The Determinants and Effects of The Early Adoption of IFRS 15:evidence From A Developing Country

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The determinants and effects of the early adoption of IFRS 15:Evidence from a
developing country
Article in Cogent Business & Management · January 2023

DOI: 10.1080/23311975.2023.2167544
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The determinants and effects of the early

adoption of IFRS 15:Evidence from a developing
country
Laila Aladwey & Ahmed Diab
To cite this article: Laila Aladwey & Ahmed Diab (2023) The determinants and effects of the early
adoption of IFRS 15:Evidence from a developing country, Cogent Business & Management, 10:1,
2167544, DOI: 10.1080/23311975.2023.2167544
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Aladwey & Diab, Cogent Business & Management (2023), 10: 2167544
https://doi.org/10.1080/23311975.2023.2167544
ACCOUNTING, CORPORATE GOVERNANCE & BUSINESS ETHICS |

RESEARCH ARTICLE
The determinants and effects of the early
adoption of IFRS 15:Evidence from a developing
country
Received: 09 November 2022
Accepted: 09 January 2023 Laila Aladwey1 and Ahmed Diab2*
*Corresponding author: Ahmed Diab,
Prince Sultan University, Riyadh, Abstract: Our study examines the determinants (especially governance and board
Saudi Arabia & Faculty of Commerce, characteristics) of the early adoption of the International Financial Reporting
Beni-Suef University, Beni-Suef, Egypt
E-mail: adiab@psu.edu.sa Standard 15 (IFRS 15) in a developing market—namely, the Egyptian Stock
Reviewing editor: Exchange. Further, our study examines the difference in IFRS 15ʹs effects on the
Collins G. Ntim, Accounting, financial statement accounts between the early adopters and the non-early adop
University of Southampton,
Southampton, UK ters. Based on the Egyptian Stock Exchange (EGX) 100 index, the study uses 79 firm-
Additional information is available at year observations for the early adoption period (2019–2020). We manually collected
the end of the article data from the Egyptian companies’ annual reports and the Thomson Reuters
database and analysed them using logistic regression and t-tests. Out of the various
examined governance mechanisms, we found that board size significantly nega
tively affects the early adoption of IFRS 15. In contrast, female directors have
a significant positive effect on the early adoption of IFRS 15 in Egypt. Regarding the
effects of firm characteristics, we found that firm age, firm size, and financial
leverage have significant positive effects on the early adoption of IFRS 15. In
contrast, profitability and audit quality have an insignificant effect on the early
adoption of IFRS 15. Finally, we found a significant difference in profitability
between IFRS 15 early adopting companies compared to non-early adopters. This
result reflects the economic value of early embracing IFRS standards and their
updates in emerging markets, such as Egypt. To the best of our knowledge, this is
ABOUT THE AUTHOR

Laila Al-Adwey is associate professor in accounting, Imam Muhammad bin Saud Islamic University,
Riyadh, Saudi Arabia. She got her PhD in Accounting from Tanta University, Egypt in joint supervision
mission with Glasgow University, UK. She also got a Certificate in Social Science Research Methods
from College of Social Sciences, University of Glasgow; and Master and BCom degrees in Accounting
from Tanta University, Egypt.
Laila is FHEA Descriptor 2 as recognized from TeachBU Bournemouth University, UK. In addition, she is
recognized as GTA from Learning and Teaching Centre, University of Glasgow, UK and as Certified
Trainer, Training of Training (TOT), awarded from International Center for Faculty and Leadership
Development, Tanta University, Egypt. Also, she is granted Special Appreciation from Arab
Administrative Development Organization in the conference of Sharjah PhD Award. She has taught
a wide spectrum accounting disciplines in both undergraduate and postgraduate levels as well as
master supervision in Egypt and UK. Besides, she presented her research papers at international and
regional conferences in Egypt and UK. Currently, she is engaged in a list of academic research papers
in accounting and targeted to be published in highly prestigious journals in accounting.
Laila is also engaged in set of activities that enhance her academic personality such as; academic
advising for Business Information Systems (BISs) program, organizing research seminars for postgrad
uate researchers, and developing the curriculum for accounting courses.
© 2023 The Author(s). This open access article is distributed under a Creative Commons
Attribution (CC-BY) 4.0 license.
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the first study that examines the determinants of IFRS 15ʹs early adoption and its
effects on the financial statement disclosures in an emerging country. Our study
turns the attention of investors in emerging markets such as Egypt to the changes
and updates in IFRS related to revenues, which can enhance the transparency and
accountability in these markets.
Subjects: Business, Management and Accounting; Accounting; Financial Accounting
Keywords: IFRS 15; revenue; corporate governance; Egypt; emerging markets
1. Introduction
The proper accounting treatment, measurement, and recognition of revenue have consistently
engaged the attention of academic scholars, investors, market analysts, and financial enthusiasts
over the years. This increased interest is due to revenue’s significance in corporate financial
assessment, calculation of income tax liabilities, and inter-firm comparisons (Y. Zhang, 2005).
Along with this view, the International Accounting Standards Board (IASB) has updated the
revenue standards by issuing the International Financial Reporting Standard 15 (IFRS 15) in
2015. Adopting IFRS, including IFRS 15, is considered of great benefit to emerging markets, notably
to support the present precarious financial community in these markets (Delcoure & Huff, 2015).
Moreover, the adoption of the updated revenue standard (IFRS 15) in emerging markets is of
crucial value for fair pricing and more transparency regarding revenue recognition (see, Ogunode &
Salawu, 2021).
A review of existing studies shows that notwithstanding the benefits of IFRS, there is an
unsettled debate as to whether the early IFRS adoption or later adoption can have accounting
implications. In this regard, in the EU context, Napier and Stadler (2020) found that IFRS 15 has
had relatively little impact on the recognition and measurement of revenue. Furthermore, Belesis
et al. (2021) noted that the effect of IFRS 15 is relatively limited between accounting periods and
mainly concerns charging some direct voyage expenses, which are considered contract costs. In
contrast, Trabelsi (2018) found that the early adoption positively affected two accounting num
bers: earnings and stockholders’ equity. In addition, Soye & Raji, 2016) reported similar results. This
debate motivated us to study the determinants affecting the early adoption of IFRS 15 and the
reporting consequences of such early adoption compared to mandatory adoption.
Additionally, the present promising findings regarding IFRS 15 adoption should be analysed in
the various markets to know if the market differences affect the anticipated findings of the new
(modified) standard. Thus, examining IFRS 15 implementation in developing contexts with their
unique nature in terms of the emerging stock markets and the newly adopted governance
structures is crucial. That is because such implementation could have significant effects on
financial reporting; compared to developed and stabilised markets with better-institutionalised
governance and accountability mechanisms (Bremer & Ellias, 2007). However, due to the recent
introduction of IFRS 15, there is surprisingly little empirical research dealing with this new standard
(Boujelben & Kobbi-Fakhfakh, 2020). Thus, the present work examines if/how the corporate gov
ernance (CG) and firm characteristics are affecting the early adoption of IFRS 15 in a developing
market—namely, the Egyptian Stock Exchange. Further, our study examines the difference in IFRS
15 effects on financial statements’ accounts between early adopters and non-early adopters. The
covered period is 2019 and 2020, the period at which the adoption of IFRS15 was still optional
within the Egyptian context.
Egypt is chosen as the context for our study as the Egyptian Stock Exchange (EGX) is one of the
oldest stock exchanges in the world and the first to be established in the Middle East and North
Africa (MENA) region. The recent economic reform, privatisation, and changes in the regulatory
environment in the early 1990s have activated the stock market activity in the last few decades
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(Samaha and Dahawy, 2010). In addition, Egypt has recently witnessed a list of radical changes at
both the economic and political levels that have implications on the stock market (International
Monetary Fund (IMF), 2020, Aladwey, 2021). Following these recent reforms and changes, the
Egyptian authorities have cooperated with related international organisations to enhance market
confidence by adopting best practices and international standards that support sustainable mar
kets (Nasr & Ntim, 2018). Therefore, Egyptian listed companies are anticipated to learn from
international experience and adopt new IFRS in their annual reports to attract more foreign
investors (Ebrahim and Abdel Fatah, 2015).
Our study is informed by the agency theory, based on the suggestion that the adoption of IFRS
can enhance the quality of financial reporting by reducing information asymmetry and corporate
management irregular reporting practices such as earnings management, which is anticipated to
reduce the agency problem (Baig & Khan, 2016). This is also based on the view that the adoption of
effective governance mechanisms, as possible determinants of the early adoption of IFRS 15, can
work as effective monitoring and control devices over corporate management behaviors and
actions. This, in turn, is crucial for reducing the agency problem, i.e., reducing the conflict between
corporate management and owners and hence, motivating management to work for the best
interest of the company and shareholders (McKnight & Weir, 2009).
Our study contributes to the literature on the preparedness of companies in developing coun
tries to implement new international accounting standards, an issue that has received limited
attention (Guerreiro et al., 2012). Further, our study contributes to the limited literature on IFRS in
Africa, where the present literature is limited to only a few countries and mainly predominated by
South Africa (Tawiah & Boolaky, 2020). Besides, our work enhances the little empirical research
focusing on IFRS 15 adoption (Boujelben & Kobbi-Fakhfakh, 2020), especially the determinants of
its early adoption such as CG mechanisms (Quagli et al., 2021). This is especially needed in African
emerging markets such as Egypt, where no related studies are found (Tawiah & Boolaky, 2020). In
addition, this study extends the present literature on the effects of the (early) adoption of IFRS 15,
as the majority of the extant research focuses on Western stabilized and developed markets that
have different institutional and contextual nature compared to African emerging markets, and
thus they are showing different results (e.g., Ferreira, 2020; Manuel et al., 2019; Napier & Stadler,
2020; Peters, 2016; Usurelu et al., 2021).
Our study has practical implications for investors in developing countries as highlighting the
importance of adopting IFRS 15 can enhance the quality of annual reports. This, in turn, can
improve investors’ confidence in the reported financial information, and positively affect their
investment decisions, which is especially needed in developing countries. In other words, our
study turns the attention of investors in developing countries such as Egypt to the changes in
the accounting standards related to revenues, which can result in more transparency and financial
information quality. Further, our study highlights the status of CG and the effects of enhancing CG
attributes on adopting IFRS in Egypt, which can enhance corporate disclosure and the informa
tiveness of accounting numbers (Sorour, 2014).
The paper is structured as follows. Section 2 presents a contextual background of the study.
Section 3 reviews the relevant literature and develops the study hypotheses. Section 4 outlines the
research methods used in data collection and analyses. Section 5 clarifies and discusses the study
findings. Finally, section 6 concludes the paper.
2. A contextual background
2.1. Accounting standards and revenues recognition in Egypt

