Determinants of international financial reporting standards adoption at commercial banks: Evidence from an emerging country

Abstract

This research investigates the transition of Vietnamese commercial banks towards mandatory adoption of IFRS by 2025 emphasizing the shift from voluntary to compulsory adoption towards adopting International Financial Reporting Standards (IFRS). The empirical research utilized a comprehensive methodological framework, including  probit regression models and six years of secondary data from 27 banks (2017-2022). The study identifies significant influences of profitability, leverage and enterprise size on IFRS adoption. However, the involvement of foreign ownership did not demonstrate statistically significant effects. These findings highlight the importance of IFRS adoption in enhancing transparency aligning with global standards and informing decision-making for investors. The analysis shows that company size (lnSIZE) and government policy (PO) significantly influence IFRS compliance, emphasizing the importance of resources and regulatory support. Other factors, including profitability, leverage, capital adequacy, and foreign ownership are not statistically significant suggesting organizational capacity and governance are key drivers of IFRS adoption.