The Relationship Between Company Characteristics and the Extent of Compliance with International Financial Reporting Standards in the Annual Reports of Listed Egyptian Companies : A Positive Accounting Approach

The objective of this paper is to examine various determinants of compliance with IASs using a significantly larger and more random representative sample of 281 Egyptian listed annual reports. The analysis is extensive, including the use of relative total and partial indices. The multivariate analysis of the impact of micro level firm-specific determinants supports the proposition that these firms' compliance is responsive to specific attributes of their environment. However, professionalism as measured by the type of auditor (proxy for agency and signalling theories), internal corporate governance factor as measured by ownership concentration (proxy for agency theory) and structure as measured by market capitalization (proxy for agency theory) dominate with respect to the overall explanatory power for variations in compliance levels with IASs disclosure and measurement/presentation practices (mandatory and voluntary). Although, the findings are consistent with the predictions of capital need theory (as measured by internationality and share trading), political process theory (as measured by size and internationality) and signalling theory (as measured by type of auditor and market capitalization), however, the effect of these three theories is not clear, as the analysis point that lack of profitability, liquidity and leverage of the firm do not seem to affect the extent of its compliance with EASs (this limits the support for signalling theory and political costs), and the performance of manufacturing are at par with non-manufacturing firms as far as the extent of the compliance is concerned (this limits the support for political process and signalling theories). Also the performance of private sector firms is at par with public sector firms as far as the extent of the compliance is concerned (this limits the support for capital need theory). This may indirectly imply that the positive accounting perspective may not be entirely applicable for de facto compliance in Egypt. Hence, it cannot be entirely inferred that listed Egyptian companies may use de facto compliance with IASs as a mean of raising capital, reducing political costs or signal to the market that they are high quality firms