Nurunnabi (2015) Tensions Between Politico Institutional Factors and Accounting Regulation in A Developing Economy

Business Ethics: A European Review
Volume 24 Number 4 October 2015
Tensions between politico-

institutional factors and
accounting regulation in a
developing economy: insights
from institutional theory
Mohammad Nurunnabi
Department of Accounting, College of Business Administration, Prince Sultan University, Riyadh, Saudi Arabia
The study contributes to building an understanding of the impact of political forces on the information
environment of listed firms in a developing economy. Specifically, it investigates the tensions between
politico-institutional factors and accounting regulation on the prolonged and incomplete implementation of
the International Financial Reporting Standards (IFRS) in Bangladesh from 1998 to 2010. Two phases of
interviews were conducted in 2010–2011 and IFRS-related enforcement documents from 1998 to 2010 were
evaluated. The study contributes that IFRSs are being diffused to developing countries like Bangladesh, but
they invariably interact with local institutions (political institutions in this case), with variable outcomes
(i.e. negative outcomes of IFRS implementation). Coercive, normative and mimetic isomorphisms are low
in Bangladesh. Notably, political forces have been undermining mimetic isomorphism because of the high
level of government intervention and the high level of political lobbying. Political institutional pressures
stand in the way of mimetic isomorphism and constitute negative forces that add further tension to account-
ing regulation (e.g. the implementation of IFRS) in Bangladesh. Regarding the low level of normative
isomorphism, there is evidence of a ‘blame culture’, with state institutions and professional accountancy
institutions in the country blaming each other for the poor progress in IFRS implementation. Although the
study focuses on Bangladesh, its results have implications for international policy makers (the Interna-
tional Accounting Standards Board, the International Monetary Fund and the World Bank), as well
as the governments and regulators of other developing economies facing similar challenges in implementing
IFRS.
Introduction necessary to finance their development. . ..There is

clear momentum towards accepting IFRS as a
‘The major emerging and transition economies of common financial reporting language throughout
the world – Brazil, China, India, and Russia – are the world . . .. Investors are able to make compari-
adopting or considering the adoption of IFRS, not sons of companies operating in different
US GAAP, in an effort to become integrated in the jurisdictions more easily’ (Sir David Tweedie 2007:
world’s capital markets and attract the investment 2).1
doi: 10.1111/beer.12089 © 2015 John Wiley & Sons Ltd, 9600 Garsington Road,
Oxford OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA
398
bs_bs_banner
...................................................................................................................................................................
Table 1: Eleven prior studies on disclosure level in developing economies
Author(s) Country of study Disclosure level (%)
Ahmed & Nicholls (1994) Bangladesh 51.33
Abd-Elsalam & Weetman (2003) Egypt 83.0
Al-Shiab (2003) Jordan 56.0
Ali et al. (2004) Bangladesh 78.0
India 79.0
Pakistan 81.0
Akhtaruddin (2005) Bangladesh 43.53
Abdelsalam & Weetman (2007) Egypt 76.0 (1991–1992)
84.0 (1995–1996)
Hasan et al. (2008) Bangladesh Not mentioned
Al-Shammari et al. (2008) Bahrain 65.0
Kuwait 72.0
Oman 65.0
Saudi Arabia 75.0
Qatar 69.0
UAE 75.0
Fekete et al. (2008) Hungary 62.0
Al-Akra et al. (2010) Jordan 54.7 (1996)
79.0 (2004)
Omar & Simon (2011) Jordan 83.12
...................................................................................................................................................................
‘[T]he most likely effect of local politics and local refer to (a) political factors and (b) cooperation
market realities on IFRS will be much less among state institutions and professional bodies
visible. . .. I believe the primary effect of local which affect the implementation of IFRS. From a
political and market factors will lie under the comparison with 11 prior studies, which have been
surface, at the level of implementation, which is carried out in developing economies, it is apparent
bound to be substantially inconsistent across
that Bangladesh has the lowest level of compliance
nations’ (Ball 2006: 16).
with IFRS (see Table 1).
The two comments set out above represent con- Two Reports on the Observance of Standards and
trasting attitudes toward the adoption and imple- Codes (ROSC reports) have been published by the
mentation of International Financial Reporting World Bank regarding accounting and auditing
Standards (IFRS).2 Although there are said to be practices in Bangladesh. In the first report, the
ample benefits in adopting IFRS as a common finan- World Bank (2003: 1) stated that: ‘Accounting and
cial reporting language (Tweedie 2007), underlying auditing practices in Bangladesh suffer from institu-
questions remain regarding implementation because tional weaknesses in regulation, compliance, and
of political and market factors (Ball 2006). The defi- enforcement of standards and rules’. In a subsequent
nition of ‘IFRS implementation’ in the context of the report, the World Bank (2009: 25) included the same
present research is: the observed outcomes of intro- sentiments regarding the poor implementation of
ducing and monitoring accounting standards. These IFRS, observing that ‘Efforts to implement IFRS for
outcomes will include the actions of the government, listed companies and other public interest entities
the Bangladesh Securities and Exchange Commis- should be accelerated. This will require either more
sion (BSEC), Ministry of Commerce, Ministry frequent updating of BAS (Bangladesh Accounting
of Finance, professional bodies, Dhaka Stock Standards) or simply adopting IFRS explicitly.
Exchange (DSE, Bangladesh) and the Central Bank . . . Full implementation will also require that
(Bangladesh Bank). ‘Politico-institutional factors’ current donor assistance to ICAB (Institute of
© 2015 John Wiley & Sons Ltd

