Mujalli, Abdulwahab; Wani, Mohammad Jib an Gul; Almg ashi, Ahmed; Ahmed,
I an; Asi i, Nasse
A icle
The in luence o IFRS and ins i u ional quali y on economic
g ow h: empi ical e idence in he GCC coun ies using
panel ARDL analysis
Cogen Business & Managemen
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g ow h: empi ical e idence in he GCC coun ies using panel ARDL analysis, Cogen Business &
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The influence o IFRS and ins i u ional quali y on
economic g ow h: empi ical e idence in he GCC
coun ies using panel ARDL analysis
Abdulwahab Mujalli, Mohammad Jib an Gul Wani, Ahmed Almg ashi, I an
Ahmed & Nasse Asi i
To ci e his a icle: Abdulwahab Mujalli, Mohammad Jib an Gul Wani, Ahmed Almg ashi,
I an Ahmed & Nasse Asi i (2024) The influence o IFRS and ins i u ional quali y on economic
g ow h: empi ical e idence in he GCC coun ies using panel ARDL analysis, Cogen Business &
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Cogen Business & ManageMen
2024, VoL. 11, no. 1, 2396547
The in luence o IFRS and ins i u ional quali y on economic g ow h:
empi ical e idence in he GCC coun ies using panel ARDL analysis
Abdulwahab Mujallia, Mohammad Jib an gul Wania, Ahmed Almg ashia, i an Ahmeda and
nasse Asi ib
aDepa men o accoun ing and Finance, College o Business, Jazan uni e si y, Jazan, saudi a abia; bDepa men o
accoun ing, College o Business, King Khalid uni e si y, abha, saudi a abia
ABSTRACT
We empi ically in es iga ed he e ec o in e na ional inancial epo ing s anda ds
(iF s) and ins i u ional quali y (iQ) on economic g ow h in he gcc egion. We used
panel da a collec ed o e 25 yea s (1998–2022) om six gcc coun ies—Bah ain, he
uni ed A ab emi a es, saudi A abia, Qa a , oman, and Kuwai . A panel coin eg a ion
es was used o in es iga e he ela ionships among he a iables. his s udy con i ms
a long- un 15% decline in gDp ollowing he adop ion o iF s in gcc na ions. he
sho - e m impac is posi i e, wi h a ise o 13% in he gDp. con e sely, ins i u ional
quali y nega i ely a ec ed he gDp in he long and sho un. We used an index o
ins i u ional quali y based on six a iables. i is ecommended ha policymake s ake
ad an age o he immedia e ad an ages o adop ing iF s while implemen ing long- e m
plans o educe he p ojec ed decline in gDp. he economic epe cussions o iF s
adop ion and ins i u ional quali y should be ca e ully conside ed while a he same
ime emphasizing he ad an ages o open ade and low in la ion in encou aging
long- e m g ow h.
1. In oduc ion
he gul coope a ion council (gcc) is a geopoli ical alliance comp ising Bah ain, he uni ed A ab emi a es,
saudi A abia, Qa a , oman, and Kuwai . i se es as a pla o m o egional coope a ion in poli ics and eco-
nomics. gcc coun ies ha e hei challenges bu do sha e common issues, such as a s ill-g owing p i a e
sec o , es ic ed &D in es men , a poo ly skilled wo k o ce, and o e eliance on he oil/pe oleum indus y
(Mish i , 2018). economic g ow h is signi ican ly alued in gcc coun ies, conside ing i s ole in s abilizing he
egion, educing po e y, and enhancing ci izens’ li es, income, and weal h (AlKha s e al., 2022). Achie ing
hese ambi ions is c i ical i he challenge is o de ise meaning ul policies o hem. he gcc coun ies ha e
b oadly adop ed in e na ional Financial epo ing s anda ds (iF s), as hese s anda ds a e he mos mode n
sys em o ensu ing p obi y and anspa ency in c oss-bo de ansac ions, hones business dealing, accoun -
abili y, and e iciency in ansac ions (ebaid, 2022; awiah & Boolaky, 2020).
ins i u ional quali y is de ined as he go e nance quali y in a coun y, and i s p ima y indica o s a e
poli ical s abili y, con ol o and consis en punishmen o co up ion, go e nmen e ec i eness, accoun -
abili y, upholding p ope y igh s, sha eholde p o ec ion, and high-quali y and en o ced legisla ion/ eg-
ula ions (cama go, 2021; Digdowiseiso & sugiyan o, 2021; el-helaly e al., 2020a, 2020b). hese wo
elemen s - iF s and ins i u ional quali y - s ongly in luence economic ac i i y in gcc coun ies. iF s
signi ican ly guides economic g ow h in gcc coun ies by making o ganiza ions ope a e app op ia ely
in e na ionally (Al Maz oui e al., 2023; Almujamed e al., 2017). Meanwhile, he quali y o ins i u ions
helps economic g ow h by enhancing a egion’s compe i i eness when o ganiza ions and hei agencies,
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT abdulwahab Mujalli [email p o ec ed] Depa men o accoun ing and Finance, College o Business, Jazan uni e si y,
Jazan, saudi a abia
h ps://doi.o g/10.1080/23311975.2024.2396547
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 1 Feb ua y 2024
e ised 13 Augus 2024
Accep ed 20 Augus 2024
KEYWORDS
gcc; economic g ow h;
iF s; ins i u ional quali y;
pMg; panel A Dl
SUBJECTS
Business, Managemen
and Accoun ing;
economics; Finance
2 A. MuJAlli e Al.
uni s, and s a a e e ec i e in hei unc ions (Al-nase & hamdan, 2021). Fo hese easons, i is impe -
a i e o in es iga e he e ec o iF s and ins i u ional quali y on he economy o gcc coun ies, as
economic g ow h is supposed o alle ia e he c i ical challenges encoun e ed in he egion.
