Muda, Paul; To nye a, Kingsley; MacCa hy, John
A icle
The mode a ing ole o en i onmen al ac o s be ween
ins i u ional isomo phic p essu es and he adop ion o
IFRS o SMEs: applica ion o SEM
Cogen Business & Managemen
P o ided in Coope a ion wi h:
Taylo & F ancis G oup
Sugges ed Ci a ion: Muda, Paul; To nye a, Kingsley; MacCa hy, John (2024) : The mode a ing ole
o en i onmen al ac o s be ween ins i u ional isomo phic p essu es and he adop ion o IFRS
o SMEs: applica ion o SEM, Cogen Business & Managemen , ISSN 2331-1975, Taylo & F ancis,
Abingdon, Vol. 11, Iss. 1, pp. 1-24,
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The mode a ing ole o en i onmen al ac o s
be ween ins i u ional isomo phic p essu es and
he adop ion o IFRS o SMEs: applica ion o SEM
Paul Muda, Kingsley To nye a & John MacCa hy
To ci e his a icle: Paul Muda, Kingsley To nye a & John MacCa hy (2024) The mode a ing
ole o en i onmen al ac o s be ween ins i u ional isomo phic p essu es and he adop ion
o IFRS o SMEs: applica ion o SEM, Cogen Business & Managemen , 11:1, 2330012, DOI:
10.1080/23311975.2024.2330012
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Cogen Business & ManageMen
2024, VoL. 11, no. 1, 2330012
The mode a ing ole o en i onmen al ac o s be ween ins i u ional
isomo phic p essu es and he adop ion o IFRS o SMEs:
applica ion o SEM
paul Mudaa, Kingsley o nye ab and John Macca hya
aaccoun ing Depa men , uni e si y o P o essional s udies, acc a, ghana; baccoun ing Depa men , acc a ins i u e o
echnology, acc a, ghana
ABSTRACT
he pu pose o he s udy was o assess he e ec o ins i u ional isomo phic p essu es
on he adop ion o iF s o sMEs in Ghana. his s udy adminis e ed a ques ionnai e o
collec p ima y da a o assess he ela ionship be ween he a iables. Mul is age
sampling me hods we e used o selec he sample size as he ue ep esen a i e o he
16 egions o Ghana wi hou bias. he s udy employed ac o analysis, and s uc u al
equa ion model analysis o es he null hypo heses in his s udy. he esul s e ealed
ha coe ci e isomo phic and mime ic isomo phic p essu es signi ican ly a ec he
adop ion o iF s o sMEs posi i ely in Ghana. howe e , no ma i e isomo phic p essu e
has no signi ican e ec on he adop ion o iF s o sMEs in Ghana. secondly, he esul
showed ha en i onmen al ac o s mode a e o s eng hen he insigni ican ela ionship
be ween no ma i e isomo phic p essu e and he adop ion o iF s o sMEs. he s udy
ecommends ha he go e nmen should collabo a e wi h he egula o (icaG) o gi e
inancial accoun ing educa ion o he sME owne s and accoun s pe sonnel o sMEs
who lack o equisi e skills o adop and implemen iF s o sMEs in Ghana. secondly,
he egula o should c ea e a special window o accoun s pe sonnel o sMEs o
become membe s o p o essional bodies.
1. In oduc ion
he p epa a ion o inancial s a emen s has gone h ough a wa e o e o ms wo ldwide o e he yea s,
and he adop ion o in e na ional Financial epo ing s anda ds (iF s) o sMEs was o enhance he
quali y o he inancial s a emen s p epa ed o decision-making by use s. iF s is a se o accoun ing
ules o he p epa a ion o inancial s a emen s o make hem consis en , anspa en , and easily com-
pa able a ound he wo ld. iF s adop ion is an issue o global ele ance among a ious coun ies o he
wo ld due o he ques o s anda diza ion, uni o mi y, eliabili y, and compa abili y o inancial s a e-
men s o o ganiza ions (okpala, 2012; palea, 2013). E e y business is equi ed o p epa e and p esen
inancial s a emen s pe he equi emen o he in e na ional Financial epo ing s anda ds (Ball, 2006).
he in e na ional accoun ing s anda d Boa d (iasB) ecognized he issue o cos and di icul y ha
small p i a e en e p ises will ace when asked o comply wi h he ull e sion o iF s. despi e hese
challenges, he iasB a gues ha a need o a single se o global inancial epo ing s anda ds is app o-
p ia e o sMEs because i would bene i global accoun ing in o ma ion and imp o e upon compa abili y,
imp o ed upon e iciency o capi al alloca ion, c ea e consis ency in audi quali y, and acili a e inancial
epo ing educa ion and aining. Fo ha ma e , he iasB de eloped in e na ional Financial epo ing
s anda ds (iF s) in July 2009 o small and Medium-sized En i ies (sMEs). one o he objec i es o iF s
o sMEs was o de elop, a single se o high-quali y, unde s andable, and en o ceable global accoun ing
se o s anda ds o he sME sec o . he s anda d was designed o p epa e he inancial epo ing needs
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT John MacCa hy macca hy[email p o ec ed], [email p o ec ed] accoun ing Depa men , uni e si y o
P o essional s udies, acc a, ghana
h ps://doi.o g/10.1080/23311975.2024.2330012
his is an open access a icle dis ibu ed unde he e ms o he C ea i e Commons a ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. he e ms on which his a icle has been
published allow he pos ing o he accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
ARTICLE HISTORY
ecei ed 5 decembe
2023
e ised 21 Janua y 2024
accep ed 8 Ma ch 2024
SUBJECTS
Economics and
de elopmen ; Business,
Managemen and
accoun ing; Economics;
sus ainable de elopmen
KEYWORDS
iF s o sMEs; coe ci e
p essu e; no ma i e
p essu e; mime ic
p essu e; isomo phic
p essu e
REVIEWING EDITOR
oyedele ogundana,
no ingham en
uni e si y, uni ed
Kingdom o G ea B i ain
and no he n i eland
JEL CLASSIFICATIONS
M40; M41; M48
2 p. Muda E al.
o sMEs i espec i e o he loca ion. he iasB was o he iew ha a single se o global inancial epo -
ing s anda ds o sMEs is needed because he bene i s o global accoun ing in o ma ion will inc ease
compa abili y since he bene i s o in e na ionally compa able accoun ing in o ma ion a e no limi ed o
la ge businesses whose deb o equi y ins umen s a e aded in public capi al ma ke s.
in addi ion o he s a u o y equi emen ha he inancial s a emen s p epa ed by sMEs mus comply
wi h iF s sMEs, esea che s belie ed ha he adop ion o iF s o sMEs would help sMEs o be diligen
and p epa e hei inancial s a emen s well ( habi & al-alnas awi, 2016). his would a oid inancial isks
such as liquidi y isk, c edi isk, and ope a ional isks o en e p ises ha use he inancial s a emen s o
sMEs. he e o e, comple e adop ion and compliance o iF s o sMEs in Ghana would help o p oduce
accu a e and eliable inancial s a emen s ha a e consis en , anspa en , and compa able among sMEs
ac oss he wo ld. acco ding o he Bank o Ghana [BoG] (2018), a inancial s a emen ha does no
comply wi h iF s s anda ds exposes he banking sec o o c edi isk as ci ed as one o he main causes
o he collapse o he se en banks in Ghana aside om he b eaches o co po a e go e nance.
since a la ge p opo ion o sMEs ely mo e on deb (loan) han equi y inancing o un hei business,
he use o iF s o sMEs would enhance hese sMEs’ accessibili y o loans om inancial ins i u ions and
help hem a ac in es o s mo e han i ms ha a e no complying wi h he s anda d. his is because
when en i ies p epa e hei inancial s a emen s using he s anda d, he basis o p esen a ion, disclosu e
no es, and he epo o he audi o s will e e o compliance wi h he applicable epo ing amewo k
which is iF s o sMEs. cu en ly, he ins i u e o cha e ed accoun an s, Ghana (icaG) has wi hd awn
he use o Ghana na ional accoun ing s anda ds (Gnas) o he p epa a ion o inancial s a emen s in
he coun y.
once i is pe cei ed ha he adop ion and implemen a ion o iF s o sMEs would enhance he inan-
cial s a emen p epa ed by he sMEs he e o e applica ion o ins i u ional isomo phic p essu es is emi-
nen . acco ding o ca oll (2016), ins i u ional heo y p o ides an ex ensi e and comp ehensi e amewo k
o unde s anding o ganiza ional beha io ’s mechanisms, causes, and e ec s on he adop ion and imple-
men a ion o iF s o sMEs. in a s udy conduc ed by Judge e al. (2010), he ins i u ional heo y was
used o demons a e ha companies mus comply wi h iF s s anda ds o he inancial s a emen s o be
accep able and ge con inual suppo om he gene al public. he ins i u ional heo y is widely acknowl-
edged in ha i p o ides a cohe en isomo phism p essu e and legali y o en e p ises o adop and
implemen iF s o sMEs.