Corporate Law 159 for 1981 and Capital Market Authority Law 95 for 1992 required Egyptian firms to
prepare financial statements according to Egyptian Accounting Standards (EAS). In addition,
a Certified Public Accountant must audit those financial statements. The Permanent Committee for
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Standards of Accounting and Auditing is officially responsible for setting accounting and auditing
standards. However, the Egyptian Society of Accountants and Auditors (ESAA) was responsible for
drafting and adopting accounting and auditing standards. EASs was first introduced in 1997 (Abd-
Elsalam & Weetman, 2003). In 2002, Egypt started a harmonization process with the International
Accounting Standards (IASs). In 2006, Egypt declared a full adoption of IASs—with some exceptions
(IAS Plus),1 albeit these standards were adopted under the name EAS. The adopted standards in Egypt
were then updated in 2015 to be applied in 2016 with 39 standards and a conceptual framework for
preparing financial statements issued by the Minister of investment’s decree No. 110 for 2015.
Regarding revenue recognition standards, in May 2014, the IASB and FASB jointly issued
a converged standard on recognizing revenue from contracts with customers (IFRS 15), replacing
all existing IFRS and US GAAP revenue requirements. In particular, it replaces IAS 18 “Revenue”
and IAS 11 “Construction Contracts” to provide a single comprehensive revenue accounting model.
The objective of the new standard is to improve the financial reporting of revenue and the global
comparability of the top line in financial statements.
Initially, the application of the new standard was required for annual periods beginning on or
after 1 January 2017. Then, the IASB amended IFRS 15, deferring the effective date by one year to
2018, considering the feedback to its consultation. However, companies applying IFRS continued to
have the option to apply the standard early. In Egypt, the Ministerial decree No. 69 for 2019
modified some of the previously issued standards related to revenue recognition, such as EAS
No. 8, titled construction contracts and EAS 11 titled as Revenues and to comply with IFRS 15 (the
focus of our study the Egyptian counterpart is EAS 48). Therefore, in Egypt, the practical application
of IFRS 15 started in early 2021, and early adoption was permitted in 2019 and 2020.
2.2. Corporate governance in Egypt

Since 2000, Egyptian regulators recognize the importance of CG in 2000. It was the first Arab
country assessed by the World Bank and the International Monetary Fund against the Organization
for Economic Co-operation and Development’s (OECD) corporate governance principles in 2001
(Elsayed, 2007). In 2003, Egypt established the Egyptian Institute of Directors (EIoD), the first
institute dealing with corporate governance in the MENA region. In 2005, EIoD, as authorized by
the Ministry of Investment, issued the Egyptian Corporate Governance Code as a set of guidelines
for the companies listed on the Egyptian Exchange (Ebaid, 2011).
The Egyptian CG code was initially issued based on the “comply or explain” approach, which
indicates that it is not obligatory for listed firms to comply (Nasr & Ntim, 2018). However, in 2007,
the Capital Market Authority’s (CMA) board of directors issued Resolution No. 11 for 2007 concern
ing the executive (mandatory) rules for the governance of companies. All listed companies must
apply these rules in order not to be delisted. Furthermore, in 2009, the World Bank issued its
Reports on the Observance of Standards and Codes (ROSC) assessment report of CG in Egypt 2009.
However, despite acknowledging the country’s efforts to enhance CG in the legal, regulatory, and
institutional frameworks, there were still concerns that CG laws and regulations were not being
fully enforced, especially concerning smaller companies.
Later on, to improve governance in nonfinancial entities, the Egyptian Financial Supervisory
Authority (EFSA) (which was renamed the Financial Regulatory Authority (FRA) in 2017) was
established. Recently, FRA issued several rules to streamline CG regulations in Egypt. For example,
in 2020, it issued decree No. 100, which regulated some issues such as the board of directors, its
committees, general assembly meetings, disclosure and transparency, the control environment,
the external auditor, insider trading and confidentiality, and treasury shares (Abdel-Meguid, 2021).
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3. Literature review and hypotheses development
3.1. What does IFRS 15 entail?