he esea ch on he in luence o iF s and ins i u ional quali y on economic g ow h in gcc na ions
lacks comp ehensi e s udies, esul ing in a de ici in knowledge in bo h he long and sho e m. p io
s udies on his subjec ha e a es ic ed ocus, mainly examining FDi. howe e , he e is s ill a lack o
comp ehensi e in es iga ion o he impac o iF s and ins i u ional quali y on economic g ow h. o he
s udies ha e e alua ed he e ec o iF s adop ion and ins i u ional quali y and hei in luence on inwa d
FDi in di e en coun ies (gasimo e al., 2023; sawye , 2011). s udies on gcc coun ies a e speci ic o
ei he iF s o ins i u ional quali y bu no bo h. Fo ins ance, Mameche and Masood (2021) add essed
he economic impac o iF s implemen a ion bu omi ed ins i u ional quali y. si iopoulos e al. (2021)
explo ed his opic by es ing he adop ion o iF s and ins i u ional go e nance bu limi ed hei wo k
o only one economic a iable, FDi. A ecen s udy conduc ed by Almaq a i e al. (2021) appea s o be
he only wo k ha co e ed his opic by concen a ing on gcc and in es iga ing he ela ionship
be ween iF s and ins i u ional quali y while conside ing he economy as a whole (Almaq a i e al., 2021).
i is e iden ha esea ch gaps exis ega ding he limi ed a ailabili y o s udies on he ela ionship
be ween iF s adop ion, ins i u ional quali y, and economic g ow h in he gcc egion. his s udy sough
o add ess his disc epancy. in addi ion, exis ing esea ches end o be na ow in scope because hey do
no in es iga e b oade economic concep s o how iF s and ins i u ional quali y shape hem in he sho
and long un. While hese concep s in luence economic g ow h om he pe spec i es o mone a y pol-
icy, compa a i e ad an age, ma ke ailu e, iscal policy, and in e na ional ade, ecen s udies ha e p e-
dominan ly concen a ed on FDi, implying ha hei comp ehensi eness is limi ed. nei he iF s no
ins i u ional quali y exis s in isola ion, so examining hei in luence oge he would only be ai .
he e o e, he main objec i e o his pape is o e alua e he economic in luence o iF s and ins i u-
ional quali y in he gcc egion. iF s is closely linked o ins i u ional quali y in g owing he economy,
and he wo should be examined in he long and sho un. iF s alone canno lead o sus ained g ow h
in gcc, which applies o ins i u ional quali y. Besides gua an eeing ha inancial s a emen s a e accu a e
and compa able wo ldwide, he egion mus ha e epu able and e ec i e ins i u ions o accomplish
desi ed economic g ow h (si iopoulos e al., 2021). ins i u ional quali y complemen s he compa abili y
and anspa ency elemen s accomplished h ough iF s o accomplish an inclusi e and sus ainable econ-
omy (owusu e al., 2022). he e o e, his s udy examines he associa ion be ween iF s and ins i u ional
quali y in boos ing he economy in he long and sho un.
he cu en s udy con ibu es o he exis ing li e a u e in se e al ways. Fi s ly, his esea ch ills he
gap in he li e a u e conce ning he ela ionship be ween iF s and ins i u ional quali y in suppo ing
economic g ow h. his s udy conside s he ins i u ional quali y index o mula ed using p incipal compo-
nen analysis. he implica ions include he need o gcc coun ies o con inue in eg a ing iF s in o hei
economic policies and linking hese s anda ds wi h ins i u ional quali y o ensu e economic g ow h. he
indings will be signi ican o in es o s, policymake s, and esea che s, gi en he need o ocus on how
economic g ow h occu s. While mos ha e concen a ed on FDi as he only signi ican economic ea u e
o iF s and ins i u ional quali y, his iew is es ic ed because hese componen s can help achie e
g ow h. Fu he mo e, his s udy is o u mos impo ance due o i s signi ican impac on economic
g ow h in he gcc. i has he po en ial o add ess a ious challenges, such as expanding he p i a e
sec o , limi ed &D in es men , a wo k o ce lacking adequa e skills o quali ica ions, and excessi e eli-
ance on he oil and pe oleum indus y.
secondly, he s udy examines how iF s, ins i u ional quali y, ade openness, and in la ion in luence
economic g ow h. i will es ablish a ounda ion o u u e academics o in es iga e mo e economic
aspec s conce ning iF s and ins i u ional quali y impac s, such as unemploymen a e, in e es a e, con-
sume con idence index, and FDi. hi dly, his s udy con ibu es o be e policy, encou aging ele an
o icials o make decisions based on he co ec da a emana ing om he con e gence o iF s and ins i-
u ional quali y.
he es o his pape is s uc u ed as ollows. he nex sec ion e iews he ele an li e a u e and
p oposes he hypo heses. sec ion 3 explains he empi ical me hodology and da a. sec ion 4 p esen s ou
es ima ion esul s. sec ion 5 p esen s a discussion, and inally, sec ion 6 concludes wi h a summa y o
cogen Business & MAnAgeMen 3
he key indings, policy sugges ions, economic implica ions, academic/ esea ch implica ions, limi a ions,
and a enues o u u e esea ch.