in spi e he ole played by ins i u ional isomo phic p essu es as a heo e ical ool o d i e he adop-
ion o iF s o sMEs. a ious s udies ha e e ealed he inconsis en ela ionship be ween ins i u ional
isomo phic p essu e and he adop ion o iF s o sMEs. While some s udies concluded he e was an
insigni ican ela ionship, especially be ween no ma i e isomo phic p essu e (damak-ayadi e al., 2020;
Kossen ini & o hman, 2014; sappo e al., 2023; sellami & Ga si, 2018) o he s udies e ealed a signi ican
ela ionship (hassan, 2008; Muniandy & ali, 2012). again, mos o he s udies conduc ed we e on he
di ec ela ionship be ween ins i u ional isomo phic p essu es and he adop ion o iF s o sMEs wi hou
conside ing he ole o he i m’s cha ac e is ics in con o ming o he adop ion o iF s o sMEs. acco ding
o delmas and o el (2010), ins i u ional isomo phic p essu es and o ganiza ional cha ac e is ics a e
igh ly linked. Fu he mo e, se e al schola s ha e a gued ha examining only ins i u ional isomo phic
p essu es is no su icien o explain di e gen o ganiza ional changes (d’aunno e al., 2000; K aa z &
Zajac, 1996). ela e ably some s udies ha e iden i ied o he ac o s apa om he ins i u ional isomo -
phic p essu es ha can in luence he adop ion o iF s o sMEs. a s udy conduc ed by aboagye-o che e
and agbeibo (2012) iden i ied size, sec o , legal o m, and he numbe o owne s as o he ac o s ha
in luence he adop ion o iF s in Ghana. ano he s udy conduc ed by abakah (2017) e ealed ha en i y
cha ac e is ics o a ibu es such as ypes, p o i abili y, and audi ypes can in luence he i m’s adop ion
o iF s in Ghana. his equi es a need o de ine p ecisely he ex en o he ins i u ional isomo phic p es-
su es in he p esence o he i m’s cha ac e is ics o a ain legi imacy in socie y.
Fo ha ma e , his s udy used i e i m cha ac e is ics in he o m o i m size, sec o , legal o m, he
numbe o owne s and he in en ion o in e na ional as en i onmen al ac o s o assess he indi ec
ela ionship be ween ins i u ional isomo phic p essu es and he adop ion o iF s o sMEs in Ghana. Fou
ou o he i e i m’s cha ac e is ics used we e iden i ied by aboagye-o che e and agbeibo (2012) as
size, sec o , legal o m, and he numbe o owne s as o he ac o s ha in luence he adop ion o iF s
coGEn BusinEss & ManaGEMEn 3
in Ghana. his analysis will equi e a deepe and mo e complex analysis in ol ing he in e play o en i-
onmen al ac o (size, sec o , legal o m, numbe o owne s, and in en ion o in e na ionalize) as mod-
e a ing a iable be ween ins i u ional isomo phic p essu es and adop ion o iF s o sMEs. he ou come
o his mode a ing analysis would o e some di ec ions o u u e esea ch.
he au ho s a e mo i a ed in his s udy o use a co a iance-Based s uc u al Equa ion Modeling
(cBsEM) o assess he di ec and indi ec ela ionship among he a iables. secondly o assess whe he
he concep ual model i s and suppo s he da a well in his s udy. once he model is well-speci ied o
he da a, he i o he model is e alua ed o he deg ee o he cBsEM i s he sample da a (Mcdonald
& ho, 2002). cBsEM is based on co a iance ma ices and would be used in he pape o explain he
ela ionships be ween he indica o s and he cons uc s and o con i m he a ionale unde lying he
heo y speci ied in he model. he cBsEM is ‘ au ologically e e ed o’ as sEM in his pape . acco ding
o ni zl (2016), sEMs o e lexibili y and use mul iple p edic o s and c i e ion a iables o be done in a
single model. he s udy adop ed and p e e ed sEM as an analy ical ool because i allows he s udy o
model he measu emen e o o he obse ed a iables (haenlein & Kaplan, 2004), he model inco po-
a es unobse able cons uc s (la en a iables) o be measu ed by indica ion, simul aneously model he
ela ionships among he mul iple p edic o and c i e ion a iables and combines and es o a p io i
knowledge and hypo heses wi h empi ical da a. he second mo i a ion o his pape is o include en i-
onmen al ac o s as a mode a ing a iable o assess he indi ec e ec o en i onmen al ac o s be ween
he ins i u ional isomo phic p essu es and he adop ion and implemen a ion o iF s o sMEs in Ghana.
his s udy shi s he esea ch ocus om a di ec ela ionship o a complex ela ionship in ol ing ins i-
u ional isomo phic p essu e, en i onmen al ac o s, and he adop ion o iF s o sMEs in Ghana. he
in e play o en i onmen al ac o s enhances o s ains he di ec ela ionship be ween ins i u ional iso-
mo phic p essu es and he adop ion and implemen a ion bu has ecei ed li le a en ion in he esea ch
communi y, especially in a de eloping coun y pe spec i e like Ghana. he second mo i a ion is o
employ s uc u al Equa ion modeling o assess he di ec and indi ec ela ionship be ween he a iables.
his s udy is impo an because i will p o ide insigh in o he ole o en i onmen al ac o s such as
he size o he sMEs, he sec o o he sMEs, legal o m, numbe o owne s and he in en ion o in e -
na ional he sMEs play in he adop ion o iF s o sMEs by sMEs in Ghana. ano he impo ance o his
s udy is ha i assessed he condi ional e ec be ween he i m’s cha ac e is ics, isomo phism p essu es,
and iF s compliance by sMEs. Finally, he esul s om his s udy will help policymake s conce ning he
policy on he adop ion and implemen a ion o iF s in he coun y in gene al. his s udy begins wi h a
e iew o ela ed li e a u e in sec ion 2 and is ollowed up wi h a me hodology o sec ion 3. sec ion 3
p esen s he me hods employed o collec da a o he s udy as well as hei analysis. sec ion 4 p esen s
he esul s and he a endan discussion o he esul s o he esea ch. Finally, he s udy ends wi h some
conclusions and limi a ions o he s udy.
2. Li e a u e e iew
his sec ion e iewed heo e ical li e a u e and empi ical li e a u e on in e na ional Financial epo ing
s anda ds (iF s) and small and Medium-sized En e p ises (sMEs) pu posely o suppo his s udy.
2.1. Theo e ical e iew: ins i u ional heo y
his subsec ion e iewed and discussed ins i u ional heo y as he main heo y unde lying his s udy.
ins i u ional heo y sugges s ha an o ganiza ion’s o mal s uc u e is inspi ed and p essu ized by ins i-
u ional isomo phic p essu es ha he inds i sel (Meye & owan, 1977). he ins i u ional heo y sug-
ges s ha en i ies a e o mal s uc u es ha a e inspi ed by socie al expec a ions wi hin which hey ind
hemsel es. he heo y p o ides no ms, p ac ices, s uc u es, and p ac ices on how en i ies can es ablish
e ec i e p ocedu es o social beha io ha mee socie al expec a ions o become legi ima e en i ies.
acco ding o Boxenbaum and Jonsson (2017) ins i u ional isomo phic p essu es adop s he no ms, p ac-
ices, s uc u es, and p ac ices o o he o ganiza ions o mee socie al expec a ions. diMaggio and powell
(1983) opined ha ins i u ional isomo phism is a medium whe e ins i u ions in an en i onmen become
4 p. Muda E al.
mo e homogeneous o social, poli ical, o legi imacy o succumb o he in ensi y o socie al and poli ical
p essu e. consequen o ins i u ional p essu es, en i ies y o con o m o he ‘bes p ac ices’ and c ea e
‘legi ima e coe cion’ o legi imize hemsel es o he gene al public.
diMaggio and powell (1983) de eloped and pos ula ed he concep o ins i u ional isomo phic p es-
su e as a key concep o he ins i u ional heo y. he ins i u ional isomo phic p o ides legi ima e p es-
su e on he o ganiza ion o be accep ed legally, socially, and poli ically by he ex e nal socie y he
o ganiza ion ope a es. he heo y posi s ha o ganiza ions adop s uc u es and p ac ices ha a e con-
side ed legi ima e and socially accep able by o he o ganiza ions– ega dless o hei ac ual use ulness
( od igues & c aig, 2007). he heo y emphasizes he impo ance o ins i u ional p essu es (isomo phism)
on he ins i u ions/en i ies’ p ac ices and he s a egic decisions o seek economics based on legi ima e
na ional bes p ac ices h ough accep ed global models. he ins i u ional p essu e c ea es a na ional
isomo phism (diMaggio & powell, 1983, 2000; Judge e al., 2010). he ins i u ional amewo k is he
mechanisms h ough which an o ganiza ion seeks o align he pe cep ion o i s p ac ices and cha ac e -
is ics wi h i s social en i onmen and how such p ac ices become ins i u ionalized in a pa icula o gani-
za ion (deegan & une man, 2006).
coe ci e isomo phic p essu e a ises when an ins i u ion equi es a coun y o adop ules and s an-
da ds. o ensu e ha inancial s a emen s a e p ope ly p epa ed in e na ional accoun ing s anda ds
Boa d equi es coun ies o p epa e inancial s a emen s in con o mi y wi h he iF s. ins i u ions o en
in luence coun ies and o ganiza ions o engage in g ow h-enhancing ac i i ies. de eloping coun ies
depend o a g ea ex en on in e na ional no ms. o ganiza ions such as he Wo ld Bank (WB), he
in e na ional Mone a y Fund (iMF), he uni ed na ions (un), and he o ganisa ion o Economic
co-ope a ion and de elopmen (oEcd) encou age he di usion o iF s among de eloping coun ies.
hei main a ionale o doing so is o boos in es o s’ con idence and o inc ease capi al ma ke e i-
ciency wo ldwide (Mi & ahaman, 2005).