IFRS 15 supersedes all relevant previous revenue pronouncements of the IASB for all financial
years starting from 1 January 2018 (International Accounting Standards Board (IASB), 2019). The
objective of the principles established in IFRS 15 is to provide helpful information regarding the
“nature, amount, timing and uncertainty” of revenue and cash flows from customer revenue
contracts (International Accounting Standards Board (IASB), 2019, para. 1). IFRS 15 provides
clear presentation and disclosure requirements, which are more extensive than the old standards
(Financial Reporting Council, 2019) by requiring entities to disclose quantitative and qualitative
information about its contracts with customers, the significant judgments and changes in the
judgments made to those contracts and any assets recognized from the costs to obtain or fulfil
a contract with a customer (International Accounting Standards Board (IASB), 2018). The revenue
recognition method introduced by IFRS 15 requires companies to carefully analyse current con
tractual arrangements in all business segments and/or geographic areas. IFRS 15 introduces a five-
step model to be applied to all contracts with customers:
(1) identify the contract(s) with a customer;
(2) identify the performance obligation(s);
(3) determine the transaction price;
(4) allocate the transaction price to the performance obligation(s) in the contract; and
(5) recognise revenue when (or as) the entity satisfies a performance obligation (Quagli
et al., 2021).
3.2. The determinants of IFRS 15 early adoption: the role of CG

Some studies examined various determinants of IFRS adoption, such as culture, corporate char
acteristics and macroeconomic conditions. Concerning the impact of culture, using international
evidence, Kolsi and Zehri (2013) found that firms adopting IFRS have Anglo-Saxon culture and
a common low legal system (see also, Chamisa, 2000). Regarding the impact of company-related
factors, Guerreiro et al. (2008), while examining the preparedness of Portuguese-listed companies
to adopt IFRS, highlighted that the size of the company, commercial internationalisation, and the
presence of a Big four auditor are associated with better preparedness to implement new account
ing standards. In the same context, Kolsi and Zehri (2013) also found an association between the
decision to adopt IFRS and larger firms being audited by Big Four firms. Other scholars focused on
macro socioeconomic conditions’ effects on the (early) adoption of IFRS, such as higher economic
growth and educational systems (Ball et al., 2000). In the EU context, Quagli et al. (2021) found
that profitability and company size are significant determinants of the quality of IFRS 15-related
disclosure. They also found that the complexity of the business (measured by the number of
business segments) is associated with better disclosures in the IFRS pre-adoption phase.
However, to our knowledge, none of the previous studies examined the possible effects of CG
mechanisms on the early adoption of IFRS15, especially in developing countries such as Egypt. CG is
defined as the set of organisational mechanisms that can delineate the powers, influence manage
ment decisions, govern their conduct, and define their discretionary space (Charreaux, 1997). The
development of institutional mechanisms like CG structures can enable the enforcement and com
pliance with IFRS (Ebrahim & Abdel Fattah, 2015). Thus, companies with effective governance
structures may be anticipated to (early) adopt IFRS as they are expected to pay attention to the
quality of the accounting numbers and introduce more disclosures (Quagli et al., 2021).
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In this regard, Delcoure and Huff (2015) find that CG is among the factors that affect emerging
markets’ voluntary adoption of IFRS. Focusing on the initial IFRS adoption in Egypt, Ebrahim and
Abdel Fattah (2015) found that CG factors indicate the perceived quality of the engaged auditor,
which ultimately can improve compliance with IFRS requirements. Alon and Dwyer (2014) indi
cated that early adoption of IFRS can support ineffective governance systems in some companies.
Below, we discuss the anticipated role of various governance mechanisms and board character
istics in the early adoption of IFRS 15.
3.2.1 Board Size

Board size is the total number of directors on the board. There is a debate concerning the
appropriate size of the board and the effectiveness of large boards. The number of members
varies depending on countries’ CG code recommendations, offering no consensus. On the one
hand, it is argued that large boards can play a crucial role in monitoring the board and making
strategic decisions (Ahmed & Duellman, 2007). This argument is based on the premise that large
boards are less likely to be dominated by management (Wang & Hussainey, 2013). Furthermore,
the large number of directors can enhance the expertise diversity on the board, including financial
reporting (Ebrahim & Abdel Fattah, 2015). From this perspective, larger boards are expected to
bring more transparency and disclosures through better monitoring than smaller boards (Quagli
et al., 2021). Some studies find a positive association between board size and voluntary disclosure
(Barako et al., 2006; Hussainey & Al-Najjar, 2012). In the context of Egypt, Ezat et al. (2008) find
that board size is positively associated with levels of voluntary corporate disclosure. Concerning
African contexts, Agyei-Mensah (2017) found that board size is significantly and positively asso
ciated with the quality of disclosure compliance.
On the other hand, some studies noted that a large board is associated with communication
issues, disputes among members, and a slow flow of decisions (Jensen, 1993). Goodstein et al.
(1994) argue that a large board size might harm the board’s effectiveness, making it ineffective in
conducting discussions or making strategic decisions, which can negatively affect corporate
financial reporting and disclosure policy. Consistently, some studies did not find any association
between board size and disclosure (Arcay & Vázquez, 2005; Cheng & Courtenay, 2006). Focusing on
the European context, Quagli et al. (2021) suggested that board size does not influence the
disclosure expected from adopting IFRS 15. This debate concerning the effect of board size
suggests the need for more research; thus, along with the first group of studies, we formulate
H1 as follows:
H1: Board size is significantly associated with the early adoption of IFRS 15.
3.2.2 CEO duality

CEO duality occurs when one individual simultaneously is the CEO and chairperson of a board. The
agency theory predicts that role duality creates personal power for the CEO that could negatively
affect the control exercised by the board. Hence, according to this perspective, if the chairperson
and the CEO overlap, management monitoring will be reduced (R. Haniffa & Cooke, 2005) and
increased agency conflict (Chi et al., 2009). In contrast, as Ntim et al. (2012) noted, it is easier to
identify who is responsible for bad performance or decision-making when the roles are separated.
This suggests that the duality of CEO and chairman jobs can affect reporting practices (Mokhtar
& Mellett, 2013). In line with this view, some studies found a negative association between duality
in positions and voluntary corporate disclosure (Gul & Leung, 2004; R. M. Haniffa & Cooke, 2002).
However, other studies did not find any significant association between the two variables (Ghazali
& Weetman, 2006; Quagli et al., 2021). For instance, by focusing on the EU context, Quagli et al.
(2021) found that CEO duality is not statistically significant, suggesting that corporate governance
mechanisms do not influence the disclosure of the expected impact of IFRS 15.
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The Egyptian culture is characterised by collectivism and considerable power distance

(Dahawy & Conover, 2007), which could make role duality a dominant situation in companies’
boards. In addition, Mokhtar and Mellett (2013) found that CEO duality is significantly associated
with Egyptian firms’ nonfinancial reporting. Thus, we formulate H2 as follows:
H2: CEO duality is significantly associated with the early adoption of IFRS 15.
3.2.3 Board independence

