The Effect of IFRS Adoption on the Business Climate: A Country Perspective

Round 1

Reviewer 1 Report

I carefully read the study titled “The effect of IFRS adoption on the business environment: a country perspective”. The study basically analyses conditions that contribute to a more favorable business environment in the countries. Topic selection looks good. I also liked the systematic of the study. I would like to make a few suggestions in order to improve the quality of the study. After these changes, the study can be published.

1.     The introduction should be improved. The purpose of the study is mentioned, but it is not enough. What is the main motivation for this work? What are the current gaps in the literature? What are the contributions of the study? These questions should be answered very clearly and precisely.

2.     Findings from the study can be discussed more comprehensively. Therefore, in the discussion section, the findings should be interpreted further.

 

3.     There are some minor deficiencies in the study. Some expressions could be more understandable and clearer. The author or authors should read the study carefully and correct these deficiencies.

Author Response

I carefully read the study titled “The effect of IFRS adoption on the business environment: a country perspective”. The study basically analyses conditions that contribute to a more favorable business environment in the countries. Topic selection looks good. I also liked the systematic of the study. I would like to make a few suggestions in order to improve the quality of the study. After these changes, the study can be published.

1. The introduction should be improved. The purpose of the study is mentioned, but it is not enough. What is the main motivation for this work? What are the current gaps in the literature? What are the contributions of the study? These questions should be answered very clearly and precisely.

Authors’ comments: Thank you for your comment, we have rewritten the introduction of this manuscript to improve the aforementioned points.

2. Findings from the study can be discussed more comprehensively. Therefore, in the discussion section, the findings should be interpreted further.

Authors’ comments: Thank you for your suggestion, we have improved the aforementioned sections, as indicated.

3. There are some minor deficiencies in the study. Some expressions could be more understandable and clearer. The author or authors should read the study carefully and correct these deficiencies.

Authors’ comments: Thank you for your comment, we have re-written and corrected the manuscript in most of the sections, based on professional tips.

Reviewer 2 Report

This paper used the fuzzy-set qualitative comparative analysis methodoloty to research the effect of IFRS adoption on the business environment.  The research topic has a practical significance for promoting the adoption of IFRS. However, several details need attention. 

 

1. There are errors that the reference sources are not found on page 10, page 14,page 22.

2. It is better to give the calculation formula of variables。

3. It is recommended to give more explanations to Table 3. The adoption degree for domestic listed companies equals the same value 0.6 when IFRSs required for all or for some, please explain. 

4. It is suggested to provide the theoretical basis of the fsQCA tool.

5. It is suggested to explain the structure, theoretical basis and model formula of the two models.  At the same time, it is necessary to verify the rationality and effectiveness of the model.

6. The manuscript is more like a report than an academic paper. It is suggested to strengthen the theoretical research depth of the paper.

It is suggested that the paper be submited to other journals.

Author Response

This paper used the fuzzy-set qualitative comparative analysis methodology to research the effect of IFRS adoption on the business environment. The research topic has a practical significance for promoting the adoption of IFRS. However, several details need attention.

1. There are errors in that the reference sources are not found on page 10, page 14, page 22.

Authors’ comments: We have corrected all the reference source errors, as you pointed out.

2. It is better to give the calculation formula of variables。

Authors’ comments: We have rewritten the methodology section to better explain how the data collection for most of the secondary data was. Please refer to the methodology section, from page 10 on.

3. It is recommended to give more explanations to Table 3. The adoption degree for domestic listed companies equals the same value 0.6 when IFRSs required for all or for some, please explain.

Authors’ comments: We have provided more explanation in the text regarding the variable development. In order words, we explained that each value for 0 to 1, comprises a set of cases, as there are different combinations of situations within the different countries. Please refer to the text in yellow on page 16.

4. It is suggested to provide the theoretical basis of the fsQCA tool.

Authors’ comments: Thank you for your comment, we have provided a more theoretical basis for the model, please refer to pages 10 and 11.

5. It is suggested to explain the structure, theoretical basis and model formula of the two models. At the same time, it is necessary to verify the rationality and effectiveness of the model.

Authors’ comments: Thank you for your comment, we have provided major revisions to the document, mainly in the introduction and methodology section to better explain the models behind this manuscript.

6. The manuscript is more like a report than an academic paper. It is suggested to strengthen the theoretical research depth of the paper.

Authors’ comments: Thank you for your comment, we have re-written and corrected the manuscript in most of the sections, based on professional tips.

 

Reviewer 3 Report

Nice presentation. Thanks

Author Response

Nice presentation. Thanks

Authors’ comments: Thank you so much for your comment.