399
Chartered Accountants of Bangladesh) be main- of conflicts and inconsistencies of regulation, and a

tained, to allow for much needed professional devel- lack of regulation governing implementation. Politi-
opment and expansion in the number of trained cal forces have been undermining mimetic isomor-
auditors and accountants’. phism because of the high level of government
This study investigates the tensions between intervention and the high level of political lobbying in
politico-institutional factors and accounting regula- Bangladesh. The study also suggests that political
tion with regard to the implementation of IFRS in institutional pressures stand in the way of mimetic
Bangladesh, as an example of a developing economy. isomorphism and constitute negative forces that add
To address the research question, semi-structured further tension to accounting regulation (e.g. the
interviews were conducted with four groups (policy implementation of IFRS). Second, in terms of coer-
makers; accounts preparers and professionals; users; cive isomorphism, prior studies have argued that gov-
and academics/researchers) over a 12-week period in ernment is in the prime position to effectively enforce
2010. The study then conducted a follow-up to the accounting regulation (Jaggi 1975; Belkaoui 1983;
first round of interviews, which took place in 2011, in Watts & Zimmerman 1986; Zeff 1988; Tower 1993).
order to compare the reactions and any inconsisten- But, in Bangladesh, the results of the present study
cies of views over time on IFRS implementation demonstrate that low coercive isomorphism (i.e. the
issues of the interviewees in the light of political low quality of investor protection laws and the lack of
change. The second round of interviews took place a enforcement of regulations) are impeding IFRS
year after the first one, when the democratic govern- implementation. The low normative isomorphism
ment was in its third year in power. The study also (in the form of a lack of cooperation among accoun-
examines the enforcement notices (namely those that tancy professional institutions, stakeholders’ non-
relate to violations of the BSEC rules and accounting participation in setting standards, and pressure from
regulation) issued by the BSEC from the beginning donor agencies) are also impeding the operation of an
of 1998 through to the end of 2010. This period of effective IFRS implementation. These findings have
study was selected because the IFRS were manda- broader implications for policy makers, in particular,
tory in Bangladesh from 1998 onwards, and at the for the national standard setters, the enforcement
time of the study, the most recently available data authorities, the International Accounting Standards
related to 2010. It typically takes 12 months to Board (IASB), the International Monetary Fund
publish the data on the BSEC website. (IMF) and the World Bank.
This study contributes to the literature in two ways. The structure of the article is as follows. The next
First, this study demonstrates that institutional section provides an overview of institutional theory
theory, with its long and varied tradition in social and the study’s propositions. The third section out-
sciences, has been a useful theoretical lens for under- lines the implementation of IFRS in Bangladesh, and
standing the effects of the institutional environment the fourth section explains the research methods.
on IFRS implementation and the motivation and The fifth section reports the findings of the study and
behaviors of firms toward it (Campbell 2007; Irvine the sixth section provides a discussion of the find-
2008; Scott 2008). According to Suddaby et al. (2007: ings. The final section presents the conclusions, con-
334): ‘Institutional accounts depict a powerful role tributions and limitations of the study.
for the interaction of professions and the state in
processes of institutional change and the creation of
new social structures’. As such, institutional theory Institutional theory and development
offers a valuable theoretical framework with which to of propositions
analyze the coercive, normative and mimetic isomor-
phisms that fundamentally shape organizational In this section, I discuss the lenses of institutional
behavior (Scott 2001). The study contributes to theory and its application with regard to IFRS
understanding the impact of political forces on the implementation in developing economies.
information environment in a developing economy. Institutional theory argues that the institutions in
Tensions exist within accounting regulation in terms society (economic, political, social and cultural)

400
Figure 1: Institutional isomorphism in relation to International Financial Reporting Standards (IFRS) implementation
in Bangladesh
Institutional isomorphism Propositions
Coercive isomorphism: Proposition 1:

Low regulative elements or It is expected that coercive isomorphism is
legal systems expected to be low (i.e. to have a negative
influence on the implementation of IFRS) in
Bangladesh because of existing institutions
IFRS implementation in Bangladesh
(low quality investor protection laws and lack

of enforcement of the laws).
Proposition 2:
Low Normative isomorphism: It is expected that normative isomorphism is

social, cognitive or cultural expected to be low (i.e. to have a negative
elements influence on the implementation of IFRS) in
Bangladesh because of a lack of cooperation
among professional accountancy institutions
and a high level of pressure from donor
agencies.
Low Proposition 3:
Mimetic isomorphism It is expected that mimetic isomorphism is
expected to be low (i.e. to have a negative
influence on the implementation of IFRS) in
Bangladesh because of a high level of
governmental intervention and a high level of
political lobbying.
affect organizations and their behavior. The ques- Irvine (2008) argued that institutional theory pro-
tion of why companies act in varied socio-political vides a broader understanding of, and insights into,
ways in different countries has intrigued prior how accounting practices are adopted in different
researchers (Meyer & Rowan 1977; DiMaggio & countries, particularly developing economies. Insti-
Powell 1983, 1991; DiMaggio 1988; Scott 2001, 2008; tutional theory provides a formidable lens with
Frynas 2005; Ite 2005; O’Dwyer 2005; Amaeshi et al. which to conceptualize actors’ interactions in a gov-
2006; Campbell 2006, 2007; Jamali & Mirshak ernance system and the socio-political changes in
2007; Irvine 2008; Jamali 2010; Dolan & different geographic contexts.
Rajak 2011; Jamali & Neville 2011; Siltaoja DiMaggio & Powell (1983) identified a number
& Onkila 2013; Blowfield & Dolan 2014; Buzan & of different institutional elements or mechanisms
Lawson 2014; Abreu et al. 2015). DiMaggio & through which ‘institutional isomorphic’ change
Powell (1991) stress the socially responsible behavior occurs. Initially, two components of isomorphism
of corporations, by which institutional theory pro- were developed by DiMaggio & Powell (1983): (a)
vides the logic of implementation according to competitive isomorphism and (b) institutional iso-
national and international rules and practices. morphism. Later, DiMaggio & Powell (1991) and
Campbell (2007: 946) argued that: ‘The relationship Scott (2001) classified institutional isomorphism into
between basic economic conditions and corporate three categories: (a) coercive isomorphism; (c) nor-
behavior is mediated by several institutional condi- mative isomorphism; and (c) mimetic isomorphism
tions: public and private regulation, the presence of (see Figure 1).
nongovernmental and other independent organiza-
tions that monitor corporate behavior, institutional-
ized norms regarding appropriate corporate Coercive isomorphism (regulative elements or
behavior, associative behavior among corporations legal systems)
themselves, and organized dialogues among corpo- Coercive isomorphism includes rules and regula-
rations and their stakeholders’. In a similar vein, tions, which tend to be imposed by external bodies to