2. Li e a u e e iew
se e al s udies ha e examined gcc iF s and ins i u ional quali y- ela ed issues (Alsuhaibani, 2012; cieślik
& hamza, 2022; Mameche & Masood, 2021; si iopoulos e al., 2021). Ali (2023) in es iga ed he in luence
o ins i u ional quali y and o eign di ec in es men (FDi) on economic g ow h om an en i onmen al
quali y pe spec i e. his indings con i med he posi i e e ec o ins i u ional quali y on he economy bu
he nega i e e ec on he en i onmen due o he c ea ion o pollu ion. Mameche and Masood (2021)
conduc ed a s udy o analyze he mac oeconomic da a o he gcc egion abou he impac o iF s
adop ion on FDi. hei esul s e ealed ha coun ies may aise FDi in lows by 3% in he sho un, bu
a 10.4% dec ease occu s in he long un. in hei wo k, cieślik and hamza (2022) sough o gain insigh s
in o iF s adop ion and ins i u ional quali y ega ding FDi. hei indings con i med he posi i e ela ion-
ship o iF s adop ion and ins i u ional quali y wi h o eign in es men . Mo eo e , a ew o he s udies
epo ed he signi icance o ins i u ional quali y in a ac ing o eign in es men and sugges ed ha gcc
go e nmen s should ensu e ha he quali y o hei ins i u ions is no ques ioned (chidlow e al., 2021;
cieślik & hamza, 2023; Dimi o a e al., 2020). Fu he mo e, Alsuhaibani (2012) examines he an icipa ed
in luence o iF s adop ion in saudi A abia and inds ha i in luences company p o i s, e enues, egu-
la o y bodies, and he o e all business milieu.
a ious gcc coun ies ha e implemen ed iF s, which a e now in e na ional egula ions de ised by he
in e na ional Accoun ing s anda ds Boa d (iAsB), in ending o ge in es o s o make sound in es men
decisions, documen a ious ways o measu ing business and inancial pe o mance in mul iple coun ies,
lowe capi al cos s o i ms, and educe isks o in es o s. Mo eo e , iF s can educe he cos s o gen-
e a ing inancial in o ma ion/da a, o e mo e incen i es o in e na ional in es men , and pe mi esou ces
o be deployed mo e e icien ly in e na ionally (lou enço & B anco, 2015).
iF s p esen s a se o accoun ing s anda ds es ablished in 2001 h ough iAsB, eplacing he
in e na ional Accoun ing s anda ds (iAs) om 1973 o 2001 (Mameche & Masood, 2021). gcc coun ies
adop ed iF s a a ious imes, wi h Bah ain in 2001, he uAe in 2015, and saudi A abia in 2017, while
oman, Kuwai , and Qa a eadily ansi ioned om iAs o iF s. oman has had iAs since 1986, Kuwai
since 1991, and Qa a since 1999 (Al-enzy e al., 2023). he iF s adop ion in gcc coun ies has p omo ed
mo e asymme ical in o ma ion, which has enhanced FDi posi i ely so ha he in o ma ion is us ed as
being mo e eliable h ough compa abili y (Alnodel, 2016).
ins i u ional quali y has many implica ions o he economic de elopmen o he gcc egion. A s udy
by hussen (2023) asse ed ha ins i u ional quali y de e mines he in es men milieu’s conduci eness
om he ade ba ie s iewpoin . economic g ow h is subjec o he quali y o ins i u ions based on
how hey uphold and en o ce he ule o law and punish co up ion (Boğa, 2019). in addi ion, coun ies
wi h well-es ablished ins i u ions ha sa egua d p ope y igh s and p omo e and o e see ee ma ke
business p ac ices ha e wi nessed economic expansion. (hussen, 2023). Fo ins ance, sub-saha an A ican
na ions ha ha e enhanced hei ins i u ional quali y eco ded 5% gDp g ow h and gDp pe capi a
g ow h o 2% annually (hussen, 2023). he gcc could g ow simila gDp and gDp pe capi a by inco po-
a ing ins i u ional quali y wi h iF s. Acco ding o nnadi and sooba oyen (2015), ins i u ional quali y
ac o s a e mo e c i ical han iF s s anda ds in a ac ing FDi and d i ing o he aspec s o economic
g ow h. Fo ins ance, se e al s udies add essed he posi i e impac o iF s on he economy, including
he wo k o oppong and Aga (2019), Özcan (2016), li and sh o (2010), and Zaidi and hue a (2014).
such in luence can be seen h ough enhancing speci ic indus ial sec o s and using ad anced echnology
in which o eign in es o s spend hei money, imp o ing he o eign exchange ese es (Bo ensz ein
e al., 1998; g aham & K ugman, 1991). ne e heless, his ela ionship has a ely been in es iga ed in he
gcc coun ies, which is wha his s udy in ends o accomplish.