Mime ic isomo phic p essu e is he second o he ins i u ional heo y and i e e s o he endency o
na ions o imi a e o he na ions iewed as legi ima e o success ul. de eloping coun ies may adop he
no ms and s anda ds o mo e de eloped economies o achie e legi imacy on he in e na ional scene
(Judge e al., 2010). coun ies and o ganiza ions a e likely o imi a e he beha io o o he en i ies ha
may be iewed as success ul o legi ima e o ha e a be e expe ience o he p ocedu e being di used
(diMaggio & powell, 1983). imi a ion among o ganiza ions in he in e na ional a ena may also a ise due
o compe i i e easons. coun ies may be p essu ed o adop iF s because no doing so would disad-
an age hem ela i e o he compe i ion and e ode hei edge in he ma ke place. he e o e, mime ic
isomo phic p essu e causes coun ies and o ganiza ions o imi a e success ul coun ies and o ganiza ions
o gain a compe i i e ad an age in he global business a ena.
he las ins i u ional isomo phic p essu e iden i ied by diMaggio and powell (1983) is no ma i e iso-
mo phic p essu e. no ma i e p essu es e e o collec i e alues ha b ing abou con o mi y o hough
and deed wi hin ins i u ional en i onmen s. his implies ha educa ion di ec ly in luences he de elop-
men o all p o essions, including accoun ing. na ions ha ha e a highe le el o educa ional de elop-
men a e o en mo e likely o adop and implemen mo e igo ous and complex in e na ional no ms as
a esul o a highe le el o p o essionalism. coun ies ha ha e a highe le el o educa ional de elop-
men a e o en mo e likely o adop and implemen mo e igo ous and complex in e na ional no ms as
a esul o a highe le el o p o essionalism. he main no ma i e isomo phic p essu es a e p o essional
commi men and educa ional quali ica ion. acco ding o diMaggio and powell (2000), he e a e h ee
mechanisms h ough which ins i u ional isomo phism change occu s namely coe ci e, mime ic, and no -
ma i e. he h ee dimensions o ins i u ional isomo phism a e illus a ed in Figu e 1.
Many s udies ha e used ins i u ional heo y as a main heo y o explain he adop ion o iF s o sMEs
globally. he heo y is linked o he decision-making p ocess o adop and comply wi h iF s adop ion
and compliance in he ield o accoun ing (Judge e al., 2010; Kim e al., 2012). sco (2013) opined ha
ins i u ional heo y is a widely accep ed heo y ha highligh s cogen isomo phism and legi imacy. he
di e en componen s o he ins i u ional heo y expound how his legi imacy is o med, and adop ed
o e ime. he heo y is conside ed a easu ed ool o iden i ying he d i e s o iF s o sMEs.
he heo y is based on some assump ions as discussed below: Fi s o all, he heo y assumes ha
he o ganiza ion abides only supe icially by ins i u ional p essu es and adop s new s uc u es wi hou
coGEn BusinEss & ManaGEMEn 5
necessa ily implemen ing he ela ed p ac ices. his assump ion is e e ed o as ‘decoupling’ in ins i u-
ional heo y (Moll e al., 2006). decoupling is a phenomenon whe e o ganiza ions main ain a sepa a ion
be ween hei o mal s uc u es, policies, o p ac ices om hei ac ual day- o-day ope a ions o beha -
io s. in simple e ms, o ganiza ions may adop ce ain s uc u es o p ac ices o legi imacy, compliance
wi h ins i u ional no ms, o o mee ex e nal expec a ions, bu hese may no necessa ily be ully imple-
men ed in hei in e nal p ocesses. secondly, he heo y assumes ha o ganiza ions end o become
mo e simila o e ime by adop ing simila s uc u es, p ac ices, and beha io s due o ex e nal p essu es
(diMaggio & powell, 1983). again, he heo y assumes ha o ganiza ions seek o gain and main ain
legi imacy in he eyes o hei s akeholde s by con o ming o ins i u ional no ms and alues o be pe -
cei ed as socially accep able (diMaggio & powell, 1983; sco , 1987). las ly, he ins i u ional heo y
assumes ha o ganiza ions esis change due o ins i u ional p essu es leading o a ce ain le el o ine -
ia in o ganiza ional beha io . his implies ha indi iduals o employees wi hin he en e p ises o en
de elop habi s, ou ines, and sha ed no ms o e ime ha make hem s able and p edic able in hei
en i onmen . When con on ed wi h change, he indi iduals may esis due o pe cei ed h ea s o hei
es ablished no ms.
he i s implica ion o hese assump ions o he e ec i e adop ion o iF s o sMEs equi es ha
be o e any en e p ise emba ks on he adop ion o iF s o sMEs hey should be mind ul o hese dynam-
ics o assump ions and plan e ec i ely o achie e success ul adop ion o iF s. a success ul adop ion o
iF s o sMEs equi es (1) e ec i e communica ion wi h employees in ol ed in he adop ion o iF s o
sMEs, (2) adop ing e ec i e change managemen s a egies, and inally e o s should be made o align
he iF s o sMEs wi h exis ing alues o help mi iga e esis ance o change and acili a e a smoo he
ansi ion o iF s o sMEs.
i is wo h no ing ha mos sMEs especially in Ghana emba ked on he adop ion o iF s o sMEs
wi hou adequa e p epa a ion and wi hou much expe ise o handle he asks ahead esul ing in a low
le el o compliance wi h iF s o sMEs in Ghana. his is con a y o he expec a ion o he heo y esul -
ing in decoupling. his posi ion is con i med by se e al s udies ha e ealed a low le el o adop ion o
iF s o sMEs (aboagye-o che e & agbeibo , 2012; a hin e al., 2017; Judge e al., 2010; Mawu o e al.,
2019; Mbawuni, 2018; sappo e al., 2023). he low le el o adop ion may be pa ly due o he assump-
ion o ‘decoupling’ in mos de eloping coun ies. Fac o s such as cul u al, egula o y, and o ganiza ional
esis ance may con ibu e o he assump ion o decoupling in ins i u ional heo y.
again, i is well men ioned ha he local egula o y landscape can in luence he adop ion o iF s o
sMEs. he e should be a egula o y suppo in he o m o a well-s uc u ed aining p og am o sMEs ha
add esses he key issues and equi emen s ha need o be add essed be o e and a e he adop ion and
implemen a ion o iF s o sMEs. howe e , he inadequa e local egula o y landscape can c ea e compli-
ance challenges o he sMEs, which will impac he willingness o he sMEs o adap o iF s o sMEs.
in summa y, ins i u ional heo y p o ides aluable insigh in o he adop ion o iF s o sMEs. he
heo y emphasizes on he in luences o ins i u ional isomo phic p essu es such as s uc u es, no ms, eg-
ula ions, and o ganiza ional legi imacy. o e ec i ely conside he adop ion o iF s o sMEs he heo y
equi es ha egula o y bodies should examine hei capaci y; he sMEs should be willing o be
Figu e 1. F amewo k o ins i u ional isomo phism.
Sou ce: DiMaggio and Powell (1983).
6 p. Muda E al.
p essu ized o adop he iF s o sMEs o become legi imized, e c. again, he heo y can help o analyze
he e ec o isomo phic p essu es on he pe cei ed legi imacy and accep ance o iF s o sMEs wi hin
a gi en amewo k. howe e , he adequacy o he heo y depends on a ious ac o s ela ing o a spe-
ci ic con ex : hese include he capaci y o he local egula o landscape, he o ganiza ional cha ac e is-
ics, and he ex en o which he sMEs a e oo ed in he ins i u ional ne wo ks.
2.2. Concep ual amewo k: adop ion o IFRS in Ghana and he implica ion ins i u ional heo y
he Wo ld Bank oge he wi h he Minis y o Finance and Economic planning (MoFEp) now known as
he Minis y o Finance launched a epo on he obse ance o s anda ds and codes ( osc) in Ghana
(Wo ld Bank, 2014). osc disco e ed ha Ghana was se iously a ec ed by weak in e na ional egula ion,
compliance, and en o cemen o s anda ds ( osc, 2004). secondly, osc also ound weaknesses in he
laws and egula ions au ho izing inancial epo ing in Ghana. he Gnas ha was se up in 1993 was
based on in e na ional accoun ing s anda ds (ias). Mos o he Gnas we e ou moded and we e no
upda ed wi h ime and he e exis gaps be ween Gnas and ias.
he s udy also ound ha he e is a lack o suppo om he egula o and p o essional body which
a ec s he moni o ing and con ol o p o essional accoun an s’ aining and p ac ices in he coun y
( osc, 2004).
o a es he si ua ion, he osc sugges ed ha Ghana should adop ully he iF s wi hou any
changes o eplace he al eady exis ing Gnas (Wo ld Bank, 2014) and icaG become a membe o he
in e na ional Fede a ion o accoun an s (iFac) in he yea 2005. iFac di ec ed ha all membe coun ies
should adop iF s; as a esul , Ghana adop ed iF s on 1 Janua y 2007 (an wi, 2010). he easons o
adop iF s a e o enhance anspa ency, and compa abili y in inancial s a emen s among global pee s,
a ac ing o eign in es men by aligning wi h supe io s anda ds. Gi en ha , all lis ed companies, go -
e nmen business en e p ises, banks, insu ance companies, secu i y b oke s, pension unds, and public
u ili ies we e equi ed o adop and implemen he ull e sion o he iF s as o 31s decembe 2007. i
is belie ed ha he adop ion and implemen a ion o iF s would os e economic de elopmen h ough
a mo e obus and s anda dized inancial epo ing amewo k.