According to the agency theory, the existence of independent directors helps reduce agency
conflicts that arise from the separation between shareholders and managers through effective
monitoring of managers’ behavior (Fama, 1980). That is, independent directors can curb the
tendency of some managers to engage in malpractices. Some studies noted that independent
boards are associated with fewer financial reporting malpractices (Hazarika et al., 2012; Klein,
2002). Beasley (1996) found less likelihood of fraud in financial statements produced by companies
with boards with higher proportions of outside directors (Ajinkya et al., 2005). Hence, outside
directors might be associated with earnings quality (Beekes et al., 2004) and more voluntary
disclosures (Abdelsalam & Street, 2007).
In contrast, some studies in developing nations reported no significant positive relationship

between the proportion of independent directors on the board and the extent of voluntary
disclosure (Ghazali & Weetman, 2006; R. M. Haniffa & Cooke, 2002). Moreover, even some studies
found that more independent directors can reduce voluntary disclosure (e.g., Barako et al., 2006;
Tengamnuay & Stapleton, 2009). This contrasting view is based on the idea that outside directors
are primarily employed part-time and hold jobs with other companies. Thus, they encounter
difficulties in comprehending the complexity of companies, which in turn, hurts their monitoring
tasks.
In the context of Egypt, Abdou et al. (2021) found that Egyptian firms are likely to have lower
levels of earnings management in the presence of more independent boards. Consistently, it is
anticipated that companies with independent directors moving earlier toward appropriate and
transparent accounting practices. Thus, we formulate the third hypothesis as follows:
H3: Board independence is significantly associated with the early adoption of IFRS 15.
3.2.4 Board meetings

As the case with board size, board meetings’ frequency or board activity might affect the decision
to adopt IFRS early in variant ways. On the negative side, some scholars suggested that increased
board activity can lead to poor performance (see, e.g., Jensen, 1993). This is based on the view that
frequent board meetings will not leave much time for board members to exert sufficient control
over management. This could result in a time shortage for directors to exchange meaningful ideas
(Vafeas, 1999). In this regard, Almaqtari et al. (2021) found that the frequency of board meetings
is not significantly related to IFRS compliance and financial reporting quality in Saudi and Omani
firms. Hashed and Almaqtari (2021) reported that the frequency of board meetings is negatively
related to compliance with IFRS in Saudi Arabia.
On the positive side, the higher frequency of board meetings is noted to result in directors
carrying out their duties in line with shareholders’ expectations and interests and monitoring
management more efficiently (Lipton & Lorsch, 1992). Lipton and Lorsch (1992) emphasised that
board meetings enhance the board’s effectiveness, which can have better organisational implica
tions. In the context of financial reporting, Laksmana (2008) found that board meeting frequency
is positively related to more transparency. Barros et al. (2013) found that voluntary disclosure in
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French firms’ annual reports is positively associated with the frequency of board meetings. By
examining Italian listed firms, Allegrini and Greco (2013) found that the number of board meetings
is positively related to disclosure. Al Amosh and Khatib (2021) found a significant impact of board
meetings on Jordanian firms’ voluntary disclosures. Almaqtari et al. (2021) found that the fre
quency of board meetings is significantly related to UAE firms’ financial reporting quality and
compliance with IFRS. Thus, we formulate H4 as follows:
H4: The frequency of board meetings is significantly associated with the early adoption of IFRS 15.
3.2.5 Female directors.

Board gender diversity is measured by the percentage of female members on the board. The
agency theory supports board gender diversity, suggesting that female directors’ presence can
enhance management’s monitoring and deter conflicts of interest between stockholders and
management (Gull et al., 2018). From this perspective, board diversity can enhance board effec
tiveness and the tendency toward transparency and extensive disclosure (Rouf, 2017). Developed
countries have systems and rules to force companies to increase female representation on the
board. However, the effect of gender diversity is unclear in developing markets due to their
emerging institutions. In Egypt, for instance, Abdou et al. (2021) found that firms are likely to
move toward reporting quality practices if they have a low percentage of female directors. Thus,
we believe that female directors can play a part in the early adoption of IFRS 15. Accordingly, the
fifth hypothesis is articulated as follows:
H5: Board gender diversity is significantly associated with the early adoption of IFRS 15.
3.3. The effects of the early adoption of IFRS 15 on financial statements accounts
The implementation of IFRS, including IFRS15, could result in different ways of accounting for
transactions compared to implementing local standards or not adopting IFRS (Manuel et al., 2019).
This premise implies that adopting international accounting standards can have financial implica
tions (Belesis et al., 2021). Jermakowicz (2004) argued that adopting IFRS in Belgium significantly
changed shareholders’ equity and net income. Similarly, Ormrod and Taylor (2004) showed that
the application of IFRS in Great Britain increased the volatility of accounting figures in the income
statement and balance sheet. Likewise, Jemakowicz and Gornik-Jermakowicz and Gornik-
Tomaszewski (2006) found that applying IFRS positively affects equity in European companies.
Focusing on IFRS 15, in particular, Ernst and Young (2018) noted that entities should change
aspects of their financial statement presentation and increase the size of their disclosures when
adopting IFRS 15. Ferreira (2020) notes that the US GAAP for revenue recognition improves entities’
liquidity due to the anticipated greater precision and increased comparability of financial informa
tion. Usurelu et al. (2021) reported a significant increase in gross and net profit after adopting
IFRS 15.
Other researchers have examined the effect of mandatory (vs early or voluntary) adoption of
IFRS in emerging markets. In Nigeria, for example, Soye and Raji (2014) showed that the differ
ences in the investigated companies’ performance between pre-and post-IFRS periods are signifi
cant. Focusing on the adoption of IFRS 15 in Dubai financial market, Trabelsi (2018) found that
early adoption had a significant positive effect on two accounting numbers: earnings and stock
holders’ equity.
In contrast, other studies reported adverse or insignificant effects of the (early) adoption of IFRS
15. For example, Peters (2016) found that Belgian entities perceive IFRS 15 as an unnecessary
change because of its complexity and the significant implementation efforts it requires. Similarly,
in the Philippines, Manuel et al. (2019) found that businesses have not yet started applying IFRS 15
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as they were still unfamiliar with the standard and its provisions. In the EU context, Napier and
Stadler (2020) found that IFRS 15 has relatively little impact on the recognition and measurement
of revenue. Deen-Conteh (2020) indicated no statistical or material difference between early
adopters and non-early adopters of IFRS 15. Belesis et al. (2021) noted that the effect of IFRS 15
is expected to be quite limited and mainly concerns charging some direct voyage expenses, which
are considered contract costs, between accounting periods.
Emerging African markets, including the Egyptian market, tend toward more secrecy and lack
of disclosures (Dahawy et al., 2002). Within this environment, financial reporting fraud and
improper revenue recognition become prevalent unless required by mandatory standards. This
idea makes us infer that the effects of IFRS 15 adoption during the early (voluntary) adoption
period, where a few companies are anticipated to apply the new standard, would be different from
the results of the companies that chose not to adopt IFRS 15 during this period. Thus, we
formulate the last hypothesis as follows:
H6: The effects of the early adoption of IFRS 15 on the financial statement accounts of the early
adopters will be more significant compared to the non-adopters.
4. Research design
4.1. The sample

The selected sample for our study is the best-performed non-financial Egyptian companies listed
on the Egyptian Exchange according to the EGX100 index for two years from 2019 to 2020. This
index consists of the constituents of both EGX30 and EGX 70.2 Excluding both the number of
financial companies and companies with missing data resulted in a sample of 79 companies. Since
the mandatory adoption of IFRS 15 for Egyptian-listed companies began on the first of
January 2021, the period covered in our study is 2019 and 2020, i.e., the period during which
the adoption of the IFRS 15 was still optional. Therefore, as shown in Table 1, the final sample ends
with firm-year observations. Data related to the IFRS 15 adoption, and the characteristics of the
corporate board are manually collected from the annual reports of the Egyptian-listed companies
published on their websites. In addition, the remaining financial data is collected from Thomson
Reuters’ Database.
4.2. Variables measurement