in go e nmen e ec i eness and poli ical s abili y, ins i u ional quali y de e mines an economy’s abil-
i y o a ac FDi (cieślik & hamza, 2022). he implica ion o he gcc is ha i would s ill expe ience
economic s agna ion o li le change e en a e iF s adop ion i he ins i u ional quali y is igno ed
(Dempe e & pauceanu, 2022). ins i u ional quali y p o ides unde lying go e nance s uc u es ha shape
4 A. MuJAlli e Al.
o he laws and egula ions o he ma ke place. consequen ly, coun ies adop ing iF s wi h high ins i u-
ional quali y enjoy highe economic g ow h (owusu e al., 2022). simul aneously, ins i u ional quali y
mo i a es domes ic businesses o eac o new o eign companies, leading o mo e compe i ion, which
is assumed o be bene icial (haya , 2019). speci ically, high-quali y ins i u ions p o ide incen i es o c e-
a e inno a i e in es men oppo uni ies, enabling i ms o mee he challenges o inc eased compe i ion,
he eby gene a ing g ow h (Khalilo & Yi, 2021). ins i u ional quali y e lec s he go e nmen ’s indi ec
mac o-con ol o economic g ow h and en i onmen al p o ec ion. ins i u ional quali y is associa ed wi h
s a egies domes ic i ms de ise o use cul u al and legal ules and p eceden s o hei ad an age (Ali,
2023). Fo example, schola s ound ei he di ec o indi ec posi i e in luence be ween ins i u ional qual-
i y and economic g ow h Acemoglu e al. (2008) ale iani and peluso (2011) and iqbal and Daly (2014).
he e o e, his s udy in es iga es he di ec linkage in he gcc coun ies, which has been a ely
in es iga ed.
3. Hypo heses de elopmen
3.1. IFRS and economic g ow h
he c i ical ole o iF s, which has led many na ions o adop such s anda ds, is linked o i s main ea u e
o enhancing disclosu e quali y, which in u n a ac s FDi in s ock ma ke s, and he economy is expec ed
o lou ish when o eign unds low in o a coun y (Özcan, 2016, oppong & Aga, 2019). he in luence o
FDi in gcc coun ies is e iden in se e al ways, including ad anced echnology and enhancing speci ic
indus ial sec o s in which o eign in es o s spend hei money, which inc eases o eign exchange
ese es (Bo ensz ein e al., 1998; g aham & K ugman, 1991). Mo eo e , i is signi ican o no e ha p e-
ious s udies did no di e en ia e be ween he iming o iF s and how i a ec s economic ou look, ye
mos o he e idence is o he sho e m (abou en yea s a e iF s adop ion). Wi h his a gumen , we
make he ollowing hypo hesis o he sho - un scena io:
Hypo hesis 1. IFRS ha e a posi i e associa ion wi h economic g ow h in GCC coun ies in he sho un.
3.2. Ins i u ional quali y and economic g ow h
Al hough he posi i e in luence o iF s has been es ablished in he discussion abo e and p o en by he
li e a u e elsewhe e in he wo ld, such as li and sh o (2010), Zaidi and hue a (2014) and Özcan (2016),
i is s ill no clea how such an in luence would unc ion in gcc coun ies since o he s udies p o ed he
lack o such a ela ionship; o ins ance, acco ding o Daske (2006), he implemen a ion o iF s in
ge many does no ha e a di ec in luence on economic g ow h. Fo his eason, i is i al o examine he
ole o iF s adop ion quali y, ye quali y should be add essed a an ins i u ional le el in he economies
being in es iga ed he e. he li e a u e has de ined ins i u ional quali y in e ms o go e nance p oce-
du es and policies, including accoun abili y, go e nmen e ec i eness, sha eholde p o ec ion, co up ion
con ol, poli ical s abili y, egula o y/legisla i e quali y, and p o ec ion o p ope y igh s (cama go, 2021;
Digdowiseiso & sugiyan o, 2021). ins i u ional quali y’s in luence on economic g ow h can p oceed in
bo h ways. Fo ins ance, he indings epo ed by nawaz e al. (2014) indica ed ha he e ec o ins i u-
ional quali y di e s ac oss Asian coun ies, depending on hei s a e o economic de elopmen . Acemoglu
e al. (2008) ind ha good ins i u ional quali y enhances a coun y’s usage o mode n echnology, which
gene ally leads o economic g ow h. o he s udies suppo his posi i e impac , such as ale iani and
peluso (2011) and iqbal and Daly (2014).
con e sely, se e al s udies suppo he idea ha ins i u ional quali y indica o s can be ha m ul o
economic g ow h (e.g., Kandil (2009); Aid e al. (2008). hese s udies a gued ha some ins i u ional
quali y indica o s, o example, co up ion, signi ican ly, when hey inc ease and a e ha d o de ec , hin-
de economic g ow h despi e he i ues o sha eholde p o ec ion and poli ical s abili y, which can pos-
i i ely bols e economic g ow h because i assu es DFi p o ide s. some ins i u ional quali y indica o s can
appea a ac i e o epellen o FDi p o ide s, such as he ule o law, accoun abili y, gene ous ax con-
cessions, cu s in a i s o excise du ies, and elaxa ion o social- and en i onmen - ela ed penal ies, as
cogen Business & MAnAgeMen 5
no ed by schneide and F ey (1985), Kimu a and odo (2010) and Mo aleb and Kali ajan (2010). hey
a gue ha de eloping coun ies ha p o ide iendly business en i onmen s o in e na ional i ms a e
mo e likely o a ac FDi. Based on his a gumen , we es he ollowing hypo heses:
Hypo hesis 2. Ins i u ional quali y has a posi i e associa ion wi h economic g ow h in GCC coun ies in he sho un.
i is wo h men ioning ha he abo e hypo heses we e de ised based on he sho - un assump ion,
which empi ical esea ch suppo s he mos because iF s adop ion imp o es he in eg i y and us wo -
hiness o inancial s a emen s and educes in o ma ion asymme y in he sho un, helping c ea e be -
e mac oeconomic condi ions (go don e al., 2012, lungu e al., 2017, Kao, 2014, u ki e al., 2017).
