Does cultural economics affect country’s competitiveness?

Abstract

This study aims to examine the relationship between financial reporting quality and investment decision efficiency in banks listed on the Iraq Stock Exchange, as well as to assess the level of each variable before and after the adoption of International Financial Reporting Standards (IFRSs). Furthermore, it investigates the impact of IFRS adoption on the nature of the correlation and effect between these variables. To achieve the study objectives, an empirical approach was adopted based on the financial data of banks listed on the Iraq Stock Exchange during the period 2012–2020. The study employed the Discretionary Loan Loss Provision (DLLP) measure to assess financial reporting quality, while investment decision efficiency was measured using the Biddle (2009) model. Statistical analyses and hypothesis testing were conducted using the STATA statistic software. The findings indicate that the adoption of IFRSs contributed to improving financial reporting quality and reducing earnings management practices among the sampled banks. The results also reveal that IFRS adoption enhanced investment decision efficiency. Moreover, the relationship between financial reporting quality and investment decision efficiency was not statistically significant before the adoption of IFRSs; however, it became positive and statistically significant after adoption. Similarly, financial reporting quality did not have a significant effect on investment decision efficiency before IFRS implementation, whereas its effect became positive and significant following adoption. These findings highlight the role of IFRSs in enhancing the usefulness of financial information and supporting more efficiency of investment decisions. Based on these findings, the study recommends strengthening compliance with IFRS requirements and continuously improving the financial reporting quality to provide more relevant and reliable information for decision-makers. It also recommends encouraging banks to utilize high-quality accounting information to rationalize investment decisions and improve investment efficiency.

Keyword : financial reporting quality, efficiency of investment decisions, International Financial Reporting Standards (IFRSs).