Our study examines the effect of corporate board characteristics on the companies’ decision to
adopt IFRS 15 early. Table 2 shows the measurement of the variables examined. Similar to Ebrahim
and Abdel Fattah (2015) and Fuad et al. (2019), our dependent variable (IFRS 15) is measured as
a dummy variable that is equal to one if the company adopts the IFRS15 in the voluntary period
and zero otherwise.
Table 1. Sample size

Description 2019 2020 Total
Number of companies 103 103 206
listed in EGX100
Less, Financial 20 20 40
Companies
Subtotal 83 83 166
Less, companies with 4 4 8
missing data
No. of firm-year 79 79 158
observations
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Independent variables are the characteristics of the corporate board. We focused on five main
characteristics. Firstly, board size (BOD), as per Kusi et al. (2018), is measured as the natural
logarithm of the number of board members. Secondly, CEO Duality (CEODUAL) is a dichotomous
variable that takes the value of 1 if the CEO and chairman are the same person and zero otherwise.
Thirdly, board independence (BIND) is measured as the proportion of independent directors to the
total number of board directors. Fourthly, consistent with Liao et al. (2018) and Abdou et al. (2021),
the frequency of board meetings (BMEET) is measured as the natural logarithm of the number of
board meetings held annually. Finally, female participation within the board (BFEM) is represented
by the proportion of female directors on the board.
A set of firm-specific characteristics are utilized to control for our dataset. To begin with, firm
age (AGE) is measured as the natural logarithm of the number of years a firm has had since its
operation (Soliman et al., 2014). In addition, audit firm (AUDIT) controls for the variation in the
quality of audit services provided for Egyptian companies (Nasr & Ntim, 2018). Also, consistent with
prior studies, our study controls for variations in firms’ profitability (ROA), measured as profit
before tax and interest at yearend scaled down by total assets at yearend (Abdel Fattah &
Aboud, 2020). We also control firm size (SIZE), measured as the natural logarithm of net sales at
yearend (Ebrahim & Abdel Fattah, 2015). Finally, we control for financial leverage (LEV), measured
as the total debt relative to the total assets at yearend (Abdou et al., 2021; Aboud & Diab, 2018).
4.3. Model specification

Since our dependent variable is a dummy variable with dichotomous variables, logistic regression
is considered appropriate for model building (Çokluk, 2010). As the aim of our study is to examine
the effect of corporate board characteristics on companies’ decisions to either early adopt the IFRS
15, consistent with Ebrahim and Abdel Fattah (2015), we stipulate the following model:
IFRit ¼ β0 þ β1 BODit þ β2 CEODUALit þ β3 BINDit þ β4 BMEETit þ

β5 BFEMit þ β6 AGEit þ β7 AUDITit þ β8 ROAit þ þβ9 SIZEit þ β10 LEVit þ εit
Where, i and t = firm and year, respectively;
BOD = board size;
CEODUAL = CEO–chairman role duality;
BIND = boards’ independence;
BMEET = frequency of boards’ meetings per year;
BFEM = percentage of female members on the board;
AGE = firm age;
AUDIT = audit quality;
ROA = firms’ profitability;
SIZE = firms’ size in terms of their sales figures; and
LEV = firms’ financial leverage.
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Table 2. Measurement of variables

Variable Measurement Previous studies
Dependent Variable
IFRS15 A dummy variable that equalizes Ebrahim and Abdel Fattah (2015);
to one in the case that the Fuad et al. (2019).
company is early adopting IFRS15,
and zero otherwise.
Independent Variables
BOD The natural logarithm of the Kusi et al. (2018).
number of board members.
CEODUAL A dummy variable is equal to one if Abdel-Meguid et al. (2014);
the CEO and chairman are Soliman et al. (2014); Ebrahim and
separate persons, and zero Abdel Fattah (2015); Elfeky (2017);
otherwise. Nasr and Ntim (2018); Abdel
Fattah and Aboud (2020); Abdou
et al. (2021)
BIND The percentage of independent Abdel-Meguid et al. (2014)
directors on the board to the total Soliman, and Abd Elsalam (2012)
number of board members. Emile et al.(2014)
Wahba (2014)
Soliman et al. (2014)
Ebrahim and Abdel Fattah (2015)
Ibrahim (2016)
Agyei-Mensah (2017)
Elfeky (2017)
El-Bassiouny and El-Bassiouny
(2018)
Nasr and Ntim (2018)
Abdel Fattah and Aboud (2020)
Abdou et al. (2021)
BMEET The natural logarithm of the Liao et al. (2018)
number of boards’ meetings Abdou et al. (2021)
per year.
BFEM The percentage of female directors Liao et al. (2018);
to total number of board members Abdou et al. (2021);Aladwey et al.
on the board. (2022)
Control Variables
AGE The natural logarithm of the Soliman et al. (2014)
number of years from its inception.
AUDIT A dummy variable that takes the Abdel-Meguid et al. (2014)
value of one if the firm’s external Soliman, and Abd Elsalam (2012)
auditor is one of the Big 4 and zero Soliman et al. (2014)
otherwise. Elfeky (2017)
Abdou et al. (2021)
ROA Profit before tax & interest at year Agyei-Mensah (2017);
end scaled down by total assets Abdel Fattah and Aboud (2020);
at year end. Aladwey et al. (2022)
SIZE The natural logarithm of net sales Ebrahim and Abdel Fattah (2015)
at year end.
LEV The total debt relative to the total Soliman, and Abd Elsalam (2012)
assets at year end. Soliman et al. (2014)
Wahba (2014)
Shahwan (2015)
Aboud and Diab (2018)
Abdou et al. (2021)
Abdel Fattah and Aboud (2020).
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5. Findings
5.1. Descriptive analysis and correlation matrix

Table 3 shows the percentage of Egyptian companies that adopt IFRS15 early during the optional
period. Panel A indicates the wide variation of adoption percentages among the different industrial
sectors. The utility sector has the highest rate, in which half of the companies choose to adopt
IFR15 in an early manner. In addition, with an equal percentage, nearly a third of the Egyptian
companies in the sectors of shipping and transportation services and travel and leisure are opting
for the early adoption of IFR15. However, none of the companies in the energy and support
services, health care and pharmaceuticals, IT media and communication services, paper and
packaging, and trade and distributors are applying IFRS15 in the early adoption period. Panel
B shows that the percentage of Egyptian companies opting to use IFRS15 has nearly tripled in
the second year of the voluntary period, with 19% in 2020 compared to only 7% in 2019.
Table 4 shows the summary descriptive statistics of the study variables. Panel A demonstrates
the continuous variables’ mean, standard deviation, minimum and maximum. On average, the
number of Egyptian listed companies’ board members is around three. The percentage of inde
pendent directors ranged from no directors to almost 87% of the board members, with a standard
variation of 16%. Approximately, the board of directors held two board meetings each year. In
addition, the results show the wide dispersion in the percentage of female directors’ representa
tion within the Egyptian companies’ boards, ranging from zero to half of the boards’ members. The
average age value of Egyptian companies is 3.3, with a standard variation of 0.7. The financial
results of Egyptian companies’ activities ranged from yielding losses, with a minimum value of—
5.4, to achieving profits, with a maximum weight of 6.7. The mean size of Egyptian companies in
terms of sales is 13.5. The standard deviation of the Egyptian companies’ financial leverage is 62.9.
Panel B shows the dummy variables’ value, frequency, and percentage. The results indicate that,
on average, 13 % of the Egyptian listed companies were optionally complying with the IFRS 15. In
addition, 46% of Egyptian companies recruited two separate persons for the positions of chairman
and CEO, a higher percentage compared to the 22% reported by Nasr and Nitm (2018) for the
Egyptian listed companies during 2011–2013. The Egyptian FRA decree No. 11 for 2014 requires
Egyptian companies to disclose the structure of their board of directors (Aladwey, 2021). Thus,
although the Egyptian CG code is not recommending the separation (Nasr & Ntim, 2018), the
higher percentage of CEO-chairman nonduality may be attributed to Egyptian companies’ endea
vours to refine their board of directors’ structure along with the latest FRA’s obligatory regulations.
The results also reveal that Big 4 auditing companies audited more than one-third of the Egyptian
companies.
Table 5 shows the results of Pearson correlation and multicollinearity statistics. The results of
Panel A indicate no multicollinearity issue between the independent variables, as the correlation
coefficients for all variables are less than 0.8 (Bouaziz et al., 2020). In addition, along with L. Zhang
(2012) and Aladwey et al. (2022), as shown in Panel B, we calculate the variance inflation factors
(VIFs) and tolerance levels for all the independent variables. According to Bager et al. (2017), VIFs
that are less than ten and tolerance levels that are more than 0.2 give an indication of the
nonexistence of multicollinearity problems among the predicted variables.
5.2. Regression Analysis

