Anna Alon

Complexity and Dual Institutionality: The Case of IFRS Adoption in Russia

Manuscript Type. Empirical. Research Questions/Issue. The widespread adoption of International Financial Reporting Standards (IFRS) by many transition economies is expected to contribute to greater transparency in financial reporting. However, the business environment in many of these countries is associated with institutional voids and ongoing economic and institutional change. Organizations operating in this environment face considerable institutional complexity due to influences from incongruent institutional logics of local and global institutions. This study investigates how organizations manage institutional complexity created by the incompatible institutional logics which are linked to IFRS adoption. Research Findings/Insights. In Russia, institutional change related to IFRS adoption was not revolutionary as IFRS did not replace Russian Accounting Standards (RAS) but both standards coexist. Based on a sample of 1,236 firms, organizational identity and the discretion in standard implementation were identified as factors that play a role in how organizations manage institutional complexity created by the coexistence of both standards. Theoretical/Academic Implications. With organizations in transition economies increasingly managing global and local pressures, this study highlights conditions under which practices rooted in conflicting institutional logics coexist and create dual institutionality. Dual institutionality occurs when distinct but related practices that organizations are using have legitimacy but are rooted in diverse institutional logics and coexist due to different levels of discretion associated with their implementation. This concept is distinct from previously identified institutional duality, where competing institutional logics of subsidiary and the host country influence how a particular practice is implemented by organizations. Practitioner/Policy Implications. While adoption of IFRS is expected to contribute to greater financial transparency and comparability, some countries choose to continue with the local standards while permitting or requiring IFRS. This type of parallel adoption may undermine the influence of IFRS. However, divergence between the logics and discretion in standard implementation makes it possible for both practices to exist.

The impact of groups and decision aid reliance on fraud risk assessment.

Purpose - The purpose of this paper is to investigate how the brainstorming component of Design/methodology/approach - The research framework links the influences of the fraud assessment setting and decision aid reliance. The hypotheses are tested in an experiment with two manipulated factors: setting (group or individual) and decision aid (provided or not provided). Findings - The results of the study provide insight on how the brainstorming impacts fraud risk assessment, decision aid use and decision aid reliance. The results show that groups using a decision aid with fraud risk factors demonstrate superior decision quality and effectiveness even with lower decision aid reliance. Research limitations/implications - The influence of the setting (group or individual) on the fraud evaluation and detection is highlighted. Practical implications - This paper will be informative for auditors and firms involved in designing an efficient and effective fraud risk assessment. Originality/value - This paper integrates the fraud risk assessment and decision aid literature to evaluate decision quality and effectiveness of group fraud risk assessment.

An institutional perspective on corruption in transition economies

Manuscript Type Empirical Research Question/Issue Companies operating in transition economies encounter a broad range of potential challenges. In the area of tax, firms make direct tax payments but may also encounter unofficial tax costs in the form of bribery or extortion. We focus on institutional determinants, including formal rules, informal rules, and enforcement, to examine conditions under which firms are more likely to encounter these transactions. We operationalize formal rules as rule-based trust and informal rules as dispositional trust. Research Findings/Insights Based on a sample of over 5,000 firms representing 20 transition economies, we show that when rule-based trust is high, the presence of tax enforcement activities in the form of visits and inspections by tax officials does not change the relationship between rule-based trust and unofficial payments. However, when dispositional trust is low, unofficial payments are more likely if verification activities occur. Theoretical/Academic Implications We adopt a more holistic view and focus on the joint consideration of different institutional determinants and firm outcomes. In doing so, the article demonstrates the complexity of firms’ tax environments where enforcement mechanisms can have unwelcome consequences, and, under certain conditions, create conditions for the persistence of corruption. Practitioner/Policy Implications This paper highlights the importance of the institutional landscape, especially considering the history of institutional voids in many transition economies. The results have implications for corporate governance and caution regulators and practitioners to consider institutional complexities when implementing reforms or establishing businesses in transition economies.

Layering of IFRS and Dual Institutionality of Accounting Standards in Belarus

ABSTRACT There is an ongoing debate about the applicability and efficacy of International Financial Reporting Standards (IFRS) adoption in countries with diverse institutional infrastructures. We examine financial reporting in Belarus and factors that are shaping its development. In Belarus, IFRS has been adopted through layering where it is an additional requirement to the existing reporting specified by the national accounting regulations. We explore how global standards were transposed and function in a highly specific institutional context. Based on an examination of reporting in the banking sector, we conclude that different objectives of IFRS and local reporting contribute to dual institutionality of standards where differing formats target the needs of diverse users. Thus, adoption through layering is unlikely to contribute to convergence between different reporting standards used for different purposes, and parallel reporting is expected to persist. By examining financial reporting practices in Belarus, we provide insights for practitioners, regulators, and standard-setters on implementation of IFRS in countries with similar heavy state involvement, and still using local regulations and traditions in parallel with IFRS.