Drivers of Institutional Change Around the World: The Case of IFRS

23 Pages Posted: 24 Apr 2018

See all articles by Miriam Koning

Miriam Koning

Erasmus University Rotterdam (EUR) - Financial Management

Gerard Mertens

Erasmus University Rotterdam (EUR) - Department of Financial Management

Peter Roosenboom

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM)

Date Written: December 2017

Abstract

Today more than ever it is crucial to understand the dynamic and intricate institutional landscape that MNEs operate in. However, the drivers of institutional change are still little understood. We focus on a recent fundamental institutional change: the worldwide switch to International Financial Reporting Standards (IFRS). The switch to IFRS was unexpected and not particularly welcomed by MNEs given that most national accounting systems in the pre-IFRS period were considered to be well aligned to the local cultural and environmental characteristics of each country. We test the drivers of this institutional change in a sample of 168 countries between 2002 and 2012 using empirical constructs from policy diffusion theory. Our findings show that the country-level decisions to adopt IFRS are not driven by local determinants but instead by adoption decisions by other, neighbouring countries and influential organizations. We find evidence for competition, learning and emulation as driving forces for the international spread of IFRS. We conclude that the switch to IFRS was not driven by an economic rationale only and diffused beyond the influence and interest of MNEs. Understanding these drivers is essential, because it enables management to anticipate and respond to institutional changes and consequently enhance performance and create competitive advantage.

Keywords: international financial reporting, institutional theory, institutional environment, policy diffusion, logistic regression

Suggested Citation

Koning, Miriam and Mertens, Gerard and Roosenboom, Peter, Drivers of Institutional Change Around the World: The Case of IFRS (December 2017). Journal of International Business Studies, Vol. 49, Issue 3, 2017, Available at SSRN: https://ssrn.com/abstract=3161415 or http://dx.doi.org/10.1057/s41267-017-0123-7

Miriam Koning (Contact Author)

Erasmus University Rotterdam (EUR) - Financial Management ( email )

United States

Gerard Mertens

Erasmus University Rotterdam (EUR) - Department of Financial Management ( email )

P.O. Box 1738
Room T09-53
3000 DR Rotterdam
Netherlands
+31 10 408 2556 (Phone)
+31 10 408 9017 (Fax)

Peter Roosenboom

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T09-56
3000 DR Rotterdam
Netherlands
+31 10 40 82255 (Phone)

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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