Economic Consequences of Mandatory Adoption of International Financial Reporting Standards in Iraqi Banks

This study examines the economic consequences associated with the mandatory adoption of International Financial Reporting Standards (IFRS) in the Iraqi banking sector. Motivated by growing evidence that the outcomes of IFRS adoption depend on institutional and market conditions, the study focuses on a bank-based emerging economy characterized by relatively underdeveloped capital markets and evolving enforcement mechanisms. Using a balanced panel of 24 banks listed on the Iraq Stock Exchange over the period 2014–2018, the analysis exploits the mandatory IFRS adoption in 2016 within a before–after regulatory framework. Panel regression techniques are employed to examine the associations between IFRS adoption and stock market liquidity, firm value, information asymmetry, and the cost of debt, while controlling for bank-specific characteristics and macroeconomic conditions. The results indicate that IFRS adoption is positively significantly associated with stock market liquidity, and negatively significantly associated with information asymmetry, consistent with improvements in the informational environment of Iraqi banks following enhanced disclosure and comparability. The findings also reveal a positive and significant relationship between IFRS adoption and the cost of debt, suggesting higher perceived financial risk by creditors. In contrast, no statistically significant association is observed between IFRS adoption and bank market valuation, highlighting the limited sensitivity of equity prices to accounting reforms in thin and institutionally constrained markets. Overall, the study contributes to the literature on the economic consequences of IFRS adoption by providing evidence from an underexplored emerging market and a highly regulated banking sector. The findings underscore the role of institutional context in shaping the outcomes of accounting standard convergence and offer policy-relevant insights for regulators and standard-setters in bank-oriented financial systems.