Mandatory IFRS Adoption in Transition Economy with Weak Enforcement Environment and Long-Term Disclosure Quality

Abstract

This paper examines the mandatory compliance with IFRS disclosure requirements for listed companies in
Macedonia, developing middle-income country with less developed capital market and weak enforcement environment for
financial reporting. This transition economy introduced IFRS in 1998 and the study was conducted on a sample of 90
companies that applied IFRS’s in their 2017 financial statements. We constructed both weighted and unweighted disclosure
indices to measure the degree of compliance. The level of compliance was significantly greater for companies engaging
international audit network firm and companies that were more leveraged. The findings did not support theories explaining
compliance in developed capital markets and in countries with strong enforcement environment for financial reporting.