ne e heless, he ou come o his si ua ion is con ingen upon he du a ion and pace a which coun ies
emb ace iF s, as he iming and swi ness o adop ion migh p o ide a ying ou comes. elmghaamez
e al. (2020) ca ied ou a s udy ha analyzed he impac o ea ly adop ion o isAs on he inancial sec-
o . hey used panel da a om 110 coun ies spanning he yea s 1995 o 2014. hei esea ch indica ed
ha ea ly adop ion o isA had a de imen al impac on se e al inancial ma ke indica o s, excep o a
ew indica o s only obse ed in lis ed co po a ions ha iled hei inancial s a emen s using iF s and
we e audi ed simul aneously by isAs.
simila ly, el-helaly e al. (2020a, 2020b) examined he impac o na ional co up ion on he global imple-
men a ion o iF s. hey analyzed da a om 89 coun ies ou side he eu opean union, spanning 2003 o 2014.
hei esea ch demons a ed a s ong in e se (di ec ) co ela ion be ween he le el o co up ion and he
speed and ex en o iF s adop ion. con e sely, elmghaamez e al. (2023) analyzed he economic ou comes
o implemen ing isA based on he di usion o inno a ion heo y. hey u ilized da a om 160 na ions span-
ning 20 yea s. he indings con i med he posi i e impac o ea ly isA adop ion on h ee economic indica o s
o he adop ing coun ies: economic g ow h, FDi in lows, and exchange a e. in con as , he la e isA adop ion
posi i ely in luenced expo s and in e es a es, bu i also ha med impo s.
in hei seminal wo k, Mameche and Masood (2021) no ed a dis inc ion be ween a sho - and a
long- un adop ion o i Fs e ec on FDi in he gcc bloc. he e is a nega i e in luence on FDi in he
long un. hwang e al. (2018) explain ha he in luence o iF s adop ion can di e o e ime i eco-
nomic and social ci cums ances a y. speci ically, he impac o p o i s managemen and alue ele-
ance, obse ed in he ini ial phase ollowing he implemen a ion o iF s, exhibi ed a ia ions o e ime
in coun ies wi h dis inc legal amewo ks and ex e nal in es o p o ec ion mechanisms. Jamaani and
Alida ous (2022) obse ed ha iF s does no a o he long- un pe o mance o i ms in he ini ial pub-
lic o e ing (ipo) ma ke . he e o e, his s udy e es s he abo e hypo hesis wi h a nega i e in luence in
he long un.
Hypo hesis 3. IFRS ha e a nega i e associa ion wi h economic g ow h in GCC coun ies in he long un.
Hypo hesis 4. Ins i u ional quali y has a nega i e (causal) associa ion wi h economic g ow h in GCC coun ies in
he long un.
4. Resea ch design
his pa p o ides an explana ion design o his esea ch, including he speci ic me hods and sou ces
used o da a collec ion. i also ou lines he de ini ions and measu es o bo h dependen and indepen-
den a iables. in addi ion, i add esses he model amewo k u ilized in his esea ch and he es ima ing
echnique adop ed o accomplish i s objec i es.
4.1. Da a sou ces
o examine he in luence o ins i u ional quali y and iF s on economic de elopmen , his s udy uses
panel da a collec ed o e 25 yea s (1998–2022) om six gcc coun ies: Bah ain, he uni ed A ab emi a es,
saudi A abia, Qa a , oman, and Kuwai . his da ase comp ised 150 obse a ions. he na u e o he da a
is quan i a i e (nume ical in na u e). Fu he mo e, annual s a is ics o all a iables we e sou ced om
c edible seconda y o al eady published da a, speci ically he Wo ld Bank’s Wo ld De elopmen indica o s
6 A. MuJAlli e Al.
(2023), he in e na ional Mone a y Fund (2023), and Wo ld go e nance indica o s (2023). since he da a
is sou ced om public pla o ms and is al eady published, no addi ional pe mission is equi ed o use i
o esea ch pu poses. able 1 shows a b ie desc ip ion o he a iables o he s udy and hei sou ce.
he dependen a iable is ep esen ed by he na u al loga i hm o each coun y’s gDp in cu en us
dolla s, which se es as a p oxy o economic g ow h. his decision is aligned wi h o he exis ing s udies,
pa icula ly hose o azzaq e al. (2023), owusu e al. (2022), and oppong and Aga (2019). he indepen-
den a iable unde examina ion is he iF s adop ion. A dummy a iable measu es iF s adop ion, wi h
a alue o one o a yea when he na ion adop ed iF s and ze o o he wise. A ew i al s udies by
Beneish e al. (2015), go don e al. (2012), and Bassemi and no o ny-Fa kas (2018) used iF s in a bina y
o m. i is essen ial o no e ha he iF s adop ion di e ed o each gcc coun y ( able 2).
he da a on ins i u ional quali y is ob ained om he Wo ldwide go e nance indica o s (Wgi) c e-
a ed by Kau mann e al. (2011). six indices we e employed o measu e o e all ins i u ional quali y:
co up ion, poli ical s abili y, ule o law, lack o iolence, go e nmen e icacy, oice and accoun abil-
i y, and egula o y quali y (Agbloyo e al., 2016; Kose e al., 2011). hese indices a e measu ed on a
scale be ween 2.5 and −2.5, whe e highe alues signi y supe io ins i u ional quali y (e.g., a coun y
wi h a sco e o 2.5 exhibi s he bes ins i u ional quali y, while −2.5 indica es he wo s ). howe e ,
p incipal componen Analysis (pcA) is used o de i e a comp ehensi e index o his a iable, which
does no ange om −2.5 o 2.5 scale. using pcA, a single weigh ed index was cons uc ed o he six
speci ic ins i u ional quali y indica o s (ins Q). he posi i e ins Q e e s o ins i u ional solid quali y,
while nega i e numbe s indica e weak ins i u ional quali y, which impac s economic g ow h acco d-
ingly. he jus i ica ion o he abo e a gumen is ha high-quali y ins i u ions will e ec i ely dis ibu e
esou ces o p o ide economic alue o all economic pa icipan s. his in ol es ensu ing ha
Table 1. Va iable desc ip ions.