401
govern socially accepted corporate behavior (Meyer application of it, are of utmost importance’. Houqe
& Rowan 1977; Blake et al. 1996; Campbell 2007; et al. (2012) highlighted the importance of high-
Gao 2009; Jamali & Neville 2011). The state estab- quality investor protection for financial reporting
lishes hard regulations (e.g. the Companies Act, quality. In a recent study, Houqe et al. (2014: 96)
Accounting Standards, and the Corporate Gover- found that: ‘Mandatory IFRS adoption has a posi-
nance Code) and enforces accounting regulations, tive effect on information quality in countries with
which act as a coercive mechanism (Scott 2008). low investor protection, having a greater effect on
Prior literature has observed that coercive isomor- countries, the lower their strength of investor
phism tends to be low in incidence in developing protection’.
economies because of their low-quality investor pro- Enforcement has been identified as an essential
tection laws and lack of enforcement (Hassan et al. determinant of effective accounting regulation (Leuz
2014). et al. 2003; Christensen et al. 2010; Chi et al. 2013).
With regard to the prior literature’s investigations Prior studies have noted that high-quality financial
of low-quality investor protection laws in developing information will depend on high-quality investor
economies, Kothari (2000: 91) argued that: ‘A protection laws and good enforcement of those laws
demand, and therefore supply, of quality financial (Kothari 2000: 90; Zeff 2007, 2012). In terms of
information will be high in a common-law legal global enforcement, Leuz (2010: 252) observed ‘sub-
system’. Ball et al. (2003) put forward an ‘irregulari- stantial enforcement differences around the world’.
ties argument’ with respect to four East Asian Reporting and disclosure was inadequate in develop-
common law countries. They also argued that the ing economies because of their lack of enforcement
IASB’s standards derive from common law sources (Belkaoui 1983). Saudagaran (2009) suggested that
(UK, US, and IFRS), which are widely viewed as the government regulatory bodies in developing
being of a higher quality than code law standards, by economies suffer from structural weaknesses and
saying that: ‘The common-law approach of IFRS is often take a lenient attitude to enforcement, which
transparent’ (Ball et al. 2000: 47). A codified law results in an inevitable culture of non-compliance
system in the form of statute law to promulgate with standards. The author therefore called for
accounting rules leaves considerable scope for flex- stronger enforcement mechanisms. The governments
ibility (Parker & Nobes 1994; La Porta et al. 1998, of many developing economies have been accused
1999, 2008). Cooke & Wallace (1990) argued that the of failing to enforce accounting standards as an
level of corporate financial disclosure regulation in inducement for corruption (Nurunnabi et al. 2011).
most developed economies is more likely to be deter- Looking to Bangladesh, such concerns are not
mined by internal factors, and that most developed unsubstantiated. For example, the government has
economies are highly regulated and have high- shown reluctance to enforce regulations in relation
quality investor protection laws, whereas regulation to politically connected companies (Nurunnabi et al.
in most developing economies is more likely to be 2011). Prior studies have also suggested that the gov-
determined by low-quality investor protection laws. ernment is in a prime position to enforce accounting
Similar findings regarding developing economies regulation effectively (Jaggi 1975; Belkaoui 1983;
have also been reported by Saudagaran & Diga Watts & Zimmerman 1986; Zeff 1988, 1995; Tower
(1997) in five ASEAN (Association of Southeast 1993).
Asian Nations) countries. Karampinis & Hevas To sum up, the prior research suggests that power
(2011) argued that in unfavorable economies with struggles and conflicts of interest exist in the regula-
inadequate institutional infrastructures (e.g. a code- tory process. Without high-quality investor protec-
law tradition, concentrated corporate ownership, tion laws and stringent enforcement of standards, the
poor shareholder protection and low regulatory quality of accounting standards alone will not
quality), the implementation of mandatory IFRS has increase transparency (Boross et al. 1995; Zeff 1995;
not been effective. Alexander & Micallef (2011: 19) Banerjee 2002). In this study, stringent enforcement
argued that: ‘the clarity of the applicable financial relates to the efficiency of the judicial system, and the
reporting regulatory framework, and the practical ability and willingness to impose punitive penalties/

402
fines. A negative influence in this research means an that institutional cooperation will reduce the uncer-
impediment to IFRS implementation. The first tainty of implementing IFRS under a democratic
proposition of this study is as follows: government in which stakeholders’ rights are
ensured (Choi & Mueller 1978; Fogarty 1992). Miller
Proposition 1: Coercive isomorphism is expected to be & Redding (1988: xi) noted that: ‘By its very nature,
low (i.e. to have a negative influence on standards setting is very much a matter of politics’.
the implementation of IFRS) in Ban- Similarly, Zeff (2012: 833) argued that: ‘There is a
gladesh because of existing institutions great deal of variability in the effectiveness of regu-
(low-quality investor protection laws lator performance . . . especially in emerging econo-
and lack of enforcement of the laws). mies and developing countries’. Peng & Bewley
(2009) found that accounting standard setting in
China is controlled, directly or indirectly, by the
Normative isomorphism (social, cognitive or state. Setting standards that are inconsistent with
cultural elements) users’ expectations could undermine the viability of a
Normative isomorphism refers to social norms that new regulatory system in a developing economy
define the ‘rules of the game’ (or ‘what it is right to do (Bloom et al. 1998). In order to properly implement
around here’, as suggested by Marquis et al. 2007: standards, the accounting standards in question
934). This element confirms a world view based on must fit the social, economic and political climate of
professionalization (Frynas 2005; Jamali & Neville the IFRS-adopting countries (Naciri & Hoarau
2011; Buzan & Lawson 2014). More specifically, this 2001).
isomorphism signifies that professional bodies, as A lack of institutional cooperation among profes-
social actors, set the socially relevant standards for, sional accountancy institutions is further compli-
and encourage conformity to, that which is consid- cated by pressure exerted by donor agencies. For
ered to be suitable and acceptable corporate example, the IASB, IMF and World Bank continu-
behavior. It also relates to defining legitimate orga- ally impose the expectation upon national profes-
nizational practices (Campbell 2006; Blowfield 2007; sional accountancy bodies in developing economies
Scott 2008; Idemudia 2011). Suddaby et al. (2007: of following international standards such as IFRS
337) have argued that: ‘Professional governance is (Irvine 2008). Irvine (2008: 128) found that the adop-
normative in nature, although it is backed by the tion of IFRS was mediated through the World Bank
coercive power of the state. Behavioral expectations in the United Arab Emirates (UAE).4 She further
are collected in ethical codes and sanctions are rarely raised the question of the donor agencies’ ‘pushed
administered. Indeed, a common criticism of tradi- down’ efforts toward IFRS adoption in develop-
tional professions is the unwillingness of associations ing economies. Researchers such as Points &
to discipline their members. The ultimate sanction, Cunningham (1998), Mir & Rahaman (2005) and
expulsion from the profession, is rarely used, creat- Uddin & Hopper (2003) have also been critical about
ing the impression that professions are more inter- donor agencies’ efforts in reforming financial report-
ested in self-preservation than in protecting the ing regimes in developing economies. Wallace &
public interest’. The central argument here is that Briston (1993) proposed collaboration between the
companies seek to be responsive to their stakehold- state and donor agencies as being the best way to
ers’ needs, and in turn, these stakeholders confer move toward effective reforms of accounting.
‘social-political’ legitimacy on corporations that In light of this discussion, I propose the following
remain committed to societal norms (Campbell proposition:
2006).
Several studies have pointed out that institutional Proposition 2: Normative isomorphism is expected
cooperation3 among professional accountancy insti- to be low (i.e. to have a negative influ-
tutions is essential to the effective implementation of ence on the implementation of IFRS)
IFRS in developing economies (Wallace & Briston in Bangladesh because of a lack
1993; Mir & Rahaman 2005). These studies suggest of cooperation among professional

