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

Abstract

Aims: Financial reporting quality has been central to maintaining market confidence and efficiency. High-quality financial reporting has been attributed to fostering investor and stakeholder trust, benefiting organizations and the capital market. Different factors have been identified as contributing to organizations achieving higher financial reporting quality. This study examines the adoption of International Financial Reporting Standards (IFRS) and its impact on financial reporting quality. Study Design: Using a positivist research paradigm, the study employed quantitative archival method. Place and Duration of Study: The study employed longitudinal analysis and quantitative archival methods to investigate companies listed on the Malawi Stock Exchange from 2008 to 2019.   Methodology: The study used all the listed companies on Malawi Stock exchange between 2008 and 2019. The study used repeated measures ANOVA to measure the financial reporting quality for the various IFRS transition stages (preparation 2009 to 2013, implementation 2014 to 2016, and adoption 2017 to 2019). Results: This study found that the financial reports did not significantly change after adopting IFRS (f(2,24) = 1.317, ƞ2 = .009, p-value = .287.) However, the study showed changes between the IFRS transition periods, starting with an increase in the percentage of movement toward financial reporting quality from the preparation period of 55.38% to 71.79% in the implementation period. However, the percentage towards good financial reporting quality dropped in the adoption period after implementation to 61.54%. Conclusion: The findings showed that adopting IFRS involves a complex, non-linear process that affects financial reporting quality differently across various transition periods. Understanding this relationship is crucial for regulators, companies, and investors, as it has different implications for each group. The study results show that the post-adoption phase of IFRS is critical for both organizations and regulators to ensure that the benefits of these international standards are fully realized and sustained over time.