International Accounting Standards, Bank Credit Ratings, and Performance: An Empirical Study

Abstract

This study aims to investigate how the obligatory adoption of IAS/IFRS has impacted the creditworthiness of a representative sample of Iraqi banks quoted on the Iraq Stock Exchange. In addition, it tries to identify the most important financial indicators that will be influenced by the required adoption of (IAS / IFRS) as well as the effect that these indicators would have on the credit ratings of Iraqi banks. The sixteen commercial banks listed on the Iraq Stock Exchange between 2011 and 2020 made up the study's cohort. The issue being investigated, as well as the hypotheses being tested, was whether the obligatory adoption of (IAS/IFRS) had an important and substantial effect on bank credit ratings. It was performed by inspecting and assessing the essential financial indicators recognized for evaluating banks and calculating their credit rating. These indicators include profitability, efficiency, liquidity, capital sufficiency, asset quality, and financial solvency. The most important financial indicators that are used in the process of constructing credit ratings for Iraqi banks have been put through a battery of statistical tests using the statistical software (SPSS) and a series of analyses of variance (ANOVA) to see how the required adoption of (IAS/IFRS) would affect those indicators. The results of these tests have been analyzed to determine how the adoption of (IAS/IFRS) will affect the most important financial indicators. After putting the hypotheses to the test and demonstrating that they are correct, several conclusions have been drawn, with the most important being that. The mandated use of (IAS/IFRS) has a significant and critical impact on the credit rating of Iraqi financial institutions such as banks. The association and influence between the implementation of standards and bank financial strength ratings indicators have become much stronger. The findings indicate that the required implementation of (IAS/IFRS) has significantly affected Iraqi banks' credit ratings. This has been accomplished via an improvement in assessing profitability, efficiency, liquidity, capital adequacy, asset quality, and financial solvency indicators.