403
accountancy institutions and a high studies have also strongly emphasized that a high
level of pressure from donor agencies. level of government intervention is essential for
improving accounting disclosure (Jaggi 1975) in
developing economies. For example, Jaggi (1975: 84)
argued that: ‘Interference by governments may be
Mimetic isomorphism essential to ensure higher reliability . . . for making
Mimetic isomorphism ‘is seen as adopting best prac- economic and social decisions’.
tices in order to be more legitimate or successful’ Additionally, a high level of political lobbying can
(Albu et al. 2014). For example, the adoption of a help companies to gain access to legislators and regu-
new practice (such as IFRS) is often taken as a proxy lators in order to discuss the companies’ positions on
for a change in institutional logics (i.e. a change in proposed legislation so that they might influence
meaning systems). The key argument here is that the policy outcomes (Sunder 1988; Ryan et al. 1999;
new practice is adopted for reasons of mimesis Cohen & Hamman 2003). Georgiou (2004: 233)
(Blowfield & Frynas 2005; Greer & Tonge 2006; argued that: ‘More lobbying may go on “behind the
Siltaoja & Onkila 2013; Albu et al. 2014; Graafland scenes” ’. In Germany, the industry lobby group rep-
& Zhang 2014). As suggested by Irvine (2008), devel- resenting preparers exerts a high level of influence on
oping economies often adopt IFRS to comply with the decisions of the German legislature (Leuz et al.
the best practices propagated by international orga- 2004). It should also be emphasized that political
nizations like the IASB, the World Bank and the lobbying is not only limited to standard setting
IMF. This is essentially about imitation of interna- (Faccio 2010). Firms with political ties and higher
tional best practices in relation to accounting regu- lobbying power often receive cheap loans from state-
lation, but that this imitation is invariably hindered owned banks and are likely to pay less tax (Chaney
by political lobbying and governmental intervention. et al. 2011).
Prior studies argue that the level of mimesis or imi- In summary, prior research has produced con-
tation can be low because of a high or low level of flicting results with respect to high/low mimetic iso-
government intervention and a high level of political morphism. In particular, prior literature provides
lobbying (McKinnon 1984; Suddaby et al. 2007). mixed evidence of government intervention; one
Regarding government intervention, Bushman & group suggests that politics has a negative influence
Piotroski (2006: 115) asked: ‘Why would politicians on the development of accounting systems, while
care about accounting numbers?’ In a study of the other group suggests that politics has little
Japan, McKinnon (1984: 318) set out two key factors influence. Some researchers have even made strong
that contribute to the high level of government calls for a high level of government intervention in
involvement in accounting policy determination: developing economies (Jaggi 1975; Belkaoui 1983).
first, the administration of corporate financial disclo- However, no evidence has been found in the prior
sure under the SEC Law is the direct responsibility of literature on the different influences of different
the Ministry of Finance; and second, accounting types of political regimes (e.g. between the demo-
standards are issued and enforced as Ministry of cratic and military eras of a state’s governance). In
Finance ordinances. Xiao et al. (2004) concluded terms of political lobbying, the prior research has
that the government of China is partly self- shown that the high level of political lobbying is
motivated and partly under external pressure to viewed as grounded in self-interest. However, there
develop IFRS. The study by Leuz & Oberholzer-Gee has been relatively little research into political influ-
(2006) claimed that a high level of political influence ence in relation to IFRS implementation in devel-
has existed in Indonesia, as an example of a developing economies.
oping economy. Three studies have found that gov- As the imitation of international best practices in
ernment intervention has little influence on relation to accounting regulation is invariably hin-
accounting disclosure [Giroux 1989 (USA); Nobes dered by political lobbying and governmental inter-
1998 (commentary, not country based); Laughlin vention, the third proposition of the study is
2007 (commentary, not country based) ]. Prior therefore:

