Institutional Determinants of Fair Value Disclosure
: Evidence from Bangladeshi-Listed Companies

  • Imam Arafat

    Student thesis: Doctoral ThesisDoctor of Philosophy


    Despite being a perpetual issue in accounting, fair-value-related disclosure in the financial statements has hardly been examined in academic research, especially in a developing country context. The International Accounting Standards Board’s perceived preference for fair value has been contested in the literature on the ground that it may not be suitable for developing countries. Applying institutional theory, this study examines Bangladeshi-listed companies’ compliance with the fair value-related disclosure requirements of IFRS and explores various institutional factors that may help to explain the level of compliance. A disclosure analysis of 72 companies revealed that overall compliance with fair value disclosure requirements was very low, at only 39.0%, and, most notably, that none of the sample companies complied with a fundamental requirement of IFRS 13, which decrees that companies disclose the level of the fair value hierarchy within which the reported fair value measurements fall. The study identified four determinants of compliance and, in so doing, provided support for four of the ten predictive factors of strategic responses to institutional processes as hypothesised by Oliver (1991), namely: legitimacy, consistency, multiplicity and coercion. These factors were tested using firm size, power distance, political representation and enforcement, respectively. A majority of these variables have never been tested in mandatory disclosure studies before and, thus, the current study provides new insights into corporate mandatory disclosure behaviour.

    Twenty-two interviews with various stakeholders were also conducted. The findings from these interviews suggested that neither preparers nor regulators have focussed on compliance with IFRS 13. This finding suggests that the adoption of this standard has been largely ceremonial. Furthermore, the application of fair value measurement appears to be motivated by the need for finance, not by the information needs of investors. Earnings management and corruption, an unregulated surveying profession and lack of professional surveyors, a scarcity of reliable data, a shortage of accountants with IFRS expertise, low quality audits, a lack of awareness of fair value accounting amongst investors and a shortage of manpower at the regulatory level appear to be important factors that have hindered compliance with IFRS fair value related standards in Bangladesh. Moreover, characteristics associated with uncertainty avoidance and large power distance are deeply rooted in the Bangladeshi culture, which also plays a role in understanding non-compliance. Thus, this study refutes the IASB’s claim that developing countries face the same constraints as developed countries in implementing fair value accounting. The study concludes that the implementation of fair value accounting in developing countries may be too advanced a step given the predominant contextual factors that affect the accounting system in these countries.
    Date of Award2018
    Original languageEnglish
    SupervisorTheresa Dunne (Supervisor) & Suzanne Fifield (Supervisor)

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