la e , in July 2009, he iasB decided o mo e u he o publish iF s o sMEs because he comple e
se o iF s was bulky o sMEs o adop and he e o e no sui able o sMEs’ needs (aboagye-o che e &
agbeibo , 2012).
as a consequence o he publica ion o iF s o sMEs by iasB, Ghana announced and o icially adop ed
iF s o sMEs in Janua y 2012 o en i ely eplace Ghana accoun ing s anda ds which was se up in 1993
by he icaG. icaG on behal o he go e nmen o Ghana di ec ed ha all sMEs in Ghana would ha e
o comply wi h iF s o sMEs by he end o 2013 i hei inancial s a emen s a e o be globally com-
pa ible. he iF s o sMEs is sepa a e om he ull iF s and is he e o e a ailable o any ju isdic ion o
adop whe he o no he coun y has adop ed he ull iF s. i is belie ed ha he adop ion o he iF s
o sMEs would enable Ghanaian company’s inancial s a emen s o be unde s ood in he global ma ke .
again, i would p o ide g ea e compa abili y o inancial in o ma ion o small p i a e en e p ises in
Ghana wi h hei pee s in ano he pa o he wo ld, as well as enhance in es o con idence in inancial
epo ing ma e s.
howe e , la e a e iF s o sMEs was adop ed he e we e widesp ead epo s o non-compliance
ega ding he 2013 au oma on ha he sME’s inancial epo s should comply wi h iF s o sMEs. his
esul ed in an ex ension o he compliance pe iod o 2015 by he ins i u e (icaG, 2014). again, se e al
s udies conduc ed a e he adop ion o iF s o sMEs ha e e ealed low compliance wi h iF s o sMEs
by sMEs in Ghana. a s udy conduc ed by a hin e al. (2017) e ealed ha he adop ion and implemen-
a ion o iF s o sMEs in Kumasi was e y low and ha mos o he sMEs in Kumasi Me opolis p e-
pa ed inancial s a emen s using he e s while Gnas. a hin e al. (2017) disco e ed inadequa e skills o
success ully implemen he iF s o sMEs, lack o suppo om egula o y and p o essional bodies, and
he complex na u e o iF s o sMEs which p e en s mos use s om unde s anding he s a emen s
p epa ed and he implemen a ion cos we e some o he challenges being encoun e ed by he sMEs
ha p e en ed hem om adop ed and implemen a ion o iF s o sMEs in Kumasi Me opolis. again, a
s udy conduc ed by amoako and asan e (2012) showed ha mos sMEs in Kumasi we e no keeping
coGEn BusinEss & ManaGEMEn 7
p ope accoun ing eco ds and hey opined ha he si ua ion would a ec he p udence o inancial
managemen , c edi accessibili y o he sMEs, and he g ow h o he sMEs.
ano he s udy conduc ed by Mawu o e al. (2019) e ealed a low le el o awa eness and adop ion o
iF s o sMEs o selec ed sMEs in Ga Eas (Medina) in Ghana. he s udy ound ha 60% o he o al
i ms in e iewed had no knowledge o iF s o sMEs. his implies ha mos o he sMEs in Ga Eas
(Madina) ha e no knowledge ha iF s o sMEs has been adop ed on hei behal which is expec ed o
enhance he compa abili y o he inancial epo ing wi h hei pee s in o he pa s o he wo ld.
he low le el o adop ion o iF s o sMEs by sMEs in Ghana implies he adop ion was ca ied ou
wi hou ca e ul unde s anding o he dynamics o assump ions o he ins i u ional heo y by he egula o
(i.e. icaG). he iF s o sMEs was scheduled o implemen a ion wi hou e ec i e communica ion by he
icaG o he end objec i e o he adop ion, wi hou pu ing in place change managemen s a egies by he
icaG, and wi hou enough e o o align he new s anda ds wi h he exis ing alues o mi iga e esis ance
and acili a e a smoo he ansi ion o iF s. his led o decoupling a si ua ion ha heo y has an icipa ed
ha en e p ises (i.e. sMEs) will abide supe icially by he ins i u ional p essu es and adop he new s uc-
u es wi hou necessa ily implemen ing he ela ed p essu es. he e idence o ins i u ional decoupling om
he adop ion o iF s o sMEs was e ealed in esea ch ca ied ou by a hin e al. (2017) amoako and
asan e (2014) and Mawu o e al. (2019) ha con i med ha sMEs ha e adop ed he iF s o sMEs supe -
icially wi hou necessa ily implemen ing he ela ed p ac ices and epo ing. secondly, he egula o (icaG)
did no o esee ha some sMEs may no ha e adequa e in as uc u e in u n o expe ise o e ec i ely
implemen he iF s o sMEs. cu en ly, mos sMEs canno employ p o essional accoun an s because o
cos . he way in his si ua ion is o he go e nmen h ough he Minis y o ade and indus y (Mo i) o
collabo a e wi h he egula o (icaG) o gi e inancial accoun ing educa ion o he sME owne s and
accoun s pe sonnel o sMEs who lack o equisi e skills o adop and implemen iF s o sMEs in Ghana.
secondly, he go e nmen h ough Mo i should c ea e a special window o accoun s pe sonnel o sMEs
who a e no p o essional accoun an s o become membe s o icaG and be gi en incen i es conside ing
he impo ance ha quali y o inancial epo s se es o in es o s bo h locally and in e na ionally.
2.3. Empi ical li e a u e and hypo heses de elopmen
his subsec ion e iewed some empi ical s udies ca ied ou by schola s on he ela ionship be ween
isomo phism p essu e (coe ci e p essu e, no ma i e p essu e, and mime ic p essu e) and iF s compliance
by sMEs. i is a sys emic analysis o p e ious s udies o p o ide answe s o his esea ch opic. he pu -
pose is o answe s based on obse a ions, measu emen s, and conclusions se led o his s udy. he
empi ical e iew is o ganized in o wo sub-sec ions: he di ec e ec be ween ins i u ional isomo phic
p essu e and he adop ion o iF s o sMEs and he ole o en i onmen al ac o s as he ue ep esen-
a i e o he popula ion o he ques ionnai e o be adminis e ed wi hou bias.
2.3.1. The di ec e ec be ween ins i u ional isomo phic p essu es and adop ion IFRS o SMEs
he s udies iden i y h ee componen s o ins i u ional isomo phic p essu es om he ins i u ional heo y
such as coe ci e p essu e, no ma i e p essu e, and mime ic p essu e a e he main a iables ha in lu-
ence sMEs’ adop ion and compliance wi h iF s. simila a iables we e adop ed in some s udies in he
pas (albu & albu, 2012; damak-ayadi e al., 2020; Kossen ini & o hman, 2014). Based on he a o emen-
ioned, he s udy hypo hesized ha he e is a ela ionship be ween ins i u ional isomo phic p essu es
(coe ci e p essu e, no ma i e p essu e, and mime ic p essu e) and he adop ion o iF s o sMEs. hese
hypo heses we e designed o assess he null hypo heses based on he concep ual model cons uc ed in
Figu e 2 o his s udy. he sEM was used o assess he di ec ela ionship be ween he a iable and he
ou come in e ed o his s udy.
H01: coe ci e isomo phic p essu e (cisp) has a signi ican e ec on he adop ion o iF s o sMEs in Ghana.
H02: Mime ic isomo phic p essu e (Misp) has a signi ican e ec on he adop ion o iF s o sMEs in Ghana.
H03: no ma i e isomo phic p essu e (nisp) has a signi ican e ec on he adop ion o iF s o sMEs in Ghana.
14 p. Muda E al.
an inc ease in ins i u ional isomo phic p essu es is accompanied by an inc ease in he adop ion o iF s
o sMEs in Ghana. able 5 indica es ha all he isomo phic p essu es a e signi ican ly associa ed wi h
sMEs’ compliance wi h iF s in Ghana. he second eason o using pea son’s co ela ional analysis is o
c issc oss he ela ionship be ween he independen and he con ol a iables o iden i y aces o mul-
icollinea i y p oblems ha may cause a w ong in e p e a ion o he ou comes o his s udy.
Mul icollinea i y causes he coe icien s in eg ession a iance o inc ease making he model uns able
and hus c ea ing di icul y o in e p e he coe icien s (Kei h, 2019; sh es ha, 2020).