Table 6 depicts the results of the logistic regression for the effect of the corporate board’s
characteristics on the Egyptian companies’ decision to adopt IFRS 15 within the early (voluntary)
adoption period. At the significance threshold of 5%, the results indicate a significant and negative
effect of the board size on the Egyptian companies’ decision to early adopt IFRS 15, where β1
= −6.65 and p-value< 0.04, accordingly H1 is accepted. This result implies that the smaller the
board size, the higher the Egyptian companies’ tendency toward the early adoption of the IFRS15.
This finding is different from the literature supporting the positive impact of larger boards on
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Table 3. The early adoption of IFRS15 according to the different industrial sectors and years
Panel A: IFRS15 relevant to the different industrial sectors
IFRS15 No. of Obs. Percentage
Sector Not Adopt Adopt Total Not Adopt Adopt Total

Basic Resources 18 4 22 82 18 100
Building Materials 13 1 14 93 7 100
Contracting & Construction Engineering 5 1 6 83 17 100
Education Services 3 1 4 75 25 100
Energy & Support Services 2 0 2 100 0 100
Food, Beverages and Tobacco 10 2 12 83 17 100
Health Care & Pharmaceuticals 8 0 8 100 0 100
IT, Media & Communication Services 12 0 12 100 0 100
Industrial Goods, Services and Automobiles 5 1 6 83 17 100
Paper & Packaging 2 0 2 100 0 100
Real Estate 39 3 42 93 7 100
Shipping & Transportation Services 4 2 6 67 33 100
Textile & Durables 8 2 10 80 20 100
Trade & Distributors 4 0 4 100 0 100
Travel & Leisure 4 2 6 67 33 100
Utilities 1 1 2 50 50 100
Total 138 20 158 87.34 12.66 100
Panel B: IFRS15 relevant to the sample period
IFRS15 No. of Obs. Percentage
Year Not Adopt Adopt Total Not Adopt Adopt Total
2019 74 5 79 93.67 6.33 100
2020 64 15 79 81.01 18.99 100
Total 138 20 158 87.34 12.66 100
enhancing the quality of financial reporting and the disclosure environment (e.g., Agyei-Mensah,
2017; Quagli et al., 2021). However, this finding supports the negative view of a large number of
directors on the board, which may result in some communication issues and preclude the decision-
making process, including the decision to apply IFRS at the voluntary stage (Jensen, 1993;
Goodstein et al., 1994). It is also consistent with Samaha and Dahawy (2011) who noted that
larger board size is not an indication of effective mentoring and extensive disclosure in the
Egyptian business environment.
The results reveal a significant and positive effect of gender diversity on the companies’
tendency to early adopt IFRS 15. Thus, at a significance threshold of 1 %, where β5 = 0.18 and
p-value< 0.01, H5 is accepted. Accordingly, a higher percentage of female directors within the
corporate board implies more willingness of the companies to take the IFRS15 early adoption
decision. This finding supports the positive role of female directors in enhancing monitoring and
directing their companies toward more transparency and extensive disclosure through early
adoption of new IFRS and their updates (Gull et al., 2018; Rouf, 2017). It is also consistent with
research conducted in developing countries such as Alfraih (2016) who found that board diversity
is positively related to Kuwaiti companies’ compliance with mandatory disclosures, Kabwe et al.
(2021) who found a positive relationship between the number of female directors in the board and
compliance with IFRS in Zambian-listed firms, and Hasan et al., 2022) who reported a negative
effect of gender diversity on irregular reporting practices in Bangladesh.
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Table 4. Descriptive statistics

Panel A: Summary Statistics for Continuous Variables
Variable Obs Mean Std. Dev. Min Max
BOD 158 2.1 0.3 1.4 2.7
BIND 158 21.4 16.2 0 86.7
BMEET 158 1.9 0.6 0.7 3.1
BFEM 158 11.6 10.5 0 50
AGE 158 3.3 0.7 0.7 5.1
ROA 158 0.2 1.1 −5.4 6.7
SIZE 158 13.5 2.3 6.7 17.7
LEV 158 7.9 62.9 0 559.6
Panel B: Summary Statistics for Dummy Variables
Variable Obs Value Frequency Percent
IFRS15 158 0 138 87.34
1 20 12.67
CEODUAL 158 0 86 54.43
1 72 45.57
AUDIT 158 0 101 63.92
1 57 36.08
However, the findings showed that the remaining independent variables (CEO duality, board
independence and frequency of board meetings) have no significant impact on the early adoption
of IFRS 15. In particular, a non-significant association between the CEO duality and the companies’
decision to early adopt IFRS 15 is reported, where β2 = −1.10 and p-value< 0. 42. Thus, H2 is
rejected. This finding is different from some studies, such as R. M. Haniffa and Cooke (2002) and
Gul and Leung (2004), who found that separating CEO and chairman positions can negatively
affect voluntary corporate disclosure. However, it is consistent with Ghazali and Weetman (2006)
and Quagli et al. (2021). It is also consistent with Ebrahim and Abdel Fattah (2015) who did not
find that CEO duality significantly affects Egyptian companies’ compliance with IFRS.
The findings also reveal a non-significant effect of the board independence on the companies’
decision to early adopt IFRS 15, with β3 = 0.05 and p-value< 0.14, suggesting the rejection of H1.
This finding is different from the majority of the literature reporting significant (positive and
negative) relationships between independent directors and voluntary disclosure (e.g.,
Abdelsalam & Street, 2007; Abdou et al., 2021; Tengamnuay & Stapleton, 2009). However, it is
consistent with research conducted in developing countries such as Malaysia (Ghazali & Weetman,
2006; R. M. Haniffa & Cooke, 2002) and Zambia (Kabwe et al., 2021). It is also consistent with
Ebrahim and Abdel Fattah (2015) who did not find a significant influence of board independence
on Egyptian companies’ compliance with IFRS. This indicates the ineffectiveness or the lack of
enforcement of corporate governance regulations as applied in some developing countries such as
Egypt (Bremer & Ellias, 2007; Mostafa, 2016a). In this regard, Samaha and Dahawy (2011)
indicated the lack of rules that govern board independence in Egypt. This suggests the context-
dependent nature of these findings.
Regarding the frequency of board meetings, the results indicate its irrelevance to the companies’
decision to adopt IFRS15 early, where β4 = −0.20 and p-value< 0.88; thus, H3 is rejected. This
finding is different from the literature reporting a significant (positive and negative) association
between board activity and the adoption of voluntary disclosures (e.g., Allegrini & Greco, 2013;
Almaqtari et al., 2021; Al Amosh & Khatib, 2021). However, this finding is consistent with Ologun
et al. (2020) who focused on the context of Nigeria and found that corporate governance
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Table 5. Pearson correlation and multicollinearity statistics

