The Impact of International Financial Reporting Standards (IFRS) Adoption on the Accounting Quality of Listed Companies in Kenya

43 Pages Posted: 23 Dec 2011 Last revised: 14 Dec 2014

Date Written: September 30, 2011


This study seeks to establish if the adoption of International Financial Reporting Standards (IFRS) in Kenya has been associated with higher accounting quality for listed companies based on the theory that IFRS adoption has benefits such as transparency, accounting quality and reduced cost of capital. By applying quantitative techniques and responding to suggestions on country specific studies, accounting quality measures of earnings management, timely loss recognition and value relevance were analyzed. There was increased variability in earnings in the post adoption period as analyzed by Levenes test for variances with f and p values of 0.000 (<.05). While the variability of change in earnings to variability of change in cash flows showed insignificant decline, analysis based on rank sum tests indicated u=0.0 and p=0.317 implying insignificant difference between the pre and post cash flow and earnings ratio variance. The Spearman correlation between cash flow and accruals as analyzed by Cramer’s test reported a p =.157, that is p>5. The rest of the measures showed insignificant variations. Previous research examined the effects of IFRS adoption mainly in the EU on the impact of IFRS adoption using quantitative techniques with literature citing gaps and conflicting conclusions on accounting quality changes. In contrast, the current research in a common law developing country has shown that IFRS insignificantly improves accounting quality under different circumstances which can be generalized in developing countries. This contribution matters as it implies more debates and better methods to be researched on while adopters to be assured that insignificant improvements appear to be related to compliance and adoption strategies most of which are continuously addressed by the Standard setters and regulators.

Keywords: IFRS, IAS, accounting quality, earnings management, timely loss recognition , Value Relevance

JEL Classification: G14, G15, G30, K22, M41, M42

Suggested Citation

Outa, Erick Rading, The Impact of International Financial Reporting Standards (IFRS) Adoption on the Accounting Quality of Listed Companies in Kenya (September 30, 2011). Available at SSRN: or

Erick Rading Outa (Contact Author)

Charles Darwin University ( email )

21 Kitchener Drive
Darwin, Northern Territory 0800


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