4.4. S uc u al equa ion modeling esul s
s uc u al equa ion modeling is a echnique ha inco po a es measu ed a iables, and la en cons uc s
and explici ly speci ies measu emen e o . he s udy adop ed and p e e ed sEM as he main analy ical
ool because i can es ima e he s uc u al ela ionship be ween measu ed a iables and la en cons uc s
and secondly, i can es ima e he mul iple and in e ela ed dependence in a single analysis. he model
is di ided in o wo pa s and i is ep esen ed as he s ages o he analysis: (1) he measu emen model
and (2) he s uc u al model (i ela es he la en a iables o one ano he ). a wo-s ep s uc u al equa-
ion modeling analysis app oach was adop ed based on he ecommenda ion o ande son and Ge bing
(1988) and sch eibe e al. (2006) as (1) measu emen model and (2) s uc u al model analysis was used
o es he hypo heses ou lined in his s udy. he measu emen model uses la en a iables and clus e s
o a iables o obse e a iables unde lying each cons uc in he analysis. again, con i ma o y ac o
analysis (cFa) is used o alida e and educe measu emen e o s. his alida ion is done using a ious
i indices. he sEM esul is o ganized in o h ee sub-sec ions: (1) he esul o he measu emen model,
(2) he esul s o he p e-sEM undamen al assump ions, and (3) he s uc u al model analysis esul s.
4.4.1. Fac o analysis
he s udy applied ha mon’s one- ac o es o examine he exis ence o po en ial common me hod a i-
ance bias among he cons uc s (chuang & lin, 2013). o achie e he one- ac o es , he s udy employed
explo a o y ac o analysis as a s a is ical echnique o educe da a o a se o summa y a iables and o
explo e he unde lying heo e ical s uc u e o he phenomena. he explo a o y ac o analysis (EFa)
helped o ex ac he unde lying ac o s and also o e ain i ems ha ha e high co ela ions wi h he
a iables o sEM analysis. o ga he in o ma ion abou he ela ionship be ween cons uc s o educe
edundancy, he Kaise -Meye -olkin (KMo) sampling adequacy es , cumula i e a iance Explained (c E),
and Ba le ’s es o sphe ici y (p- alue) we e used. he con en ional h esholds o KMo alue should
be g ea e han i e (>0.5), c E should also be g ea e han i y pe cen (>50%) and Ba le ’s es alue
should be signi ican a a 5% con idence le el. he esul om KMo, c E, and he p- alues om Ba le ’s
es , ha he da a o he sample is su icien o ac o analysis. he e o e, able 6 indica es ha he c E
anged om 61% o 85% which mee s he ecommended h eshold while KMo anged om 0.61 o
0.87also mee s he ecommended h eshold. he e o e, all a iables me he c i e ia o Ba le ’s es
wi h all p- alues being signi ican .
4.4.2. Tes o con e gen alidi y ( eliabili y es )
alidi y is he p ecision o he esea ch o he deg ee o which i has been measu ed by he esea che
(Gola shani, 2003). in quan i a i e da a, alidi y migh be add essed h ough hones y, dep h, ichness,
Table 6. summa y o esul s showing ac o analysis o he s udy a iables.
Va iables CVe (%) KMo Ba le ’s es (P- alue)
Coe ci e 61.191 .817 0.00
no ma i e 66.560 .618 0.00
Mime ic 64.352 .614 0.00
enVi 60.178 .868 0.00
Compliance 85.328 .676 0.00
nB: accep able h esholds: CVe = Cumula i e Va iance explained, > 50%; KMo = Kaise -Meye -olkin, Minimum alue >0.6, Ba le ’s es o
sphe ici y (p- alue < 0.05).
Sou ce: au ho ’s Cons uc (2021).
coGEn BusinEss & ManaGEMEn 15
and scope o he da a achie ed. in his s udy es i ems we e de eloped o es he concep ual model
de eloped in Figu e 2 using s a a-sEM. howe e , he assessmen o he es i ems was pe cep ion-based
h ough a i e-poin like scale wi h a complex model as well. he e o e, he e is a need o e alua e
he model based on he eliabili y analysis es , con e gen alidi y, and disc iminan alidi y o he indi-
idual es i ems designed o his s udy. he alidi y o he es i ems is examined using c onbach’s
alpha (α), composi e eliabili y (c ), and a e age a iance Explain (a E) o assess he alidi y and eli-
abili y o he es i ems o he cons uc s. seka an (2003) speci ied he a ious anges om 0 o 1 o he
c onbach’s alpha (α) and hei espec i e in e p e a ions as ollows: om 0.90 and abo e is in e p e ed
as excellen ins umen , om 0.80 o 0.89 is in e p e ed as good ins umen , and om 0.70 o 0.79 is
in e p e ed as accep able ins umen , om 0.60 o 0.69 is in e p e ed as ques ionable ins umen , om
0.50 o 0.59 is in e p e ed as poo ins umen and om 0.50 and below is in e p e ed as unaccep able
ins umen . o es o he eliabili y o he ins umen , he e u ned ques ionnai e was ed in o he s a-
is ical so wa e (s a a e sion 15) o calcula e c onbach’s alpha (α), composi e eliabili y (c ) and he
a e age a iance Ex ac ed (a E) esul s a e p esen ed in able 7.
he esul s in able 7 indica e ha he c onbach’s alpha (α) alues o he es i ems a e g ea e han
0.700 and i p o ides a clea indica ion ha he es i ems ha e good eliabili y and a e accep able
(nunnally, 1970). he lowes c onbach’s alpha alue among he es i ems is no ma i e isomo phic p es-
su e (nisp) wi h c onbach’s alpha (α) alue abo e 0.705 which is abo e 0.700. likewise, he cons uc s
had composi e eliabili y (c ) alues anging om 0.782 o 0.896, and he alues ob ained we e g ea e
han he ecommended alue. he esul s depic ha all he cons uc s ha e also demons a ed su i-
cien composi e eliabili y acco ding o he accep able h eshold by nunnally (1970). he e o e, all he
eliabili y alues ob ained o he es i ems a e accep able and he makeup o he componen s as a
whole was in e nally consis en (c eswell, 2012; Kline, 2011). he a e age a iance Explain (a E) calcu-
la es he le el o a iance cap u ed by one cons uc e sus he le el explained due o measu emen
e o s and was also used o asce ain he da a. he a E calcula es he g and mean alue o he squa ed
loadings o he indica o s and i is he amoun o a iance ha is cap u ed by he cons uc conce ning
he amoun o a iance due o measu emen e o (hai e al., 2014). in summa y, able 7 shows ha
he composi e eliabili y (c ) measu e is g ea e han 0.700 while he a e age a iance explained (a E)
is abo e 0.50 and i ollows he Fo nell and la cke (1981) ecommenda ion. he e o e, he cons uc s
o he es i ems we e alid and us wo hy o assess he adop ion and implemen a ion o iF s o
sMEs in Ghana.
4.4.3. Disc iminan alidi y analysis
disc iminan alidi y is used o di e en ia e one cons uc om ano he cons uc in he model. he
assessmen o he disc iminan alidi y is o u mos impo ance in s a is ical esea ch ha in ol es la en
a iables ep esen ing he cons uc . he disc iminan alidi y o his s udy is assessed using he
Fo nell-la cke and he e o ai -Mono ai a io (h M ) c i e ion. he disc iminan alidi y helps o ensu e
Table 7. Reliabili y and alidi y analyses o s udy a iables.
Va iables es i ems Final i ems alpha (α) CR aVe
CisP Coe c1 0.974 0.723 0.896 0.685
Coe c2 0.787
Coe c4 0.763
Coe c5 0.768
MisP Mime ic1 0.801 0.741 0.815 0.595
Mime ic2 0.723
Mime ic4 0.787
nisP no m1 0.708 0.705 0.784 0.548
no m3 0.786
no m4 0.724
enVi en 1 0.868 0.769 0.890 0.730
en 2 0.882
en 4 0.811
iFRs Comp1 0.768 0.723 0.782 0.643
Comp2 0.834
No e: α = C onbach’s alpha, CR = Composi e Reliabili y, aCe = a e age Va iance explained.
Sou ce: Modi ied Field Da a (2023).
16 p. Muda E al.
ha he same eason canno accoun o he a iance among di e en a iables. he Fo nell-la cke
c i e ion is a s a is ical echnique used in s uc u al equa ion modeling o assess he disc iminan alidi y
o he measu emen model. i compa es he squa e oo o he a e age a iance Explain (a E) wi h he
co ela ion o he la en cons uc (hai e al., 2014). disc iminan alidi y is con i med o be in exis ence
when he squa e oo o he a E o he cons uc is g ea e han he co ela ion be ween one cons uc
and ano he cons uc (Fo nell & la cke , 1981; hai e al., 2010). he ou come om he Fo nell-la cke
disc iminan alidi y analysis is p esen ed in able 8.
able 8 shows he diagonal o he ma ix o he co ela ion ma ix o each cons uc and he absolu e
alue o hei co ela ion is lowe han he squa e oo o he a E o each cons uc in all he espec i e
ows and columns o each cons uc .
his signi ies ha he e is su icien disc iminan alidi y o each cons uc o his s udy. he e o e,
all he cons uc s ha e demons a ed good disc iminan alidi y and he con ex ual pe o mance o he
es i ems o he cons uc s is p o en o be disc imina ely alid. he he e o ai -Mono ai (h M ) a io
has become he al e na i e measu e o Fo nell-la cke pos ula ed by hensele e al. (2015) o assessing
he disc iminan alidi y o he cons uc . he h M a io o co ela ion is usually used o assess he
disc iminan alidi y o he cons uc . he h M a io measu es he simila i y be ween he la en a i-
ables and when he h M is smalle han one hen disc iminan alidi y is conside ed obus o well
speci ied.