Panel A: Pearson correlation for Continuous Variables Panel B:
Multicollinearity
Statistics
BOD BIND BMEET BFEM AGE ROA SIZE LEV VIF Tolerance
BOD 1 1.26 0.793205
BIND 0.0344 1 1.19 0.838059
0.6681
BMEET 0.0336 0.1403 1 1.17 0.852811
0.6748 0.0788
BFEM −0.2319* 0.1674* −0.0163 1 1.11 0.900437
0.1012 0.0356 0.8385
AGE 0.0089 −0.1779 0.1506 −0.0143 1 1.22 0.819776
0.1719 0.0253 0.0590 0.0590
ROA −0.0495 0.1207 0.0035 0.0260 −0.0738 1 1.04 0.960408
0.5393 0.1333 0.9656 0.7471 0.3600
SIZE 0.3748* 0.1136 0.2838* −0.0539 0.0256 −0.1211 1 1.36 0.733768
0.0000 0.1552 0.0003 0.5015 0.7497 0.1321
LEV −0.0632 0.0562 −0.1051 −0.0453 0.0377 0.0244 −0.0976 1 1.05 0.956895
0.4300 0.4829 0.1890 0.5722 0.6378 0.7620 0.2223
Notes: Statistical significance * denote significance at the 5 level
mechanisms had no significant effect on financial reporting following the IFRS adoption decision.
Thus, this finding supports the uniqueness of developing countries, including Egypt, in terms of the
status of their governance mechanisms, which lacked enforcement up to the present time (see,
Almaqtari et al., 2021; Dahawy et al., 2002).
Table 5 shows the results of the control variables, which represent the firm-specific character
istics affecting the companies’ decision to early adopt IFRS15. To begin with, at the significance
level of 5%, a positive and significant association between the companies’ age and their will
ingness to adopt the IFRS15 is reported, where β6 = 2.87 and p-value< 0.03. This finding suggests
that long-age companies tend to adopt IFRS 15 optionally. This finding is consistent with Jang &
Rho, 2016), who reported a positive association between firm age and IFRS adoption in the Korean
context. Similarly, the companies’ size positively affects the early adoption decision of IFRS 15,
where β9 = 0.83 and p-value< 0.1 at the significance level of 10 %. This finding suggests that more
prominent companies (in terms of their sales figures) have more willingness to adopt IFRS 15
within the optional period. In addition, Modugu and Eboigbe (2017) consistently found a positive
relationship between Nigerian companies’ size and disclosure. Also, at a significance level of 5%,
financial leverage is found to be a significant and positive determinant of the companies’ decision
to early adopt IFRS 15 (β10 = 0.02 and p-value< 0.03). This result implies that highly leveraged
companies may undertake the IFRS 15ʹs early adoption decision due to the pressures they face
from creditors to show more transparency and disclosure. Manganaris et al. (2015) reported
a similar result, attributing the higher leverage ratio to IFRS adoption.
Finally, the results revealed that neither the audit quality nor the companies’ profitability
affected the IFRS 15ʹs early adoption decision. This finding is consistent with Dumontier and
Raffournier (1998), who found no association between IFRS adoption and financial performance.
However, it differs from Tran et al. (2019) who indicated that the decision to adopt the IFRS is
affected by return on equity and by being audited by the big four editors.
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Table 6. Results of logistic regression: co-efficients

Coef. Robust Std. Err. Z P>|z|
Independent variables
BOD −6.65 3.22 −2.06 0.04**
CEODUAL −1.10 1.38 −0.80 0.42
BIND 0.05 0.04 1.48 0.14
BMEET −0.20 1.32 −0.15 0.88
BFEM 0.18 0.06 2.74 0.01*
Control variables
AGE 2.87 1.33 2.16 0.03**
AUDIT 0.55 2.44 0.23 0.82
ROA −1.11 1.31 −0.85 0.40
SIZE 0.83 0.50 1.66 0.10***
LEV 0.02 0.01 2.24 0.03**
Constant −17.94 7.40 −2.43 0.02**
Obs 158
Prob > chi 0.00
Industry-effect Controlled
Note: Statistical significance: *, **and ***denote significance at the 10, 5 and 1% levels, respectively
5.3. Additional analysis

Following Armstrong et al. (2010) and Tawiah (2022), we conducted a t-test to identify whether
the mean of the financial statement items differs between IFRS 15 early adopters and non-early
adopters. Specifically, the examined financial statement items are sales revenues; stock price;
accounts receivable; cost of goods sold, and profitability measured in three proxies (ROA, operating
income, and profit at year-end). Those items are chosen for two reasons. First, they are closely
related to the core of IFRS 15, concerned with revenue from contracts with customers. Second,
tracking the annual reports of the Egyptian-listed nonfinancial companies reveals that such
companies always highlight the importance of investigating the effect of IFRS 15 on these
examined financial statement items.
Table 7 includes the results of the t-test of the items of the financial statements for early and
non-early adopters. The p-value of the t-test indicates that the examined financial statement
items are indistinguishable for early and non-early IFRS15 adopters, except for profitability mea
sured by ROA (p-value = 0.07) and by profit at year-end (p-value = 0.07) at the significance
threshold of 1% for both. These results suggest that H6 is partially accepted. This finding is
consistent with André and André et al.’s (2012) finding concerning the effect of IFRS voluntary
adoption on the profitability figures of UK non-listed financial companies. A similar result is also
reported by Trabelsi (2018), who indicates a significant effect of IFRS 15 on earnings in Dubai.
These findings support the economic consequences of IFRS adoption in emerging markets, such as
Egypt and the UAE.
6. Conclusion
Our study examined the governance characteristics affecting the early adoption of IFRS 15 in
a developing market—the Egyptian Stock Exchange. Further, our study examined the difference in
the effects of IFRS 15 on the financial statements’ accounts between the early adopters and the
non-early adopters. Out of the various governance mechanisms examined, we found that board
size significantly negatively influences the early adoption of IFRS 15. In contrast, female directors
significantly positively affect the early adoption of IFRS 15 in Egypt. In contrast, the findings
revealed that board independence, frequency of board meetings, and CEO duality have no
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Table 7. Additional test: two sample t-test

