The Impact of IFRS Adoption on Financial Transparency in Saudi Companies: A Theoretical Exploration

This study explores the impact of International Financial Reporting Standards (IFRS) adoption on financial transparency in Saudi companies. Using a theoretical approach, the research synthesizes existing literature and applies frameworks such as signaling theory, agency theory, information asymmetry theory, and institutional theory to analyze how IFRS adoption has influenced financial reporting practices. The findings reveal that IFRS has significantly improved transparency, particularly in the banking and petrochemical sectors, by reducing information asymmetry and enhancing corporate governance. However, smaller companies and sectors like real estate and manufacturing face challenges in fully complying with IFRS due to resource constraints and sector-specific complexities. The study offers practical recommendations, including strengthening regulatory oversight, providing support for SMEs, and integrating Environmental, Social, and Governance (ESG) reporting into financial disclosures. These measures are critical for further enhancing transparency and aligning Saudi companies with international standards as part of Saudi Arabia’s Vision 2030.