404
Proposition 3: Mimetic isomorphism is expected to be the Law Reform Ordinance 1978 (Chowdhury 2002).
low (i.e. to have a negative influence on During the second military era (2006–2008), the Cor-
the implementation of IFRS) in Ban- porate Governance Codes Ordinance was intro-
gladesh because of a high level of gov- duced in 2006. It applied the ‘comply or explain’
ernmental intervention and a high level principle. The government proposed the Financial
of political lobbying. Reporting Ordinance 2008 in order to implement
IFRS (Hasan et al. 2008).
Economic development in terms of the annual
Implementation of IFRS in Bangladesh growth rate of gross domestic product (GDP) (%),
from 1972–1975 (the first democratic era) was nega-
In this section, I outline the past and present political tive, at −0.35%; in 1975–1990 (the first military era)
regimes and the history of accounting regulation in growth of 3.39% was recorded; in 1991–2006 (the
Bangladesh. second democratic era) it had risen to 5.01%; in
There have been two distinct types of political 2006–2008 (the second military era) it was 6.41% and
regime in Bangladesh. These may be described as in 2009–2010 (the third democratic era) it was 5.9%
democratic regimes and military regimes. They have (World Bank 2011). These figures indicate that the
alternated over the 40 years of Bangladesh’s exis- highest GDP (%) was recorded during the second era
tence as an independent country, taking up approxi- of military government (2006–2008). Pakistan also
mately equal periods of time in total. During the first experienced its highest growth rates (6.7%) during
democratic era (1972–1975), Bangladesh followed a military rule (Khan 2011). According to the World
socialist economic model by nationalizing all its Bank’s governance indicators (Kaufmann et al.
industries. The government established the ICAB, 2010), Bangladesh experienced significant deteriora-
the Institute of Cost and Management Accountants tions in key areas such as political stability, govern-
of Bangladesh (ICMAB), the National Board of ment effectiveness, control of corruption, and voice
Revenue and the Bangladesh Bank (Chowdhury and accountability during the democratic govern-
2002). In the second democratic era (1991–2006), the ment eras. The implementation of law and control of
major regulatory reforms of the early 1990s were corruption were both deemed better under military
aimed particularly at moving toward an open government than democratic government (World
economy. Examples of this include the Financial Bank Governance Indicators 2010).
Sector Reforms Programme in 1990, the establish- According to the World Bank (2009: 19), ‘Bangla-
ment of the BSEC in 1993, the Privatization Board in desh is a common law country and has been influ-
1993, the BSEC Act 1993, the Companies Act of enced by British and to a lesser extent, Indian and
1994, which replaced the older Companies Act of Pakistani law and legal tradition. The Companies
1913, the Bank Companies Act of 1991, the Finan- Act (CA) and other legislation are based on dated
cial Institutions Act of 1993, and the Bangladesh UK equivalents. The BSEC has used their regulatory
Securities and Exchange Rules in 1997, requiring authority to compensate for this dated legal struc-
mandatory compliance with IAS/IFRS. During the ture; however, key gaps remain in the current frame-
first military regime (1975–1990), some positive con- work’. The accounting regulation for non-financial
tributions were also made by the government. companies in Bangladesh can be found in the follow-
Firstly, the Bangladesh Garment Manufacturers and ing sources: the Companies Act 1994;5 the Bangla-
Exporters Association and the Board of Investment desh Securities and Exchange Rules 1987; DSE
were established. The ICAB became a member of the Listing Rules 1998; Listing Regulation of the Chit-
IASB and started working on the adoption of IASs tagong Stock Exchange (CSE);6 and the Income Tax
in 1983. A reform agenda for the financial sector was Ordinance 1984. For financial companies, the rel-
launched in 1984. Development of the legal system evant accounting regulation is the Bank Companies
also took place and produced the Administrative Act 1991 (for banking companies) and the Insurance
Tribunals Act 1980 (Act VII of 1981), the Income Act 1938 (for insurance companies). However, Ban-
Tax Ordinance 1984 (Ordinance XXV of 1984) and gladesh’s progress in IFRS implementation has been

405
very slow due partly to inconsistencies within the test the reaction of the interviewees to IFRS imple-
accounting regulation (World Bank 2003, 2009). mentation issues. The interviewees might have
Despite the comments made in World Bank Reports changed their attitudes because of the increased
(World Bank 2003, 2009) regarding inconsistencies maturity of the democratic government. All of the
in the country’s accounting regulation, no real 27 first-round interviewees were contacted for
change has yet taken place. follow-up interviews via e-mail and telephone, but
only 12 of them agreed (see Table 3). Table 3 pres-
Research methods ents that preparers and professionals (AP) and users
(US) groups represented 33% of the sample when
Interviews comparing the second round to the first round of
Two rounds of interviews were conducted (in 2010 interviews. The follow-up rate was below 50% (see
and 2011) in order to reach theoretical saturation Appendix A2 for the second round of interview
(Strauss & Corbin 1998). This was achieved, in my questions).
opinion, when I had conducted 39 interviews, of
which 27 were in the first round and 12 in the second
round, as was the case for Kamla et al. (2012). A Documentary analyses
total of 27 semi-structured interviews were con- The study examines enforcement notices issued by
ducted over a 12-week period from 3 June 2010 to 30 the BSEC from the beginning of 1998 through to the
August 2010. Interview questions were sent in end of 2010, which relate to violations of accounting
advance of the interview in each instance (see Appen- regulations. The enforcement notices issued during
dix A1). Of the 27 interviewees, seven had had a total this period are BSEC releases that address a number
work experience of less than 10 years. The majority of accounting, auditing and reporting concerns.
had long-term experience in accounting or finance- However, relatively few of these releases involve SEC
related fields and may be plausibly considered as enforcement action in relation to accounting stan-
members of the elite (Gillham 2000; Creswell & dards. The author hand-collected information from
Miller 2000) of accountancy in Bangladesh. The the BSEC website (http://www.sec.gov.bd/). Each
interviewees held high positions including a World BSEC filing is carefully reviewed to ensure consis-
Bank official, governmental officials, an ex-Central tency (Rollins & Bremser 1997; Chen et al. 2005;
Bank Governor, a President of the ICAB, members Files 2012). The author then carefully reviewed the
of the Ministry of Finance, of the BSEC, of the Big BSEC announcements and eliminated 57 observa-
Four Accountancy firms, company accountants, tions that were repeated from earlier press releases;
credit rating agency officials, university faculty 24 were not accessible from the website.7 The total of
members and stock brokers. These interviewees were 1,647 enforcement actions gathered is not equal to
chosen because each of them plays an important role the number of releases, because, as mentioned, some
in the implementation of IFRS in Bangladesh. The of the releases contain more than one enforcement
present study interviewed a broad spectrum of action. Feroz et al. (1991) and Campbell & Parker
respondents, grouped into four defined groups (1992) have also addressed the fact that some releases
(seven policy makers; 12 accounts preparers and pro- repeat enforcement actions. My final sample consists
fessionals; six users; and two academics and of 42 unique observations derived from enforcement
researchers) (see Table 2 for a summary of the notices that are related to specific violations of
interviewees). The initial intention was to record all accounting regulations.
of the interviews. However, 13 of the interviewees
were not comfortable with recording their interview.
Therefore, extensive notes were taken during these Findings
interviews. The length of the interviews ranged from
60 to 90 min. In this section, based on an analysis of the interview
I decided to follow up the first round of inter- data and on analysis of the documentary evidence, I
views between 2 and 27 September 2011 in order to will focus on the three propositions: coercive, nor-