Va iable name symbol De ini ion uni ype sou ce
g oss Domes ic
P oduc
gDP he o al alue con ibu ed o
he economy comp ises he
p oduc ion o goods and
se ices minus he alue
equi ed o p oduc ion/
manu ac u e.
gDP (cu en us$) Dependen Wo ld Bank (2023)
in e na ional Financial
Repo ing
s anda d.
iFRs in e na ional accoun ing
s anda d
Bina y independen iFRs and ias plus
ins i u ional Quali y
index
ins Q he ins i u ional quali y index
encompasses he ule o law,
oice and accoun abili y,
go e nmen e ec i eness,
poli ical s abili y, absence o
iolence, con ol o co up ion,
and egula o y quali y
index independen Wo ld go e nance
indica o (2023)
ade openness o ade e e s o he combined
alue o goods and se ices
expo ed and impo ed,
measu ed as a pe cen age o
g oss domes ic p oduc (gDP).
ade (% o gDP) Con ol Wo ld Bank (2023)
in la ion inF in la ion, gauged by he
consume p ice index (CPi),
indica es he annual
pe cen age shi in he
a e age cos .
in la ion, consume
p ices (annual %)
Con ol in e na ional Mone a y
Fund (2023)
Table 2. iFRs adop ion.
gCC coun ies adop ion yea
saudi a abia 2017
Bah ain 2010
oman 2001
Kuwai 2001
Qa a 2002
uni ed a ab emi a es 2015
sou ce: in e na ional inancial epo ing s anda d websi e (www.i s.o g).
cogen Business & MAnAgeMen 7
ins i u ions ake he lead in consis en ly designing, moni o ing, and imp o ing policies and s a egies
o enhance local indus ies’ compe i i eness sus ainably. his app oach mi iga es he subjec i i y bias
ha may a ise when a pa icula a iable is conside ed a p oxy o a speci ic aspec . Fo example,
when assessing ins i u ional quali y, some s udies ha e used ei he poli ical s abili y o con ol o co -
up ion as measu es, and excluding one while including he o he may in oduce subjec i i y bias by
o e looking he mul idimensional aspec s o ins i u ional quali y (A in e al., 2021; ghalia e al., 2019;
Kim e al., 2018).
he s udy also included con ol a iables ha we e iden i ied as p edic o s o economic de elopmen ,
consis en wi h he esea ch by Agbloyo e al. (2016), oppong and Aga (2019), owusu e al. (2022), and
Zaman e al. (2021). p e ious s udies ha e highligh ed sa ings, ade openness, inancial ma ke de el-
opmen , popula ion inc ease, and in la ion as c i ical g ow h ac o s. in his s udy, ade openness and
in la ion a e he con ol a iables o economic g ow h. ade openness is calcula ed by adding he o al
alue o impo s and expo s and scaled by gDp. con e sely, in la ion is assessed using he consume
p ice index (cpi) and ep esen s he annual pe cen age change in he a e age cos o goods and se ices.
4.2. Model speci ica ion
o in es iga e he e ec o iF s and ins i u ional quali y on he economy, we w i e he ollowing basic
o mula ion in unc ional o m in line wi h exis ing s udies (oppong & Aga, 2019; owusu e al., 2022).
GDP IFRS INSTQ TO INF
=
()
, ,, (1)
Whe e gDp is he g oss domes ic p oduc , iF s deno es he adop ion o in e na ional inancial epo -
ing s anda ds, ins Q ep esen s he ins i u ional quali y index, o is ade openness, and inF s ands o
in la ion. his baseline equa ion (1) conside s he ela ionship be ween ins i u ional quali y and iF s
adop ion ega ding economic g ow h. he ins i u ional quali y index is an indica o o ins i u ional qual-
i y, and he a iable desc ip ions and da a sou ces a e summa ized in able 1. con ol a iables a e
di ec ly o indi ec ly ela ed o economic g ow h and cons i u e he co e elemen s o o e all economic
de elopmen . he e o e, equa ion (1) is modi ied and logged o help in e p e he coe icien s.
GDP IFRS INSTQ TO INF
i i i i i i
=+ + ++ +
ββ β β β ε
01 2 3 4 (2)
his s udy co e s he pe iod om 1998 o 2022 o he six gcc coun ies. he subsc ip s i and poin
ou he coun y and ime co espondingly; e deno es he s ochas ic e o e m, and ß0 deno es he
in e cep s.
o es he p oposed hypo heses, we conduc ed p elimina y es s. ini ially, his in ol es examining
c oss-sec ional Dependence in panel da a using he c oss-sec ional dependence (cD) es p esen ed by
pesa an e al. (2004). subsequen ly, we execu ed a homogenei y es , as sugges ed by pesa an and
Yamaga a (2008), o assess he homogenei y among he selec ed a iables. Bo h es s a e c ucial o
selec ing app op ia e uni oo es s. When he null hypo hesis is e u ed, he c oss-sec ional dependence
es , which employs pesa an’s cD, o e s insigh in o he exis ence o c oss-sec ional dependence among
he a iables ac oss all sec ions and coun ies. he homogenei y esul s we e based on he adjus ed
del a ilde. i he null hypo hesis is ejec ed, he homogenei y condi ion o he panel is ejec ed; al e -
na i ely, panel he e ogenei y is accep ed.
in addi ion, uni oo es s a e selec ed depending on hei ou comes o con i m ha he a iables
a e s a iona y and p e en decep i e eg essions. i he e is c oss-sec ional dependence, i is mo e sui -
able o employ second-gene a ion uni oo es s, such as he cips and cADF, as hey can add ess his
issue. se e al i s -gene a ion uni oo es s a e conduc ed i c oss-sec ional dependence does no exis .
