International Financial Reporting Standards in Libya: An institutional theory perspective.

Abstract

This thesis seeks to investigate a number of issues relating to the mandating of International Financial Reporting Standards (IFRSs) in Libya in 2006. This includes examining the factors that influenced the decision of the Libyan government to mandate these standards and, following this decision, examining the obstacles to implementing these standards in Libya. The benefits of these standards are also investigated. In addition, this thesis seeks to assess the level of compliance of the companies listed in the Libyan Stock Market (LSM) with the disclosure requirements of IFRSs over two years (2008-2009) after the mandating of the standards. Finally, the study investigates the association between the level of compliance with the disclosure requirements of these standards and corporation-specific characteristics, namely company size, type of audit firm, profitability, liquidity, listing status, ownership structure and industry type.

To explore the factors, benefits and obstacles to the mandating, the research is based on multiple methods for collecting data. These methods include questionnaire surveys and semi-structured interviews. To assess the mandatory disclosure level, a checklist is developed involving 72 mandatory disclosure items which representing 7 International Accounting Standards (IASs). Finally, the infonnation disclosed in the financial statements of a sample of 14 companies listed in the LSM carefully examined against the checklist

The results of the questionnaire surveys and interviews show that the mandating of these standards in Libya was a result of a mimetic external force, that is, the influence of global capital markets. At the same time, the role of the Libyan government as an internal coercive force exerted pressure, through legislation on an organisational field (the Libyan stock market), to mandate these IFRSs. Regarding the benefits, the most perceived benefits of JFRSs are the improved of quality of financial reporting in Libya and the attraction of
foreign investors. Lack of training and lack of professionalism among accounting staff are the most frequently perceived obstacles to IFRSs implementation.

Finally, this study reports that the degree of compliance with the disclosure requirements of IFRSs is low in both 2008 and 2009, and has not significantly improved over time. The multiple regression results reveal that there is no significant association between the disclosure requirements of IFRSs and any independent variables in 2008. Type of audit firm is the only independent variable that is being positive and significant to the level of CMD (Corporate Mandatory Disclosure) in 2009. This result suggest that the Libyan authorises should give more attention to companies which are audited by local firms.