Reviewer 4 Report

Review of JRFM article

 The effect of IFRS adoption on the business environment: a country perspective

 Introduction

The research reported on in this article analyses conditions that contribute to facilitating a favourable business environment in 117 countries. Ten areas depicted, based on the notion of Ease of Doing Business (EDB) as defined in figures 1 and 2 are used for this purpose. One of these areas is Getting Credit (GC) which together with EDB are central to the article. These are used to determine the effect of various levels of IFRS adoption on the business environment with respect to EDB and GC. Two hypotheses are stated to measure the interplay among IFRS adoption, EDB (as considered by a friendly business environment – see a question on this below) and GC. Comprehensive analyses are performed using the fsQCA methodology.

Some interesting findings with respect to necessary and sufficient conditions for EDB and GC in the context of IFRS adoption emerged. There are many but two of these are: (1) Two new indicators, namely, the degree of IFRS adoption and experience are now associated with EDB and GC. (2) fsQCA results/findings indicate that a high level of IFRS adoption do not necessarily hamper EDB in a country. In addition, the Main Contributions section succinctly states the contributions.

It’s a deep article and the research done in this paper is laudable, but there are some things that can be improved upon.

Issues/Challenges/Questions with the article

Readers may not necessarily be familiar with the fsQCA techniques, so some explanation on how it works would help.

Hypothesis H1: I understand the spirit of the hypothesis, but would these be in a technical sense? For example, a user-friendly computer system goes by the technical denotation of User Experience (UX). What would be the analogous denotation for “Business Experience”? Also, would there be null hypotheses for each of H1 and H2?

The literature review up to about the middle of page 10 is really well written, but from there on it becomes hard to follow the detail of what the researchers did. The overall picture is clear, but the numerous tables and analyses thereof became hard. I elaborate on some of these challenges in the points that follow.

Sometimes it’s not clear which results/findings are from literature, or which from the authors of the article – e.g., the explanation in connection with Park et al. (207) on page 19. Are the results you mention from author Park, or what you found from your analyses?

I’m unclear as to whether the data used from the 117 companies constitute secondary data? Or were primary data collection among the companies performed? I suspect it’s secondary data since a database constructed is mentioned on page 16. What is this database? These (database and secondary data or not) should be clarified in the article. Also, does your institution require that you have ethical clearance when working with secondary data? Please clarify this aspect as well.

Links among the two hypotheses, models 1 and 2 and Figure 2 are somewhat hard to map onto each other. I eventually managed to link the two hypotheses with the two models, but model 1a, 1b and 2a, 2b (e.g., page 24) remain somewhat unclear. On page 23 I noticed “high EDB (model 1b) and GC (model 2b)”, but WRT to models 1a and 2a, it remains unclear. This should be clarified and more explicit in the article. I suggest you add a concise table which provides for a clear mapping among the hypotheses and the model subdivisions.

You mention on (for example) page 28, 10 areas and 41 different indicators in business environment fields. I could see the 10 fields in Figure 2, but I’m still unclear about the 41 indicators? These are a lot to list in an article, so maybe you can just say the listing of these are beyond the scope of the article, or explicitly refer the reader to the relevant literature source for more information.

Figure 2 is an important entity in the article, but it’s rather small and hard to read, even if one enlarges it. Please see if you can do something about the readability of this important entity.

Move entities, for example the tables closer to the place in the article where you refer to them the very first time.

Kindly resolve the numerous “Error! Reference source not found.” In the article. Also, a reference on page 33 is in yellow highlight.

End of Report

 

Comments for author File: Comments.pdf

Author Response

The research reported on in this article analyses conditions that contribute to facilitating a favourable business environment in 117 countries. Ten areas depicted, based on the notion of Ease of Doing Business (EDB) as defined in figures 1 and 2 are used for this purpose. One of these areas is Getting Credit (GC) which together with EDB are central to the article. These are used to determine the effect of various levels of IFRS adoption on the business environment with respect to EDB and GC. Two hypotheses are stated to measure the interplay among IFRS adoption, EDB (as considered by a friendly business environment – see a question on this below) and GC. Comprehensive analyses are performed using the fsQCA methodology.

Some interesting findings with respect to necessary and sufficient conditions for EDB and GC in the context of IFRS adoption emerged. There are many but two of these are: (1) Two new indicators, namely, the degree of IFRS adoption and experience are now associated with EDB and GC. (2) fsQCA results/findings indicate that a high level of IFRS adoption do not necessarily hamper EDB in a country. In addition, the Main Contributions section succinctly states the contributions.

