American Sociology Review, 23,582–583.

Lackson, B., & Muba, S. (2021). Factors Affecting the Adoption of Financial Reporting Standards by Micro, Small and Medium Enterprises in Tanzania: The Case of Mbeya City Council. East African Journal of Business and Economics, 4(1), 46–61.

Maali, B. M., & Al-Attar, A. (2017). Corporate Disclosure and Cultural Values: A Test for Multinational Corporations. The Journal of Developing Areas, 51(3), 251–265.

Mahjoub, E. E., & Dicko, S. (2017). The Impact of IFRS Adoption on Canadian Firms’ Disclosure Levels. International Journal of Accounting and Financial Reporting, 7(1), 227–248

Mbelwa, L. H., & Mahangila, D. N. (2020). Critical External Institutional Pressures towards Effective Implementation of IFRS in the Tanzanian Private Hospital Sector. ORSEA Journal, 9(1), 90–109.

Mensah, E. (2021). The effect of IFRS adoption on financial reporting quality: Evidence from listed manufacturing firms in Ghana. Economic Research-Ekonomska Istraživanja, 34(1), 2890–2905.

Meyer, J. W., & Rowan, B. (1977). Institutionalized Organisations : Formal Structure as Myth and Ceremony. American Journal of Sociology, 83(2), 340–363.

Mitchell, M. L., & Jolley, J. M. (2010). Research Design Explained: Instructor's edition (7th ed.). Belmont, CA: Wadsworth/Cengage Learning.

Msuya, R., & Maleko, G. (2015). Non-compliance and Challenges of Implementing IFRS in Saving and Credits Cooperative Societies (SACCOS) in Shinyanga Region – Tanzania. Journal of Business Administration and Education, 7(1), 17–33.

NBAA. (2018). Technical Pronouncement No.1 of 2018: Scope of Applicability of IFRS, IPSASs and IFRS for SMEs in Tanzania. Dar es Salaam: Tanzania. Retrieved from https://www.nbaa.go.tz/2019/march/techpro2019.pdf

Nurunnabi, M. (2017). Auditors’ perceptions of the implementation of International Financial Reporting Standards (IFRS) in a developing country. Journal of Accounting in Emerging Economies, 7(1), 108–133.

Obara, L. C., & Nangih, E. (2017). Accounting practices and performance of oil and gas industry (upstream sector) in Nigeria: An empirical analysis. International journal of Academic Research in Accounting, Finance, and Management Sciences, 7(2), 215-222.

Ogbenjuwa, E. I. (2016). Implementation of International Financial Reporting Standards by listed companies in Nigeria (Doctoral dissertation, Walden University). Retrieved from https://scholarworks.waldenu.edu/cgi/viewcontent.cgi?article=3430&context=dissertations

Olaoye, S. A., & Aguguom, T. A. (2017). Justification for IFRS in Sub-Sahara African Countries : A case of Multinational Corporations. International Journal of Economics and Business Management, 3(7), 56–68.

Özdil, S. Ö., & Kutlu, Ö. (2019). Investigation of the mediator variable effect using BK, Sobel and Bootstrap methods (Mathematical literacy case). International Journal of Progressive Education, 15(2), 30-43.

Prince, T. R. (1963). Extension of the Boundaries of Accounting Theory. South-Western Publishing Company, Ohio

Pucheta-Martínez, M.C. and Gallego-Álvarez, I. (2020). Corporate Environmental Disclosure Practices in Different National Contexts: The Influence of Cultural Dimensions. Organization and Environment, 33 (4), 597–623.

Quraishi, M. K., & Islam, M. S. (2014). The Adoption of IAS/IFRS in a Developing Country-A Case of Bangladesh. ELK Asia Pacific Journal of Finance and Risk Management, 5(3).

Riahi, R. (2022). Adoption of International Accounting Standards in Emerging Countries: A Cultural Perspective. European Journal of Business and Management Research, 7(1), 28–34.

Rotberg, B. (2016). Culture and IFRS: The effect of Culture on IFRS Implementation and financial Reporting Quality. (Thesis, Radboud University). Retrieved from https://theses.ubn.ru.nl/server/api/core/bitstreams/6ef729cf-9ee5-4c4e-91be-e2044fe14892/content

Shiferaw, N., & Assefa, D (2020). Benefits and Challenges of International Financial Reporting Standard (IFRS) Transition in Ethiopia (Case Study on Some Selected Organizations in Ethiopia). International Journal of Scientific and Research Publications, 10(6), 1041–1049

Soetan, T.. (2018). Analysis of cultural influence in the application of international financial reporting standards in Nigeria. International Journal in Management & Social Science, 6(6), 190–203.

Tanzania Extractive Industries Transparency (TEITI), (2020). The 10th TEITI Report for the Period of July 1st 2017 to June 30th 2018. Mzumbe University, Dar Es Salaam.

Tasos, S., & Stergios, A. (2018). Classification and Factors Influencing Accounting Systems. International Journal of Research in Management, 5 (8), 1–7.

Taylor, R. S. (2020). Foreign direct investment and economic growth. Analysis of sectoral foreign direct investment in Tanzania. African Development Review, 32(4), 699-717.

UNCTAD. (2021). World investment report 2021: Investing in sustainable recovery. UN.

Yamane, T. (1973). Statistics: An Introductory Analysis (3rd ed.). Harper and Row.

Yamen, A., Nimer, K., Ramadan, A., & Abidi, O. (2018). The impact of national culture on sustainability reporting: a cross country analysis”, Asian Journal of Empirical Research, 8(3), 110–123.

Yoo, B., Donthu, N., & Lenartowicz, T. (2011). Measuring hofstede’s five dimensions of cultural values at the individual level: Development and validation of CVSCALE. Journal of International Consumer Marketing, 23(3&4), 193–210.

Zouita, M. S., Louail, B., & Mameche, Y. (2019). The impact of the local SMEs sector on FDI and the mediating effect of IFRS adoption in developing economies: The case of Algeria. International Journal of Advanced and Applied Sciences, 6(11), 120–129.


Refbacks

  • There are currently no refbacks.


[ISSN 0856 2253 (Print) & ISSN 2546-213X (Online)]