406
...................................................................................................................................................................
Table 2: Detailed summary of the interviewees: the first round
Codea Company/organization Work experience Qualification
(years)
Policy makers PM1 ICAB (The Institute of Chartered 26 PhD
Accountants of Bangladesh)
PM2 ICAB (The Institute of Chartered 10 ACA
Accountants of Bangladesh)
PM3 ICMAB (The Institute of Cost and 30 FCMA
Management Accountants of
Bangladesh)
PM4 BSEC (The Bangladesh Securities 11 MBA
and Exchange Commission)
PM5 World Bank 14 FCA
PM6 Bangladesh Bank (the Central Bank) 40 PhD
PM7 Ministry of Finance 16 MA
Preparers and professionals AP1 Big 4 accountancy firm in 32 ACA
Bangladesh
AP2 A pharmaceutical company 24 ICMA (Part)
AP3 Big 4 accountancy firm in 9 ACA
Bangladesh
AP4 Small accountancy firm 10 ACA
AP5 Bank 10 M.Com.
AP6 An engineering company 8 MBA
AP7 Bank 15 M.Com
AP8 Small accountancy firm 5 ACA
AP9 Small accountancy firm 20 FCA
AP10 Multinational company 11 ACMA
AP11 A pharmaceutical company 7 ACA
AP12 Big 4 accountancy firm in 15 FCMA, FCA
Bangladesh
Users US1 Bank 10 MBA
US2 Stock broker and Central Depository 9 MA
Bangladesh Limited (CDBL)
participatory
US3 Financial institution and CDBL 9 MBA
US4 Bank 10 CMA (Part)
US5 Credit Rating Agency of Bangladesh 6 MBA
US6 Bank 18 M.Com
Academics and researchers AR1 A private university, Bangladesh 21 PhD
AR2 A public university, Bangladesh 10 MBA
a
Code (interviewee): PM, policy makers; AP, preparers and professionals; US, users; AR, academics and researchers. Thirteen interviewees
declined to have the interviews recorded.
...................................................................................................................................................................
mative and mimetic. In this study, the italics in the Coercive isomorphism (Proposition 1)
interview quotes indicate that the interviewee
strongly emphasized a specific issue (in other words, As reported in Table 4, of the 24 respondents who
I have tried to convey the interviewees’ tone using gave negative answers, nine interviewees expressed
italics). the belief that effective regulations are essential

407
...................................................................................................................................................................
Table 3: The 12 interviews from the existing pool of 27 interviewees: the second round
Two phases of interviews Interview PM AP US AR Total
year
Second round 2011 4 (PM1, PM2, 4 (AP5, AP6, 2 (US4, 2 (AR1, AR2) 12
PM4, PM5) AP10, AP12) US5)
First round 2010 7 12 6 2 27
Second to first round 57% (4/7) 33% (4/12) 33% (2/6) 100% (2/2) 44% (12/27)
interviews (%)
Code (interviewee): PM, policy makers; AP, preparers and professionals; US, users; AR, academics and researchers.
...................................................................................................................................................................
...................................................................................................................................................................
Table 4: Perceptions on coercive isomorphism with regard to current accounting regulation scenario in
Bangladesh: the first round interviews (n = 27)
PM AP US AR Total %
Low coercive
isomorphism
(non-satisfactory
regulation) (A)
Low-quality investor 4 2 3 1 10/27 37
protection laws (PM1,PM3, PM4, PM6) (AP1,AP5) (US1, US3, (AR1)
US4)
Lack of enforcement of 2 8 3 1 14/27 52
the laws (PM2, PM5) (AP3,AP4, (US2, (AR2)
(PM3a) AP6,AP7, US5, US6)
AP8, AP10,
AP11,AP12)
Total (A) 6 10 6 2 24/27 89
High coercive 1 2 0 0 3/27 11
isomorphism (PM7) (AP2, AP9)
(satisfactory
regulation) (B)
Total (B) 1 2 0 0 3/27 11
Subtotal (A + B) 7 12 6 2 27 100
(6 + 1) (10 + 2) (6 + 0) (2 + 0) (24 + 3)
a
The interviewee mentions more than one issue; the less discussed issue = ‘0’, otherwise ‘1’.
Code (Interviewee): PM, policy makers; AP, preparers and professionals; US, Users; AR, academics and researchers.
...................................................................................................................................................................
because of low-quality ‘investor protection Quality of investor protection laws

laws’; four said that the standards setting process
should be more participatory and transparent, According to 10 of the interviewees, accounting
and 14 argued that enforcement is questionable regulation in Bangladesh is not satisfactory and
because of the apparently loose outcome of laws there is therefore a need to establish efficient regula-
in Bangladesh. Only three of the interviewees tion in order to improve the transparency of corpo-
were convinced that the current regulations are rate reporting to gain public trust (see Table 4). The
satisfactory. users and account preparers expressed the opinion