It’s a deep article and the research done in this paper is laudable, but there are some things that can be improved upon.

Issues/Challenges/Questions with the article

Readers may not necessarily be familiar with the fsQCA techniques, so some explanation on how it works would help.

Authors’ comments: Thank you for your comment, we have provided a more theoretical basis for the model, please refer to pages 10 and 11.

Hypothesis H1: I understand the spirit of the hypothesis, but would these be in a technical sense? For example, a user-friendly computer system goes by the technical denotation of User Experience (UX). What would be the analogous denotation for “Business Experience”? Also, would there be null hypotheses for each of H1 and H2?

Authors’ comments: Thank you for your comment, the null hypotheses here will depend on the consistency level of the model. According to Ragin (2008), if consistency is lower than 0.8, there will be no association between the tested variables.

The literature review up to about the middle of page 10 is really well written, but from there on it becomes hard to follow the detail of what the researchers did. The overall picture is clear, but the numerous tables and analyses thereof became hard. I elaborate on some of these challenges in the points that follow.

Sometimes it’s not clear which results/findings are from literature, or which from the authors of the article – e.g., the explanation in connection with Park et al. (207) on page 19. Are the results you mention from author Park, or what you found from your analyses?

Authors’ comments: Thank you for your input, we have re-written most of the results section, to better clarify our findings. Refer to pages 19 to 25.

I’m unclear as to whether the data used from the 117 companies constitute secondary data? Or were primary data collection among the companies performed? I suspect it’s secondary data since a database constructed is mentioned on page 16. What is this database? These (database and secondary data or not) should be clarified in the article. Also, does your institution require that you have ethical clearance when working with secondary data? Please clarify this aspect as well.

Authors’ comments: Thank you for your comment. We have included the table with the economies in the sample of this study to better clarify your questions, and we also better organized and write the methodology section.

 

Links among the two hypotheses, models 1 and 2 and Figure 2 are somewhat hard to map onto each other. I eventually managed to link the two hypotheses with the two models, but model 1a, 1b and 2a, 2b (e.g., page 24) remain somewhat unclear. On page 23 I noticed “high EDB (model 1b) and GC (model 2b)”, but WRT to models 1a and 2a, it remains unclear. This should be clarified and more explicit in the article. I suggest you add a concise table which provides for a clear mapping among the hypotheses and the model subdivisions.

Authors’ comments: Thank you for pointing this out. We have better explained in table 2 the connection between the hypothesis and the models.

You mention on (for example) page 28, 10 areas and 41 different indicators in business environment fields. I could see the 10 fields in Figure 2, but I’m still unclear about the 41 indicators? These are a lot to list in an article, so maybe you can just say the listing of these are beyond the scope of the article, or explicitly refer the reader to the relevant literature source for more information.

Authors’ comments: Thank you for your comment. We have rewritten this sentence to better explain that the EDB ranking used, comprises these 41 sub-indicators grouped into 10 major indicators, as previously mentioned in the introduction.

Figure 2 is an important entity in the article, but it’s rather small and hard to read, even if one enlarges it. Please see if you can do something about the readability of this important entity.

Authors’ comments: Thank you for your suggestion. We have improved the readability of Figure 2.

Move entities, for example the tables closer to the place in the article where you refer to them the very first time.

Authors’ comments: Thank you for your suggestion. We have improved the organization of the manuscript, as suggested.

Kindly resolve the numerous “Error! Reference source not found.” In the article. Also, a reference on page 33 is in yellow highlight.

Authors’ comments: Thank you for pointing out these issues. We have corrected all the reference source errors, as you pointed out, as well as the highlight in yellow on page 33.

Reviewer 5 Report

Please, see attachment.

Comments for author File: Comments.docx

Author Response

Dear Editor and Authors,

I am grateful for allowing me to examine this paper entitled "The effect of IFRS adoption on the business environment: a country perspective".  The paper discusses the effect of adopting IFRS standards over the presence of a friendly business environment for companies, such as their propensity to access to credit. Currently this issue is really ambiguous and poorly defined. Any attempt to systematize knowledge in this regard is therefore justified.

Sincerely I found the work well written, easily understandable, and also interesting for the topic considered. I also believe that the methodology sound well and it appears appropriate to the type of investigation.

 

Therefore, I have only some observations which I hope could improve the readability of the paper.

 

1. The great attention that exists today on the issue of sustainability creates a misunderstanding on the concept of business environment that is clarified only on page 3. As far as I know to indicate the complex of factors that facilitate business choices (laws, infrastructures, bureaucracy, access to credit….) researchers use the term "business climate". The authors can evaluate whether it is appropriate to change the term "business environment" (which can create misunderstandings, see infra) to "business climate".