Acco ding o Danish and Wang (2018), he adi ional eg ession models o FMols and Dols do
no conside he c oss-sec ional assump ion. hence, he pooled mean g oup (pMg) es ima e app oach
is employed in his empi ical s udy o de e mine whe he he es ima ed model dic a es how ins i-
u ional quali y and iF s adop ion shape economic de elopmen in gcc na ions. he hypo hesis o
he esea ch in ol es he alida ion o long- un and sho - un ela ionships be ween he a iables.
14 A. MuJAlli e Al.
in he sho - un con ex . e o co ec ion e m (ec ) analysis is c i ical o de e mining a model’s
long- un equilib ium. he nega i e and signi ican ec coe icien (−0.305) indica es a ealis ic long- un
equilib ium, wi h gDp e e ing o i s equilib ium le el a he 30% annual adjus men a e. his equa es
o 3.3 yea s o he economy o change and s abilize, emphasizing he du abili y o long- un equilib-
ium ela ionships.
7.1. Economic implica ions
he nega i e associa ion be ween gDp and iF s adop ion and ins Q implies possible economic chal-
lenges and ad e se ou comes in he u u e. his sugges s ha adop ing iF s and imp o ing ins i u ional
quali y, in ended o inc ease economic pe o mance, may ha e had a be e impac han expec ed.
policymake s mus ho oughly e alua e he expenses and ad an ages o implemen ing global accoun ing
s anda ds and in es ing in enhancing ins i u ional quali y o gua an ee hei bene icial con ibu ion o
s able economic g ow h.
he posi i e connec ion be ween gDp and o unde sco es he signi icance o implemen ing libe al
ade policies o os e ing economic g ow h in gcc coun ies. An inc ease o 1% in ade openness is
co ela ed wi h a long- e m ise o 0.6% in gDp, sugges ing ha ini ia i es o encou age in e na ional
comme ce can subs an ially bene i economic pe o mance. policymake s mus p io i ize measu es ha
make ade mo e accessible, such as lowe ing a i s, enhancing ade in as uc u e, and encou aging
indus ies ha ocus on expo ing. his will allow hem o ake ull ad an age o he po en ial ad an-
ages o ade openness ega ding gDp g ow h.
on he o he hand, he s ong posi i e associa ion be ween gDp and inF highligh s he impo ance
o low in la ion in p omo ing economic expansion in gcc coun ies. An inc emen al ise o 1% in
in la ion is co ela ed wi h a signi ican 6% su ge in gDp o e an ex ended pe iod, sugges ing ha
mode a e in la ion migh s imula e economic ac i i y and in es men . policymake s should s i e o
sus ain a mode a e le el o in la ion o bols e economic expansion while concu en ly adop ing s eps
o alle ia e he ad e se consequences o excessi e in la ion, such as p ice ola ili y and diminished
buying capaci y.
7.2. Academic/ esea ch implica ions
his s udy o e s aluable insigh s in o he in ica e dynamics o gcc coun ies’ economies, speci ically
ega ding he in luence o in e na ional accoun ing s anda ds, ins i u ional quali y, ade openness, and
in la ion on gDp. hese insigh s can be aluable o esea che s and schola s in economics and inance,
helping hem be e unde s and he ac o s ha a ec economic pe o mance in gcc na ions. hey can
also use hese insigh s o iden i y po en ial a eas o u he esea ch and explo a ion.
i is i al o conside long- e m and sho - e m dynamics when examining he connec ion be ween
economic a iables, as emphasized in he s udy. he di e en long- and sho - e m e ec s o iF s adop-
ion and ins Q on gDp show ha hese ac o s may change o e ime, calling o di e en ways o
analyzing hem. esea che s need o use eliable econome ic echniques, such as ec analysis, o unde -
s and he changes in economic ela ionships o e ime e ec i ely. he cu en s udy esul s ha e signi -
ican consequences o o mula ing economic policies in gcc coun ies. policymake s mus ho oughly
e alua e he impac o implemen ing in e na ional accoun ing s anda ds, enhancing ins i u ional quali y,
os e ing ade openness, and con olling in la ion on economic de elopmen and s abili y. policymake s
can enhance he e icacy o policies ha os e inclusi e economic de elopmen in gcc coun ies by
in eg a ing empi ical ac s and insigh s om academic esea ch.
in conclusion, he indings o his s udy con ibu e o a be e comp ehension o he economic
dynamics o gcc coun ies, and hei policy implica ions a e signi ican . i is s ongly ecommended o
ca e ully conside he economic epe cussions o iF s adop ion and ins i u ional quali y, while empha-
sizing he posi i e in luence o open ade and low in la ion in encou aging long- e m economic
g ow h. he insigh s can help guide s a egic policy decisions and encou age a balanced app oach o
egional economic e o m.