408
that inconsistencies between local laws and IFRS salary structure? Obviously, the answer is ‘No way’.
have been overlooked by the regulatory bodies. So, the government should appoint qualified
In order to build effective regulation, four policy accountants, otherwise ‘dreams of implementing
makers expressed the belief that the most effective IFRS will never come true’! (AP12)
way to improve corporate accountability is through One policy maker from the ICAB tried to push the
public pressure exerted by domestic and interna- full burden onto the BSEC and expressed the
tional organizations. However, according to the opinion that the BSEC should take all the blame not
interviewees, legal and corporate governance assumed by the ICAB. This represents the perspec-
reforms, which are seen as beneficial to less powerful tive that conflicting interests exist between the regu-
stakeholders, may be difficult to implement because latory bodies. In terms of making enforcement
of relatively high levels of government corruption in activities more proactive, the interviewees from the
the country. The interviewees felt that the most fun- US group focused on the need for a depoliticized
damental problems lie in the fact that accountants regulatory body. The present culture (which has seen
are fulfilling the wishes of company directors. Those frequent changes of regulatory bodies) fundamen-
companies do not want to disclose confidential infor- tally weakens effective enforcement. One user said
mation. One interviewee expressed this sentiment by that:
saying:
If the government changes, the regulatory staff will
I don’t think it is very satisfactory. . . I have seen, in also change. Even [if] any company violates the
my past experience as a Governor, that many of the regulatory requirements and is linked with the politi-
reports [by] companies, banks or financial institu- cal party in government, the authority won’t take any
tions [sent] to Bangladesh Bank and different regu- action against them. (US6)
latory agencies only reflect their [company
directors] wishes. (PM6) In the second round of interviews, only one inter-
viewee, from the BSEC, chose not to make any
In the second round of interviews, the only inter-
comment on enforcement issues. Most of the
viewee from the BSEC (a body linked with the Min-
interviewees (11 out of 12) believed that the current
istry of Finance) believed that there are already
enforcement regime is ineffective.
enough regulations. Eleven of the interviewees felt
The documentary analysis (which examined the
that there is a need for new regulation in order to
distribution of regulatory enforcement actions by
implement IFRS.
year) revealed that during the period 1998–2010, 42
IFRS-related enforcement actions represented 2.6%
(42/1647) of the total of enforcement actions, which
Lack of enforcement of the law
is a very low proportion. It was observed that the
The interviewees felt that tightening law enforcement enforcement notices were based on 15 accounting
would create a higher quality of financial reporting standards, specifically, IAS 1 (30 times9), IAS 2
that would also ensure investors’ faith and trust in a (11 times), IFRS 7 (three times), IAS 12 (four
firm’s fundamental soundness (see Table 4). All three times), IAS 16 (nine times), IAS 17 (once), IAS 19
users who responded were critical of the current (once), IAS 23 (once), IAS 24 (once), IAS 34 (four
enforcement scenario. Although the BSEC’s enforce- times), IAS 36 (once), IAS 37 (twice), IAS 38 (once),
ment role in the context of IFRS implementation is IAS 39 (twice) and IAS 41 (once). Most of the vio-
unclear, some infrastructure problems exist which lations were in relation to IAS 1, IAS 2, IAS 12, IAS
are not supportive of the BSEC’s functions. One 16, IAS 34 and IFRS 7. The fine amounts also
interviewee asked: varied. For example, the minimum penalty issued
Why does the government not recruit qualified was a warning and a fine of Tk. 0.10 million, while
accountants into the BSEC? The answer is that the the maximum was Tk. 15 million and the average
salary is only Tk.8 15,000 [£150] to 20,000[£200] was Tk. 1.61 million. Twenty-five of the 42 enforce-
monthly. Do you think any qualified accountant ment notices imposed a penalty of less than a million
would be interested in joining the BSEC with this Taka.

409
...................................................................................................................................................................
Table 5: Views on normative isomorphism regarding donor agencies’ influences and lack of cooperation
among professional bodies to implement or not implement International Financial Reporting Standards: the
first round interviews (n = 27)
Low normative isomorphism PM AP US AR Total %
A high level of donor agencies’ 2 (PM1a, PM7a) 2 (AP1a, AP2 a) 0 1 (AR1 a) 5/27 19%
pressure
Lack of cooperation and 7 12 6 2 27/27 100%
stakeholders’ non-participation
in the standard setting process
a
...................................................................................................................................................................
The results show that coercive isomorphism is low expressed disappointment regarding this process.
(i.e. that accounting regulation has had a negative They stated that the standard setting process should
influence on the implementation of IFRS). This be more transparent (e.g. in terms of stakeholders’
section brings together the arguments made by the participation in the standard setting process) than it
interviewees that effective regulation offering inves- is at present. The current practice of standard setting
tor protection and stringent enforcement of the law in Bangladesh is viewed as far from satisfactory and
is a prerequisite for the effective implementation of as failing to promote the desired levels of transpar-
IFRS. ency and accountability. One interviewee stated this
clearly, saying:
It is very important that major users of corporate
Normative isomorphism (Proposition 2) annual reports should participate [in] reviewing
Lack of cooperation among institutional accounting standards. (AR1)
accounting bodies In line with questions of accountability and
All the interviewees agreed that successful implemen- transparency, the participating accounts preparers
tation could be achieved through an improvement in were supportive of creating a Financial Reporting
cooperation among the major professional account- Council and enforcing it through a Financial
ing institutions. The existence of a ‘blame culture’ Reporting Act (FRA). The interviewees were also
was also strongly expressed by the respondents. The asked the following question: ‘4. Who really regulates
interviewees thought that the two major institutions accounting issues?’. In response, 26 of the 27 respon-
in Bangladesh, the ICAB and the BSEC, appear to dents perceived the ICAB to be the regulator. The
be undivided in their opinions when it comes to majority10 of interviewees demonstrated an emerging
blaming one another. They are in favor of their own realization of the need for real regulators. One of
institutional activities, and criticize other institu- the policy makers was very critical of the ‘real
tions. The following comment represents the feelings regulators’.
of the respondents about such frustrating scenarios Strictly speaking, there is no ‘real’ regulatory body
of non-cooperation. as such to oversee [the] implementation of account-
ing regulation . . .. IFRS are not strictly being exam-
Our department has no role, as the role is reserved by ined by any particular body . . .. As you know, no
the ICAB and the corporate world. (PM4) particular body cares much. (PM6).
The interviewees also provided reasons for such a In the second round of interviews, only two policy
lack of cooperation, in particular, stakeholders’ non- makers from the ICAB said they thought that the
participation in the accounting standard setting standard setting process was an authentic and
process (see Table 5). Four of the interviewees democratic process in which stakeholders could