Authors’ comments: Thank you for your input. We have taken your suggestion and eliminated the “business environment” mentions from the paper.

2. The issue of regulations on the entrepreneurial activity of companies has been much debated over the last few decades. If the Authors want to increase the quality of their contribution they should recall this debate from its origins, and not limiting themselves to quoting recent articles.

Authors’ comments: Thank you for your input. We have rewritten different sections of the document to better suit your suggestions.

3. I cannot understand why to page 5 Authors specifically talk about SMEs. If the authors intend to refer to SMEs, they should specify this purpose in the title and be more precise in the description of the framework. But I don't think that was their intention. For this reason, they should be generic in addressing the topic for all the companies.

 

Authors’ comments: Thank you for your comment, we added a clarification in the document, to explain that both public companies/large companies, as well as, as SME can apply IFRS. The idea is to reinforce that IFRS is not only for big companies, but for all companies, and for that reason can affect the countries’ business climate.

4. Similarly, on pages 5-6 the authors speak in general of Africa, which is a continent, and then of only two Asian countries and then in general. Here, too, I think we need coherence. If the authors intend to restrict the field of analysis to specific geographical areas, they should say so immediately, possibly already in the title. Conversely, they must have a wide-ranging approach to discussing the effects of applying IFRS.

A theme that presents a vast literature, which the Authors actually consider in the next subsection.

Furthermore, readers would like to understand why (the reasons) the previous investigations cited by the Authors found this positive association.

In a nutshell, I believe that the sub-section titled “IFRS as a business-friendly instrument” is, in this current form, useless if not detrimental to the paper as a whole. While the section on research hypotheses is too long. Authors could split it into two subsections related to the two hypotheses.

 

Authors’ comments: Thank you for your suggestion, we have proceeded as you indicated, and divided the research hypothesis section into two sub-sections. We also harmonized the text to be clearer.

 

5. Nevertheless, it would be useful if this aforementioned sub-section could be dedicated to the explanation of the concept of IFRS. As this Journal has a very wide audience, readers not expert in accountability may not be familiar with this term, its meaning and implications. For example, the types of firms that are subject to IFRS.

Furthermore, I believe that the Authors should specify which IFRS they refer to. As it is known, the standards are developed by the two committees, the International Accounting Standards Board (IASB) and the newly created International Sustainability Standards Board (ISSB). The IASB establishes the IFRS Accounting Standards, or how a company prepares its financial statements, while the ISSB establishes the IFRS Sustainability Disclosure Standards; or how a company discloses information on factors related to sustainability that can help or hinder the creation of value. Since the Authors talk about the business environment, there is the risk of creating confusion.

 

Authors’ comments: Thank you comment. We have made clarifications as you suggested previously, such as adopting the term business climate, instead of the business environment, and we have also clarified that IFRS is applied to publicly traded companies but can be applied to others and that the IFRS that the manuscript refers was developed by the International Accounting Standards Board (IASB) (page 5).

 

 

 

1. The sentences “Finally, IFRS…) can be inserted only if Authors refer to developing countries. Even if the authors do not specify which are the 117 countries investigated, it is difficult to imagine that they refer only to developing countries. If their focus was not on developing countries, I believe the H2 could lose a large part of its meaning. The results expressed in the discussion confirm this assumption of mine. That is to say, it would be necessary to replicate this survey with reference to specific world areas (eg continents) or by directly comparing countries with high or low levels of per capita income. However, as I have already said, I appreciated the type of survey and also the fact that the Authors consider the adoption of IFRS to be necessary.

 

Authors’ comments: Thank you for your comment. We have included the table with the economies in the sample of this study to better clarify your questions, please refer to pages 10 and 11.

 

 

2. About the limits, I believe that the authors should specify that the 39 (156 -117) countries without adequate information for statistical analysis are probably developing countries. Consequently, the results of the survey could be skewed in favour of developed countries, where the aforementioned issue of access to credit is less of a concern.

Authors’ comments: Thank you for your comment. We have included the table with the economies in the sample of this study to better clarify your questions, please refer to pages 10 and 11. We have also adapted the limitations of the study to better detail this point.

 

To page 8, please explain what the acronyms GAAP means,

Table 4. Maybe as a decimal separator you should use a period and not a comma.

 

Good luck.

Authors’ comments: Thank you for pointing out these issues. We have corrected it as you recommended.

 

Round 2

Reviewer 1 Report

The authors have implemented the recommendations as far as possible. Therefore, the study is acceptable.