IFRS adoption and enforcement and their effects on accounting quality and capital markets: evidence from South Africa
type: CreativeWork
description: This study addresses a critical gap in the literature on the impact of International Financial Reporting Standards (IFRS) adoption on accounting quality and capital markets by exploiting the unique case of South Africa (SA). Unlike the European union and other countries, where IFRS adoption and enforcement changes occurred simultaneously, SA provides a unique setting where these events can be studied separately. IFRS adoption in SA became mandatory on January 1, 2005, without concurrent enforcement changes, which were only implemented six years later with the introduction of the Companies Act No. 71 of 2008, in 2011. This separation creates two natural experiments' that allow for an isolated analysis of the effects of IFRS adoption and subsequent enforcement changes. SA appears to be the first emerging and developing country to adopt IFRS and introduce enforcement mechanisms in a staggered manner (rather than contemporaneously), thus providing an innovative setting for examining the separate effects of both on accounting quality and capital markets. The study leverages this unique context to assess whether the benefits observed in accounting quality and capital markets literature are attributable solely to IFRS adoption or also to the enforcement changes. The first natural experiment refers to the period from 2005 to 2010, during which SA adopted IFRS without enforcement changes. The second natural experiment refers to the period from 2011 onwards, marked by significant enforcement reforms, including the Companies Act requirement for state-owned and public companies to prepare financial statements compliant with IFRS, thus providing legal backing for their enforcement, the establishment of the Companies and Intellectual Property Commission (which monitors and enforces IFRS compliance), and the Financial Reporting Investigations Panel (FRIP), among other enforcement enhancements. The research employs four earnings management models, one timely loss recognition measur…
abstract: This study addresses a critical gap in the literature on the impact of International Financial Reporting Standards (IFRS) adoption on accounting quality and capital markets by exploiting the unique case of South Africa (SA). Unlike the European union and other countries, where IFRS adoption and enforcement changes occurred simultaneously, SA provides a unique setting where these events can be studied separately. IFRS adoption in SA became mandatory on January 1, 2005, without concurrent enforcement changes, which were only implemented six years later with the introduction of the Companies Act No. 71 of 2008, in 2011. This separation creates two natural experiments' that allow for an isolated analysis of the effects of IFRS adoption and subsequent enforcement changes. SA appears to be the first emerging and developing country to adopt IFRS and introduce enforcement mechanisms in a staggered manner (rather than contemporaneously), thus providing an innovative setting for examining the separate effects of both on accounting quality and capital markets. The study leverages this unique context to assess whether the benefits observed in accounting quality and capital markets literature are attributable solely to IFRS adoption or also to the enforcement changes. The first natural experiment refers to the period from 2005 to 2010, during which SA adopted IFRS without enforcement changes. The second natural experiment refers to the period from 2011 onwards, marked by significant enforcement reforms, including the Companies Act requirement for state-owned and public companies to prepare financial statements compliant with IFRS, thus providing legal backing for their enforcement, the establishment of the Companies and Intellectual Property Commission (which monitors and enforces IFRS compliance), and the Financial Reporting Investigations Panel (FRIP), among other enforcement enhancements. The research employs four earnings management models, one timely loss recognition measur…
author: Modise, Kagiso
language: en
keywords: IFRS, South Africa
date published: 2025
date modified: 2026-07-22T22:23:46Z
provider: University of Cape Town
publisher: Networked Digital Library of Theses and Dissertations
type: WebPage
source organization: Department of Finance and Tax

PropertyValue
property ID: Handle
value: http://hdl.handle.net/11427/41747