Role of the state in implementing IFRSs in a developing country : the case of Bangladesh
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The purpose of this study is to examine what factors have been affecting the implementation of IFRSs in Bangladesh from 1998 to 2010. The study seeks to answer these specific research questions: (1) What is the relative impact of accounting regulatory frameworks and politico-institutional factors on the implementation of IFRSs in Bangladesh?; 2(a): How do (i) training opportunities in the accounting profession and (ii) the state of corruption, as outcomes of culture in Bangladesh, affect the implementation of IFRSs?; 2(b): What other country specific factors are affecting implementation of IFRSs?; (3) How does a study of implementing IFRSs help to build an understanding of a theory of the role of the state in accounting change in a developing country such as Bangladesh? This study adopts a mixed methodology in which interviews over two years (2010-2011) are conducted and documentary analyses of IFRSs-related enforcement documents (1998-2010) are evaluated to identify the possible obstacles for implementing IFRSs in Bangladesh. In relation to RQ-1, the study finds that politico-institutional factors are stronger and more dominant factors than accounting regulatory frameworks for impeding IFRSs implementation in Bangladesh. A lack of co-operation among the institutional bodies has existed in both democratic and military-backed government eras (the military-backed government ruled for 19 years out of 40 years of independence in Bangladesh). However, the military-backed government was effective compared to the democratic government in terms of taking action against companies identified as being corrupt. There is evidence of ‘blaming culture’ with the state institutions and the professional bodies blaming each other regarding the IFRSs implementation process. With respect to RQ-2(a), deficiencies in the training opportunities in accounting profession and high levels of corruption are inhibiting IFRSs implementation. Interviewees comment that professional curricula contain limited content on IFRSs and there are limited training opportunities for accountants in the majority of companies. Looser enforcement of the laws is found during the periods of democratic government. However, the levels of corruption were lower during the military-backed government. Regarding RQ-2(b), some country specific factors are also identified in this study: a lack of qualified accountants; a lack of interest in IFRSs by managers of some companies; a culture of secrecy; and higher costs of IFRSs compliance with lower benefits for small companies. In terms of RQ-3, this study contributes to IFRSs implementation as an example of accounting change in a developing country by applying a Weberian view of the theory of the role of the state. Additionally, this study considers the state-society relationship employing institutional dynamics (Dillard et al., 2004). In particular, outcomes of accounting change in Bangladesh are observed from state and individual organisation levels. However, the influence of the organisation field level is unknown in this research because industry lobbying groups were not interviewed. Since the role of the state is vague in prior accounting research, this study discusses roles of the state (i.e. the state approves experts to write rules; it consults with various stakeholders; it enforces outcomes; it is accountable to its citizens; and it engages with donor agencies) in a developing country’s experience during the process of accounting change. Extending Weber’s (1958), (1968) argument on state-society, the study finds that for a state in an era of democratic government, politico-institutional factors and corruption (as an indication of societal values) may be more important and concentrated factors than for a state under a military-backed government in terms of impeding IFRSs implementation. The study reveals that all roles of the state have negative influences on accounting change. However, interviewees’ initial concerns about the roles of donor agencies are transformed into concerns about the democratic government’s failure to implement IFRSs. The implications of the study are relevant to policy makers, practitioners and users of financial information. Although the study is based on Bangladesh, the results of the study are expected to be relevant to other developing countries experiencing similar phases of IFRSs implementation.