4.4.4. Measu emen model: con i ma o y ac o analysis
he measu emen model is also known as pa h analysis. a pa h analysis is a se o ela ionships be ween
he dependen and independen a iables. he s udy used maximum likelihood (Ml) es ima ion o i he
model o he da a, which assumes ha da a is no mally dis ibu ed in mul i a ia e analysis. o ensu e
he e is a smoo h analysis o he s uc u al ela ionship, he s udy c ea ed ac o ial sco es om he con-
s uc by con e ing he mul idimensional cons uc s o uni-dimensional. his was done o o m in e ac-
i e e ms o he mode a ing analysis. he mos accep able and widely used model i indices a e
chi-squa e o he deg ee o eedom (cMin/d ), Goodness o Fi index (GiF), compa a i e Fi index (cFi),
ucke lewis index ( li), no med Fi index (nFi), pclose is he p- alue o ejec ing he null hypo hesis
ha he model i s he indi idual subjec da a, s anda dized oo Mean-squa ed esidual (s M ), and
oo Mean squa e E o o app oxima ion ( MsEa). hu and Ben le (1999) sugges ha a s udy should
use a combina ion o a leas wo i indices. able 9 shows he esul s o i indices o he s uc-
u al model.
able 9 p o ides in o ma ion on he i indices, hei cu -o c i e ia ( ule o humb), and he subse-
quen esul s o he s udy model. he compa a i e Fi index (cFi) is equal o he disc epancy unc ion
Table 8. Resul o Fo nell-La cke disc iminan alidi y analysis.
Va iables CisP MisP nisP enVi iFRs
CisP 0.712
MisP 0.647 0.702
nisP 0.433 0.477 0.723
enVi 0.399 0.406 0.465 0.821
iFRs 0.338 0.491 0.342 0.318 0.739
Sou ce: Resea che ’s s a a e sion 16 compila ion.
Table 9. Resul o measu emen model (con i ma o y ac o analysis).
Fi indices Cu -o poin ini ial measu emen model Modi ied measu emen model in e p e a ion
CMin/DF ≤3.00 2.622 2.481 excellen
g.F.i ≥0.95 0.806 0.911 accep able
C.F.i ≥0.95 0.879 0.914 accep able
Pclose ≥0.05 0.038 0.060 excellen
sRMR ≤0.08 0.022 0.057 excellen
Li ≥0.95 0.895 0.913 accep able
iFi ≥0.95 0.847 0.867 accep able
RMsea ≤0.06 1.423 0.053 accep able
h eshold sou ces: Hu and Ben le (1999), and gaskin and Lim (2016).
coGEn BusinEss & ManaGEMEn 17
adjus ed o sample size. he accep able cFi should ange be ween 0 and 1 wi h a la ge alue indica ing
be e model i . accep able model i is indica ed by a cFi alue o 0.90 o g ea e (hu & Ben le , 1999).
he oo Mean squa e E o o app oxima ion ( MsEa) is ela ed o he esidual in he model. MsEa
and he alue should ange be ween 0 and 1 wi h a smalle MsEa alue indica ing be e model i .
accep able model i is indica ed by an MsEa alue o 0.06 o less (hu & Ben le , 1999). a p elimina y
measu emen o i indices showed ha : he chi-squa e (χ2 = 317.504, deg ee o eedom (dF) = 128,
P < 0.000) was signi ican ; cMin/dF = 2.622; Goodness-Fi -index [GFi] = 0.806, compa a i e Fi index
[cFi] = 0.900, oo mean squa e e o o app oxima ion [ MsEa] = 1.423. a cu so y look a some o he
model’s i indices (e.g. GFi, aGFi, iFi) does no seem o be su icien ly op imized o da a and he e o e
some e-speci ica ions and e ining a e necessa y (ande son & Ge bing, 1988; By ne, 2010). he e ised
model o measu emen was hen analyzed wi hou he p oblem i ems being included. he yielded i
indices showed an accep able inc ease in he i ness o he upda ed measu emen model; all i indices
we e ound his ime wi hin hei ecommended le el such as cMin/dF was 2.481, GFi = 0.911, aGFi =
0.818, iFi = 0.867, cFi = 0.914 and MsEa = 0.057 as in able 2. he chi-squa e o he deg ee o eedom
(cMin/dF) o 2.481 o he measu emen model is a good alue wi hin he h eshold o 3 as ecom-
mended by hu and Ben le (1999). i showed he e is he goodness o i and adequa e quali y on all
he commonly used i indices (hai e al., 2010; hoyle, 1995; hu & Ben le , 1999; Kline, 2011). he MsEa
was 0.053 and i sa is ies he ecommended cu o poin (<0.06), sugges ed by hu and Ben le (1999)
and hai e al. (2010). addi ionally, he s uc u al esul s s ongly suppo he concep ual model de el-
oped in Figu e 2. his, he e o e, sugges s ha he model adequa ely ep esen s he da a and he model
quali y is accep able.
4.4.5. Resul s o he P e-SEM undamen al assump ions
i is e y impo an in he case o pa ame ic s a is ical analysis o check he eg ession assump ions
be o e he eg ession analysis because he da a o be used o he analysis is aken om a sample pop-
ula ion and a he same ime he esul ob ained om he analysis would be in e ed o he la ge
popula ion. his will allow he s udy o check he p esence o mul icollinea i y, linea i y, no mali y,
homoscedas ici y, and au oco ela ion assump ions a e iola ed. he i s assump ion es ed is he mul i-
collinea i y assump ion and he esul is p esen ed in able 10.
able 10 shows ha he a iance in la ion Fac o ( iF) alues o he a iables a e lowe han 10 and
his p o ides a clea indica ion ha he a iables a e no su e ing om mul icollinea i y p oblems. he
highes iF among he a iables is he in en ion o in e nalize which has a alue o 2.674 wi h a ole -
ance alue abo e 0.374. his indica es ha none o he a iables iola e he mul iple eg ession assump-
ions o he model. a mul icollinea i y p oblem a ises when he e is a co ela ion be ween wo
independen and con ol a iables in he eg ession analysis. Mul icollinea i y is edundan in o ma ion
in he model ha needs o be elimina ed. o he wise, i will cause an uns able es ima ion o he eg es-
sion coe icien o he s udy. he second eg ession assump ion es ed was he linea i y assump ion.
linea i y means he co ela ion be ween a iables used o he analysis should be ep esen ed by a
s aigh line. i means he slope o he eg ession unc ion is cons an and i exp esses he ela ionship
be ween he dependen and independen a iables in a linea o m. acco ding o hai e al. (2010), lin-
ea i y is a mul i a ia e echnique ha is based on co- ela ional measu es o associa ion, including ac o
analysis and mul iple eg essions. he linea i y assump ion is es ed using a sca e plo . he sca e plo
is used o assess linea i y by examining isually he pa e n o he da a poin s on he plo . any depa u e
o linea i y may a ec he co ela ion o a iables o ming he ela ionship he e o e, he linea i y
Table 10. Va iance in la ion Fac o (ViF) index and he ole ance Le el ( L) index.
Va iables ole ance le el (i.e. 1/ViF) ViF le el
iFRs 0.374 2.674
CisP 0.447 2.237
MisP 0.386 2.591
nisP 0.434 2.304
enVi 0.472 2.119
Mean ViF 2.385
Sou ce: Resea che ’s s a a e sion 16 compila ion.
18 p. Muda E al.
assump ion is e y impo an o es he a iables o ensu e linea i y assump ion is no iola ed. he
esul o he es showed ha all he a iables a e linea wi h each o he .
he hi d eg ession assump ion es ed in his s udy was he no mali y assump ion. he assump ion
o no mali y o da a is es ed because Ml es ima ion assumes da a is no mally dis ibu ed wi h a eason-
able sample size. he e o e, i is impo an o es assump ions o ensu e i is no iola ed. he null
hypo hesis o he shapi o-Wilk es o Kolmogo o -smi no is used o es whe he he popula ion o he
sample da a is no mally dis ibu ed o he wise da a is no . he esul o es ing whe he he da a is
no mally dis ibu ed is p esen ed in able 11.
able 11 shows ha he p- alue is 0.143 o he shapi o-Wilk and g ea e han a 5% le el o signi i-
cance (i.e. p > 0.05). since he p- alue is g ea e han 5% in he shapi o-Wilk, i means ha he da a has
no de ia ed signi ican ly om he no mal dis ibu ion and he e o e, he s udy can assume ha he da a
is no mally dis ibu ed.
he inal eg ession assump ion es ed in his s udy was he homoscedas ici y assump ion. he
homoscedas ici y indica es ha he e o a iance does no subs an ially change wi h he alues o he
p edic o s (hai e al., 2010). homoscedasci y is also known as homogenei y and i is usually es ed by
le ene’s es o homogenei y o a iance ( abachnick & Fidell, 2007). le ene’s es o homogenei y uses
he F- es o es he null hypo hesis ha he a iance is equal ac oss he g oup and ha he homosce-
das ici y assump ion is iola ed. he decision ule o le ene’s es is o he p- alue o be lowe han
5% o assume he a iances a e signi ican ly di e en o he g oup sizes a e unequal. he le ene es o
he me ic a iables was es ed ac oss he a iables as pa o he - es and p esen ed in able 11.
able 12 shows he p- alues a e highe han 5% and he e o e ejec he null hypo hesis ha assumes
he a iances a e signi ican ly di e en o he g oup sizes a e unequal. When his assump ion is iola ed,
he F-s a is ics alue will be biased and a la ge sample size mean will be associa ed wi h a small sample
size and ice e sa. When his happens, he signi icance le el will be unde es ima ed and can cause he
null hypo hesis o be alsely ejec ed. he p- alues o hese a iables a e highe han 0.05 o 5% and
he bes homogenei y o a iance o hese a iables is Misp ollowed by En i. his is because hey ha e
he smalles le ene’s s a is ics o 1.256 and 1.566 espec i ely.