cogen Business & MAnAgeMen 15
7.3. Limi a ions and a enues o u u e esea ch
he cu en s udy used panel coin eg a ion es s o show he associa ion be ween a iables. howe e ,
he s udy’s c oss-sec ional design aises ques ions ega ding endogenei y and causa ion. unaccoun ed
a iables o he possibili y o causali y in he o he di ec ion may impac he obse ed connec ions
be ween he adop ion o iF s, he quali y o ins i u ions, and economic g ow h. Fu u e s udies could
u ilize ad anced me hodologies such as ins umen al a iable app oaches, dynamic panel da a models,
o s uc u al equa ion modeling o mo e e ec i ely un a el he causal linkages be ween adop ing iF s,
ins i u ional quali y, and economic g ow h in he gcc egion.
on he o he hand, he cu en indings a e limi ed o he egion o gcc and migh no be eadily
ans e able o o he coun ies o egions wi h dis inc economic, egula o y, and ins i u ional ci cums ances.
hence, i is ad isable o be cau ious when ex apola ing he indings o o he coun ies in he gcc. in
o de o imp o e he applicabili y o he esul s, u u e s udies could pe o m compa a i e assessmen s
ac oss a ious egions o coun ies wi h di e en economic, egula o y, and ins i u ional amewo ks.
E hical app o al and consen o pa icipa e
no applicable.
Consen o publica ion
no applicable.
Au ho ’s con ibu ions
AW con ibu ed o he s udy concep ion, MJGW esea ch me hodology, and da a analysis. AA and IA w o e he i s
d a o he manusc ip and e ised i . NA and AW pe o med da a collec ion and in e p e a ion o he da a. AW
and AA ead and app o ed he inal manusc ip . All he au ho s ag eed o be accoun able o all aspec s o he wo k.
Disclosu e s a emen
he au ho s whose names a e lis ed in his pape ce i y ha hey ha e no a ilia ions wi h o in ol emen in any
o ganiza ion o en i y wi h any inancial in e es (such as hono a ia; educa ional g an s; pa icipa ion in speake s’
bu eaus; membe ship, employmen , consul ancies, s ock owne ship, o o he equi y in e es ; and expe es imony
o pa en -licensing a angemen s), o non- inancial in e es (such as pe sonal o p o essional ela ionships, a ilia ions,
knowledge o belie s) in he subjec ma e o ma e ials discussed in his manusc ip .
Disclosu e s a emen
no po en ial con lic o in e es was epo ed by he au ho (s).
Funding
no sou ces o unding we e used o conduc his s udy o p epa e his manusc ip .
Abou he au ho s
D . Abdulwahab Mujalli se es as an Assis an p o esso o in e nal Audi ing and Accoun ing in he Depa men o
Accoun ing and Finance a he college o Business, Jazan uni e si y, saudi A abia. his esea ch po olio is cen e ed
a ound pi o al opics, including in e nal audi ing, co po a e go e nance, in e na ional Financial epo ing s anda ds
(iF s), Accoun ing in o ma ion sys ems (Ais), and he pedagogy o Accoun ing educa ion. D . Mujalli’s schola ly con-
ibu ions aim o b idge he gap be ween heo e ical amewo ks and p ac ical applica ions in he ield, os e ing a
deepe unde s anding o hese c i ical a eas wi hin he global accoun ing communi y.
Mohammad Jib an Gul Wani is a ph.D. s uden in he Azman hashim in e na ional Business school o he uni e si i
eknologi Malaysia. he has a MBA deg ee om glyndw uni e si y, uni ed Kingdom. his esea ch in e es includes
16 A. MuJAlli e Al.
accoun ing epo ing, economic g ow h, ou ism de elopmen and en i onmen al sus ainabili y. he cu en ly wo ks
as a acul y membe in he Business college a Jazan uni e si y, saudi A abia.
D . Ahmed Almg ashi is an Assis an p o esso o Accoun ing wi hin he Depa men o Accoun ing and Finance a
he college o Business, Jazan uni e si y, saudi A abia. his esea ch expe ise spans se e al c i ical a eas, including
Accoun ing in o ma ion sys ems (Ais), co po a e go e nance, audi ing p ac ices, and ad ancemen s in Accoun ing
educa ion. D . Almg ashi’s wo k is dedica ed o explo ing and ad ancing hese domains, con ibu ing o bo h aca-
demic schola ship and p ac ical applica ions in he ield o accoun ing and inance.
D . I an Ahmed is an Assis an p o esso a Jazan uni e si y, saudi A abia. he ob ained his ph.D. in economics and
Managemen om he uni e si y o Mace a a, i aly. his esea ch in e es s include inancial economics and public
economics. he has published se e al esea ch a icles in quali y pee - e iewed in e na ional jou nals.
D . Nasse Asi i is cu en ly wo king as an assis an p o esso o accoun ing a King Khaild uni e si y and has ex en-
si e wo k expe ience in co po a e go e nance, in e nal audi ing, acco al base accoun ing and spending e iciency in
public sec o , he is a g cp and g cA ce i ied. his p ima y esea ch a eas encompass opics ela ed o co po a e
go e nance, en i onmen al managemen accoun ing, in e na ional Financial epo ing s anda ds (iF s), acco al base
accoun ing and spending e iciency in public sec o .
Da a a ailabili y s a emen
he da ase s used and/o analyzed du ing he cu en s udy a e a ailable om he co esponding au ho on eason-
able eques .
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