Two-sample t-test Mean Std. Err. Std. Dev. t-value p-value
Sales IFRS15 Not Adopt 40 69 82
Revenues
Adopt 31 165 74 0.4610 0.6454
Stock Price IFRS15 Not Adopt 14.2 1.9 21.8
Adopt 21.7 6.3 28.4 −1.3618 0.1753
Account IFRS15 Not Adopt 14 39 45
Receivable
Adopt 62 34 15 0.7439 0.4580
ROA IFRS15 Not Adopt 0.21 0.09 1.10
Adopt −0.28 0.28 1.26 1.8382 0.0680*
Operating IFRS15 Not Adopt 94 18 21
Income
Adopt 47 24 11 0.9816 0.3278
Profit IFRS15 Not Adopt 3.22 7.62 8.96
at year end
Adopt −4.98 1.20 5.37 1.8235 0.0702*
Cost of IFRS15 Not Adopt 31 57 67
goods sold
Adopt 26 16 72 0.2620 0.7937
Note: Statistical significance: *, **and ***denote significance at the 10, 5 and 1% levels, respectively
significant association with the decision to adopt (or not to adopt) IFRS 15 during the early
adoption period.
Regarding the impact of firm characteristics, we found that firm age, size, and financial leverage
have significant positive relationships with the early adoption of IFRS 15. In contrast, profitability
and audit quality have an insignificant relationship with the early adoption of IFRS 15. Finally, we
find a significant difference in profitability (as measured by ROA and profit at year-end) between
IFRS15ʹs early adopting and non-early adopting companies, which reflects the economic value of
early embracing IFRS standards and their updates in emerging markets such as Egypt.
Our study contributes to the limited literature examining the adoption of IFRS 15 in emerging
African markets such as Egypt (Tawiah & Boolaky, 2020). To the best of our knowledge, our study is
the first to examine the IFRS 15 early adoption determinants and consequences in the Egyptian
market. Our study has some practical implications. Firstly, focusing on the importance of adopting
IFRS 15 can improve the confidence of the various stakeholders in the reported financial informa
tion, enhance the quality of annual reports, and support investment decisions. Secondly, our
study’s findings highlight the status of CG and the effect of CG mechanisms on adopting IFRS in
Egypt. Furthermore, improving corporate governance in Egypt can create value for the companies
by enhancing disclosures (Sorour, 2014). This implication supports Nasr and Ntim’s (2018) indica
tion of the need to enhance efficiency and transparency relating to financial and non-financial
reporting and disclosures in the Egyptian market. Thirdly, as prior research focused on EU-
developed countries (e.g., Boujelben & Kobbi-Fakhfakh, 2020; Piosik, 2021), our study directs the
attention of the regulators and standard setters to the situation of compliance with IFRS in
developing markets (Dahawy et al., 2002). Finally, our study turns the attention of investors in
emerging markets such as Egypt to the changes in the accounting standards related to revenues
which can result in more transparency and reduce the expectation gap between investors’ expec
tations from the new standard and the old standards presented. By highlighting these issues and
understanding the reported relationships in our study, it is anticipated that regulators, standard
setters, the Egyptian government, accountants, and managers can make better decisions con
cerning implementing IFRS and their regular updates.
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One limitation of our study is the shortness of the early adoption period (2 years). In the present
case, this is justified by the recent or late adoption of the international revenue standard in
emerging markets such as Egypt compared to the case in developed and other developing
markets. To overcome this limitation, a future study can examine a period to stand on a fuller
implication of adopting the revenue standard in this market. Further, a future study can compare
the findings during the early and mandatory adoption periods, which can be beneficial in under
standing how mandatory rules affect Egyptian companies’ (and other companies in emerging
markets) disclosures in contrast to voluntary disclosures.
Acknowledgements capital market: Relative familiarity and language

The authors would like to thank Prince Sultan University effect in Egypt. Journal of International Accounting,
for their support. Auditing and Taxation, 12(1), 63–84. https://doi.org/
10.1016/S1061-9518(03)00002-8
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The authors received no direct funding for this research. Hassan, Y. (2021). Corporate governance and earn
ings management nexus: Evidence from the UK and
Author details Egypt using neural networks. International Journal of
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Ahmed Diab2 org/10.1002/ijfe.2120
E-mail: adiab@psu.edu.sa Aboud, A., & Diab, A. (2018). The impact of social,
ORCID ID: http://orcid.org/0000-0001-8413-7829 environmental and corporate governance disclo
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of Commerce, Beni-Suef University, Beni-Suef, Egypt. Agyei-Mensah, B. K. (2017). The relationship between
corporate governance mechanisms and IFRS 7 com
Citation information pliance: Evidence from an emerging market.
Cite this article as: The determinants and effects of the Corporate Governance: The International Journal of
early adoption of IFRS 15:Evidence from a developing Business in Society, 17(3), 446–465. https://doi.org/
country, Laila Aladwey & Ahmed Diab, Cogent Business & 10.1108/CG-06-2016-0129
Management (2023), 10: 2167544. Ahmed, A. S., & Duellman, S. (2007). Accounting conser
vatism and board of director characteristics: An
Notes empirical analysis. Journal of Accounting and
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2. See https://www.egx.com.eg/getdoc/9a176cf8-c9b9 1016/j.jacceco.2007.01.005
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-03-02-2019.aspx#:~:text=EGX%20100%20index% ciation between outside directors, institutional
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Disclosure statement 00174.x
No potential conflict of interest was reported by the Aladwey, L. M. A. (2021). The effect of equity ownership
authors. structure on non-conditional conservatism: An
empirical study based on listed companies in Egypt.
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The Determinants and Effects of The Early Adoption of IFRS 15:evidence From A Developing Country

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Article in Cogent Business & Management · January 2023

Laila Mohamed Alshawadfy Aladwey Ahmed A. Diab

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The determinants and effects of the early

Laila Aladwey & Ahmed Diab

To link to this article: https://doi.org/10.1080/23311975.2023.2167544

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Published online: 18 Jan 2023.

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ACCOUNTING, CORPORATE GOVERNANCE & BUSINESS ETHICS |

ABOUT THE AUTHOR

Subjects: Business, Management and Accounting; Accounting; Financial Accounting

Keywords: IFRS 15; revenue; corporate governance; Egypt; emerging markets

2.1. Accounting standards and revenues recognition in Egypt

2.2. Corporate governance in Egypt

3. Literature review and hypotheses development

3.1. What does IFRS 15 entail?

(1) identify the contract(s) with a customer;

(2) identify the performance obligation(s);

(3) determine the transaction price;

3.2. The determinants of IFRS 15 early adoption: the role of CG

3.2.1 Board Size

3.2.2 CEO duality

The Egyptian culture is characterised by collectivism and considerable power distance

3.2.3 Board independence

In contrast, some studies in developing nations reported no significant positive relationship

3.2.4 Board meetings

3.2.5 Female directors.

4.1. The sample

4.2. Variables measurement

Table 1. Sample size

4.3. Model specification

IFRit ¼ β0 þ β1 BODit þ β2 CEODUALit þ β3 BINDit þ β4 BMEETit þ

Where, i and t = firm and year, respectively;

BOD = board size;

CEODUAL = CEO–chairman role duality;

BIND = boards’ independence;

BMEET = frequency of boards’ meetings per year;

BFEM = percentage of female members on the board;

AGE = firm age;

AUDIT = audit quality;

ROA = firms’ profitability;

SIZE = firms’ size in terms of their sales figures; and

LEV = firms’ financial leverage.

Table 2. Measurement of variables

5.1. Descriptive analysis and correlation matrix

5.2. Regression Analysis

IFRS15 No. of Obs. Percentage

Sector Not Adopt Adopt Total Not Adopt Adopt Total

Table 4. Descriptive statistics

Table 5. Pearson correlation and multicollinearity statistics

Table 6. Results of logistic regression: co-efficients

5.3. Additional analysis