4.5. Resul s o he s uc u al model analysis
his subsec ion assesses he di ec e ec o isomo phic p essu es (i.e. coe ci e p essu e, no ma i e p es-
su e, and mime ic p essu e) and compliance o sMEs o iF s and he indi ec e ec o en i onmen al
ac o s (En i) be ween isomo phic p essu es (i.e. coe ci e p essu e, no ma i e p essu e, and mime ic
p essu e) and compliance o sMEs o iF s. he pa h analysis is used o p oduce he Ml es ima ion o
p oduce he di ec and indi ec esul s in his s udy. he model p edic i e powe and he pa h cons uc s
a e used o assess he e ec o he independen cons uc s on he dependen cons uc s espec i ely.
Table 11. es s o no mali y dis ibu ion.
Kolmogo o -smi no ashapi o-Wilk
s a is ic D sig s a is ic D sig
CisP 0.234 740 0.143 0.845 740 0.345
MisP 0.229 740 0.197 0.891 740 0.423
nisP 0.263 740 0.367 0.770 740 0.541
enVi 0.213 740 0.233 0.816 740 0.373
iFRs 0.202 740 0.206 0.816 740 0.223
Sou ce: Resea che ’s s a a e sion 16 compila ion.
Table 12. es o homogenei y o a iance (Le ene’s es ).
Va iables Le ene s a is ics d 1 d 2 sig
iFRs 2.435 2 685 0.247
CisP 2.283 2 685 0.189
MisP 1.256 2 685 0.143
nisP 1.648 2 685 0.236
enVi 1.566 2 685 0.113
Sou ce: Resea che ’s s a a e sion 16 compila ion.
coGEn BusinEss & ManaGEMEn 19
he model p edic i e powe is assessed by he -squa ed measu es wi hin he measu emen model as
well as he s uc u al model le el. Each hypo hesis is es ed basis o he size, sign, and s a is ical signi -
icance o he coe icien o he la en a iable and he dependen a iable. he esul om he di ec
analysis is p esen ed as a baseline esul in model (1) while he esul om he indi ec analysis is p e-
sen ed as in model (2) o (4). he analyses we e ca ied ou in wo s eps o selec he mos sui able
independen a iables o he model. again, he con ol a iables in ol ing size and g ow h a e used in
all he analyses.
able 13 p esen s he es ima ed coe icien s (β) and he s anda d e o s (in pa en hesis) along wi h
he signi icance le els (p- alues) o he coe icien s o aid he explana ion o he di ec ion and e ec on
he dependen a iable. Model (1) shows he coe icien and he p- alue o he ins i u ional isomo phic
p essu e (cisp, Misp, and nisp) a iables and he mode a ing a iables (En i) wi hou he in e ac ing
e ms on he adop ion o iF s o sMEs. Model (1) shows he coe icien alues and he p- alues o he
pa hs ending o iF s o sMEs o he coe ci e p essu e was (β = 0.417, p < 0.05). his implies he e is a
posi i e and signi ican ela ionship be ween coe ci e isomo phic p essu e and iF s o sMEs a a 5%
signi icance le el. he e o e, based on he esul in able 13 and he explana ions he eo , he s udy
ailed o ejec he null hypo hesis (h01) and concludes ha coe ci e isomo phic p essu e a ec s he
adop ion o iF s o sMEs signi ican ly. i implies ha all hings being equal, a 1% inc ease in coe ci e
isomo phic p essu e inc eases he adop ion o iF s o sMEs in Ghana by 41.7%. his inding is consis-
en wi h p e ious s udies ha opined ha coe ci e isomo phic p essu e and iF s compliance
(damak-ayadi e al., 2020; Kossen ini & o hman, 2014) ca ied ou s udies on he coe ci e isomo phic
p essu e and he adop ion o iF s and concluded ha coe ci e isomo phic p essu e is a powe ul legal
sys em ha sMEs mus comply wi h o secu e s uc u al and p ocedu al legi imacy. again, he coe icien
alues and he p- alues o he pa hs ending o iF s o sMEs o he mime ic p essu e in Model (1) was
(β = 0.279, p = 0.004). his implies he e is a posi i e and signi ican ela ionship be ween mime ic isomo -
phic p essu e and iF s o sMEs a a 5% signi icance le el. he e o e, based on he esul in able 13 and
he explana ions he eo , he s udy ailed o ejec he null hypo hesis (h02) and concludes ha mime ic
isomo phic p essu e a ec s he adop ion o iF s o sMEs signi ican ly. i implies ha all hings being
equal, a 1% inc ease in mime ic isomo phic p essu e inc eases he adop ion o iF s o sMEs in Ghana
by 27.9%. his inding is consis en wi h p e ious s udies conduc ed by Judge e al. (2010), Kossen ini
and o hman (2014), i sumeikan (2011), p icope (2016), and sellami and Ga si (2018) opined ha many
companies adop and implemen iF s due o he p essu e o imi a e success ul o ganiza ions ha ha e
implemen ed iF s. hese s udies concluded ha mime ic isomo phic p essu es a ec he adop ion o
iF s. he e o e, mime ic isomo phic p essu e is one o he powe ul o ces d i ing sMEs o adop and
implemen iF s o sMEs in Ghana.
Table 13. Di ec and indi ec s uc u al equa ion modeling esul s.
Dependen a iable: iFRs Di ec analysis indi ec analysis
Hypo heses Reg ession Pa h Model 1 Model 2 Model 3 Model 4
H01 iFRs←CisP 0.417*** 0.492*** 0.488 0.353***
(0.009) (0.060) (0.085) (0.098)
H02 iFRs←MisP 0.279*** 0.221*** 0.218*** 0.269***
(0.037) (0.025) (0.031) (0.080)
H03 iFRs←nisP 0.249* 0.464** 0.456 *** 0.183***
(0.087) (0.146) (0.153) (0.080)
iFRs←MisP 0.198** 0.101** 0.098** 0.144**
(0.089) (0.0307) (0.031) (0.044)
H04 iFRs←(CisP*enVi) 0.020***
(0.067)
H05 iFRs←(MisP*enVi) 0.024**
(0.007)
H06 iFRs←(nisP*enVi) 0.031**
(0.009)
(Cons an ) 0.124** 0.572** 0.331** 0.065***
−0.199 −0.099 −0.099 −0.024
R-squa ed (R2) 0.661 0.891 0.764 0.868
F 247.29 571.76 242.41 493.385
P- alue 0.000 0.000 0.000 0.000
D-Wa son 2.057 2.101 1.999 2.002
Sou ce: Resea che ’s s a a e sion 16 compila ion.
20 p. Muda E al.
addi ionally, he coe icien alue and he p- alue o he pa h ending o iF s o sMEs o he
no ma i e p essu e in Model (1) was (β = 0.249, p = 0.374). his implies he e is a posi i e bu insig-
ni ican ela ionship be ween no ma i e isomo phic p essu e and iF s o sMEs in Ghana. he e o e,
based on he esul in able 13 and he explana ions he eo , he s udy ejec s he null hypo hesis
(h03) and concludes ha no ma i e isomo phic p essu e does no signi ican ly a ec he adop ion o
iF s o sMEs. his ou come is consis en wi h p e ious s udies (damak-ayadi e al., 2020; Kossen ini
& o hman, 2014; p icope, 2016; sappo e al., 2023) who concluded ha he e was an insigni ican
ela ionship be ween no ma i e isomo phic p essu e and he adop ion o iF s o sMEs. Fu he mo e,
p icope (2016) concluded ha no ma i e p essu e is no a signi ican de e minan o iF s adop ion
in de eloping coun ies. Finally, he coe icien alues o he pa h s a ing om en i onmen al ac-
o s and ending wi h he adop ion o iF s o sMEs in he model (1) was (β = 0.198, p = 0.000). his
implies he e is a posi i e and signi ican ela ionship be ween en i onmen al ac o s and he adop-
ion o iF s o sMEs in Ghana. his implies ha en i onmen al ac o is signi ican ly ela ed o he
adop ion o iF s o sMEs in Ghana. he en i onmen al ac o is used in model (1) as a con ol a i-
able. he p edic i e powe ha is -squa ed o he model (1) is 0.661 o 66.1% and i is wi hin he
accep able le el and close o 100%. i implies ha he independen cons uc s o he model can
explain abou 66.1% o he changes ha a e happening o he iF s o sMEs o his s udy. his
lea es 33.9% unexplained by he eg essi e model. he e o e, he null hypo heses: h01 and h02
unde he di ec analyses we e suppo ed while he null hypo hesis h03 is no suppo ed a he
signi icance le el o 5%.
he nex s age o he analysis is o pe o m he indi ec analysis by in oducing he in e ac i e
e ms (En i*cisp), (En i*Misp), and (En i*nisp) in o Model (1) o become Model (2), Model (3), and
Model (4) and hen assess he indi ec e ec o he in e ac ing e ms be ween he ins i u ional isomo -
phic p essu es and he adop ion o iF s o sMEs in Ghana. i is wo h no ing ha he esul om he
indi ec analysis in model (2) h ough model (4) showed a signi ican imp o emen in model i ness
h ough signi ican changes in he -squa ed om 66.1% o 89.1% in he model summa y om (1) o
(4). again, he coe icien alues and p- alue be ween he in e ac i e e ms (En i*Misp) and he adop-
ion o iF s o sMEs in he model (3) was (β = 0.198, p = 0.000). he e o e, en i onmen al ac o s com-
p ising he size, sec o , legal o m, numbe o owne s, and in en ion o in e na ionalize mode a e o
s eng hen he ela ionship be ween ins i u ional isomo phic p essu es and he adop ion o iF s o
sMEs in Ghana. his ou come is consis en wi h p e ious s udies (sappo e al., 2023; aboagye-o che e
and agbeibo (2012). aboagye-o che e and agbeibo (2012) conclude ha en i onmen al ac o a ec s
he adop ion o iF s o sMEs. Finally, he coe icien alues and he p- alues o he mode a ing e m
(En i*nisp) pa hs ending in iF s o sMEs was (β = 0.031, p < 0.000) unde model (4). he esul om
he model (4) indica es ha en i onmen al ac o (En i) mode a es he ela ionship be ween no ma-
i e isomo phic p essu e and he adop ion o iF s o sMEs in Ghana since he p- alue is less han
0.05 o 5% signi icance. he e o e, en i onmen al ac o s signi ican ly mode a e he ela ionship
be ween no ma i e isomo phic p essu e and he adop ion o iF s o sMEs in Ghana. again, he s udy
obse ed ha wi h he inclusion o he in e ac ion e m (i.e. En i*nisp) in he model (4), he coe i-
cien and he p- alue o he no ma i e isomo phic p essu e has mo ed om an insigni ican ela ion-
ship wi h he adop ion o iF s o sMEs o a signi ican ela ionship wi h he adop ion o iF s o sMEs
in Ghana. he e o e, en i onmen al ac o s comp ising he size, sec o , legal o m, numbe o owne s,
and in en ion o in e na ionalize mode a e o s eng hen he ela ionship be ween ins i u ional isomo -
phic p essu es and he adop ion o iF s o sMEs in Ghana. Fu he mo e, he s udy obse ed a signi -
ican imp o emen in model i ness pa icula ly o model (2) whe e he -squa ed was 89.1%. he
coe icien alues and he p- alues o he mode a ing e m (En i*cisp) pa hs ending in iF s o sMEs
we e (β = 0.020, p < 0.000) unde model (2). his ou come sugges s ha wi h he inclusion o he in e -
ac ion e ms (En i*cisp), (En i*Misp), and (En i*nisp) in he model (2), model (3), and model (4) ha e
seen signi ican imp o emen in he coe icien s, he p- alues and p edic i e powe s ( -squa es) o he
indi ec analysis.
his ou come con ibu es o in ui ional heo y by explaining ha ins i u ional isomo phic p essu es
can in e ac wi h en i onmen al ac o o in luence he adop ion o iF s o sMEs in Ghana. Mos o he
s udies concluded he e is a ela ionship be ween ins i u ional isomo phic p essu es and he adop ion o
coGEn BusinEss & ManaGEMEn 21
iF s o sMEs. howe e , his s udy ex ends he conclusion ha he in e play o en i onmen al ac o s as
a mode a ing a iable enhanced he ela ionship. he e o e, he null hypo heses: h01, h02, h04, h05,
and h06 unde he di ec analyses we e suppo ed while he null hypo hesis h03 is no suppo ed a
he signi icance le el o 5%.
5. Conclusions and ecommenda ions
he pape assesses he di ec ela ionship be ween coe ci e isomo phic p essu e, mime ic isomo phic
p essu e, no ma i e isomo phic p essu e, and he adop ion o iF s o sMEs and he mode a ing e ec
o en i onmen al ac o s comp ising he size, sec o , legal o m, numbe o owne s, and in en ion o
in e na ionalize. he esul showed ha he e we e posi i e and signi ican ela ionships be ween coe -
ci e isomo phic p essu e, mime ic isomo phic p essu e, and he adop ion o iF s o sMEs in Ghana,
while he e was insigni ican ela ionship be ween no ma i e isomo phic p essu e and he adop ion o
iF s o sMEs. howe e , when he in e ac i e e ms (En i*cisp), (En i*Misp), and (En i*nisp) we obse ed
a posi i e and signi ican ela ionship be ween all he a iables o ins i u ional isomo phic p essu es and
he adop ion o iF s o sMEs in Ghana. again, he s udy obse ed a signi ican imp o emen in model
i ness a e he in oduc ion o he in e ac i e e ms in o he di ec eg ession model. his ou come
con i med ha ins i u ional heo y can co-exis wi h en i onmen al ac o o p essu ize sMEs o adop
iF s o sMEs in Ghana.
hese indings ha e signi ican implica ions o s uc u ing he adop ion o iF s o sMEs in Ghana.
Fo ins ance, he s udy ound ha coe ci e and mime ic isomo phic p essu es con ibu e mo e o he
decision o sMEs o adop and implemen iF s o sMEs. conside ing he impo ance o sMEs adop ion
and implemen a ion o iF s o sMEs, emphasis mus be placed on hese d i e s o ge mo e sMEs o
implemen iF s o sMEs in Ghana. secondly, he s udy ound no ma i e isomo phic p essu e is insigni i-
can ly ela ed o he adop ion o iF s o sMEs. his e ela ion equi es ha he accoun an s o he sMEs
should be encou aged o belong o p o essional accoun an bodies. he s udy ecommends ha he
go e nmen h ough he Minis y o ade and indus y (Mo i) o collabo a e wi h he egula o (icaG)
o gi e inancial accoun ing educa ion o he sME owne s and accoun s pe sonnel o sMEs who lack o
equisi e skills o adop and implemen iF s o sMEs in Ghana. secondly, he go e nmen h ough Mo i
should c ea e a special window o accoun s pe sonnel o sMEs who a e no p o essional accoun an s o
become membe s o icaG and be gi en incen i es conside ing he impo ance ha quali y o inancial
epo s se es o in es o s bo h locally and in e na ionally. he e a e wo main limi a ions o his s udy.
he p ima y limi a ion o his s udy is ha he esea ch ins umen is a s uc u ed closed-ended ques-
ionnai e and inhe en ly designed o ga he speci ic and quan i iable in o ma ion. his may limi he
esponden s o p ede e mined esponse op ions and may no p o ide in-dep h in o ma ion ha may
suppo he s udy. he second limi a ion is ha he s udy only looks a mode a ing analysis wi hou
looking a media ing analysis o assess he in e ac ion be ween a i m’s cha ac e is ics and he adop ion
o iF s o sMEs. las ly,
Wi h his no el ou come, esea che s can now emba k on iden i ying a ious ac o s ha enhance o
s ain ins i u ional isomo phic p essu es o adop iF s o sMEs. in seeking o unde s and how a ious
ac o s (i.e. i m cha ac e is ics) can co-exis wi h ins i u ional isomo phic p essu es o in luence he
adop ion o iF s o sMEs. Fu u e esea ch should assess he ole o a i m’s cha ac e is ics as a mode -
a ing a iable o in luence he adop ion o iF s o sMEs. again, u u e esea ch should assess he ole
o media ing a iables in in luencing he adop ion o iF s o sMEs.
Au ho con ibu ions s a emen
i. concep ion and design: p. Muda & K. o nye a.
ii. analysis and in e p e a ion: p. Muda, K. o nye a & J. Macca hy.
iii. d a ing o pape : p. Muda, & K. o nye a.
i . e ising i c i ically o in ellec ual con en : p. Muda, K. o nye a, & J. Macca hy.
. Final app o al o he e sion o be published:J. Macca hy & K. o nye a.
i. all au ho s ag ee o be accoun able o all aspec s o he wo k.
22 p. Muda E al.
Disclosu e s a emen
no po en ial con lic o in e es was epo ed by he au ho (s).
Abou he au ho s
M . Paul Muda is a lec u e a he uni e si y o p o essional s udies. M . Muda is a ph.d. candida e a he acc a
ins i u e o echnology Business school and a membe o he ins i u e o cha e ed accoun an s, Ghana.
Kingsley To nye a is a cha e ed accoun an wi h a conside able numbe o yea s o expe ience in academia and
indus y. he has been in ol ed in accoun ing, inancial managemen , isk man-agemen and s a egy a senio man-
agemen le el in he inancial se ices sec o . he has esea ch in e es in accoun ing, inance and co po a e go e nance.
D . John MacCa hy holds a doc o a e in Finance and is a lec u e a he uni e si y o p o essional s udies, acc a.
John is a membe o he associa ion o cha e ed ce i ied accoun an s (acca), uK and, he cha e ed ins i u e o
axa ion, Ghana (ci -Gh). d . Macca hy has ex ensi e expe ience in accoun ing, audi ing, axa ion, and co po a e
Finance bo h in indus ial and business p ac ice. he augh axa ion, ad anced axa ion, co po a e Finance, Financial
epo ing, and audi ing. My p incipal esea ch in e es s a e iscal policy, co po a e inance, co po a e go e nance,
and o ensic ools o analysing inancial epo age.
A ailabili y o da a and ma e ial
sepa a e da a a ailabili y upon eques .
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