410
...................................................................................................................................................................
Table 6: Companies with repeated violations from 1998–2010 regarding compliance with International
Financial Reporting Standards
Companya Industry Repeated violations
A Ltd. Textile Once in 2008 and twice in 2009
B Ltd. Textile Once in 2009 and once in 2010
C Ltd. Textile Three times in 2007 and once in 2009
D Ltd. Food and Allied Twice in 2008
E Ltd. Food and Allied Once in 2009 and once in 2010
F Ltd. Food and Allied Once in 2007 and once in 2008
G Ltd. Food and Allied Once in 2006 and twice in 2007
H Ltd. and I Ltd. (H–I group) Food and Allied Twice in 2007
J Ltd. Tannery Six times in 2007
K Ltd. Tannery Once in 2008 and once in 2009
L Ltd. Cement Four times in 2007 and once in 2010
M Ltd. Miscellaneous Twice in 2007
N Ltd. Miscellaneous Six times in 2007 and once in 2009
a
Company names have been anonymized. Detailed information is available on request from the author.
...................................................................................................................................................................
actively participate. However, 10 of the interviewees Three interviewees recommended that donors, in
feel that the standard setting process is not transpar- particular the World Bank, should take a long-term
ent, and that it is non-participatory. Interestingly, all view of their aid commitments to Bangladesh and
the interviewees expressed the view that a lack of that aid funding should not involve any government
cooperation among accountancy professional bodies intervention.
impedes IFRS implementation in Bangladesh. In the second round of interviews, the respondents
did not provide any negative comments on political
pressure from donor agencies. This is possibly
Pressure from donor agencies
because the present democratic government has so
The interviewees expressed high concern about the far failed to introduce the FRA of 2009.
roles of donor agencies in terms of their influence on With respect to the different political regimes in
the development of accounting practices in Bangla- Bangladesh in recent decades, it was observed from
desh. One interviewee summed up the IFRS as a the documentary analyses (1998–2010) that in the
form of global political pressure. democratic era, there have been 864 enforcement
For IFRS there is international pressure from actions (representing 52% of the total of enforcement
donor agencies. I think it is like, ‘you are asking actions), while the military era saw 783 enforcement
somebody to sing but he/she can’t’. (PM7). actions (representing 48%). This is surprising given
that the military government only ruled for 3 years
The interviewees generally believed the whole (2006–2008) while the democratic government ruled
process to be highly political and that the engage- for more than 10 years (1998–2005, 2009–2010). The
ment of local professionals and corporate employees role of the BSEC is to efficiently monitor the market
was being ignored in terms of decision making while (BSEC Annual Report, 2004–2005); however, the
the ‘donor agencies’ wishes’ were transformed reality is different. To illustrate this point, I found
through the government without considering the that 13 of 42 IFRS-related violations were cases in
local culture. One of the policy makers argued that: which 13 companies had continuously violated the
[I]t is an injustice to developing countries to imple- regulations (see Table 6).
ment IFRS, because they are not logistically pre- The results show that normative isomorphism is
pared. (PM1) low (i.e. that there has been a negative influence on the

411
...................................................................................................................................................................
Table 7: Views on mimetic isomorphism regarding political influences to implement or not implement
International Financial Reporting Standards: the first round interviews (n = 27)
PM AP US AR Total %
Low mimetic
isomorphism (A)
A high level of 1 2 1 0 4/27 15
government (PM6) (AP1, AP2) (US5)
intervention
A high level of 3 2 2 0 7/27 26
political lobbying (PM2, PM3, (AP5, AP12) (US2, US3)
PM5) (AP1a, AP2a)
Total 4 4 3 0 11/27 41
High mimetic
isomorphism (B)
No government 1 (PM4) (PM7a) 0 0 0 1/27 4
intervention
Total 1 0 0 0 1/27 4
No comment mimetic
isomorphism (C)
No comment on 2 8 3 2 15/27 55
politics (PM1,PM7) (AP3,AP4, AP6, AP7, (US1, US4, US6) (AR1, AR2)
AP8, AP9, AP10,
AP11)
Total 2 8 3 2 15/27 55
Subtotal (A + B + C) 7 12 6 2 27/27 100
(4 + 1 + 2) (4 + 0 + 8) (3 + 0 + 3) (0 + 0 + 2) (11 + 1 + 15)
a
...................................................................................................................................................................
implementation of IFRS). This is because of an there is no government intervention in IFRS imple-

absence of cooperation between institutional bodies mentation. My interpretation of this is that the most
including state institutions and professional bodies likely reason for interviewees to avoid comment on
(e.g. the ICAB, the ICMAB, the BSEC, the MOC and politics (especially with regard to the accounts
the MOF), which has impeded the implementation preparers and the members of the professionals
process. However, the pressure exerted by donor group) is that they felt that doing so would pose a
agencies was not highly reflected by the interviewees. risk to their job security.
Mimetic isomorphism (Proposition 3) Government intervention

Twenty-seven interviewees expressed sentiments on The respondents believed that ‘a high level of gov-
politics in ways that can be classified into five cat- ernment intervention’ is one of the major factors that
egories (see Table 7). Of the 27 interviewees, four has been impeding IFRS implementation. They
were critical of the government’s intervention, and expressed the view that the government is ‘not
seven believed that a high level of political lobbying sincere’ about establishing an independent board,
is a significant contributing factor in impeding the and instead, simply wants to retain its bureaucratic
implementation of IFRS. However, 15 of the control over the determination of accounting stan-
interviewees provided no comment at all on politics dards and monitoring processes in the country. One
and only one interviewee expressed the belief that AP is highly skeptical in this regard.

412
Bureaucracy, you see, is a never ending process in approving accounting-related laws has resulted in
Bangladesh, and they want to extend their influence those laws being defeated, as some MPs simply do
everywhere. (AP1) not want to pass a FRA.
The two respondents from the policy-making In the second round of interviews, all the academ-
groups denied that the existence of government inter- ics and users who participated in the study were criti-
vention as such is responsible for implementing cal of political lobbying. Only one of the four APs
IFRS. This is not surprising given that some policy- thought that political lobbying was a key problem,
making interviewees represented government institu- but the other three APs were silent on the issue. This
tions or ministerial bodies. The only PM felt that a evidence is similar to the findings from the first round
higher level of government intervention existed of interviews.
under the democratic government than under the The findings show that mimetic isomorphism is
military-backed government. low (i.e. that it has a negative influence on the imple-
In the second round of interviews, nine mentation of IFRS). The findings also reveal that
interviewees were of the opinion that politics within politics creates complexity in coercive and normative
the government has been responsible for creating isomorphism.
barriers to implement IFRS. They point out that
auditors’ qualified opinions are not valued by the
Discussion of the tensions between
regulators.
politico-institutional factors and
accounting regulation
Political lobbying
In order to illustrate the tensions between politico-
Seven of the interviewees criticized the political lob- institutional factors and accounting regulation, after
bying involved in the IFRS implementation process. reading and reflecting on the transcripts, I summa-
They provided different opinions as to how a high rized the first and second round interviewees’
level of political lobbying is negatively associated attitudes to IFRS implementation, and set this infor-
with IFRS implementation. First, they expressed mation alongside each interviewee’s work experience
concerns that some politicians do not actually want and qualifications (see Tables 2 and 8). I also devel-
transparency in financial reporting. An AP provided oped ordinal categories for their responses regarding
an interesting example of political lobbying. the main topics and questions that are asked. The
views of each interviewee on a given topic are repre-
You know, the World Bank and ICAEW provided
around £180,000 to support Bangladesh in imple- sented by one answer (see Q1 to Q4 in Table 8).
menting IFRS in 2008 . . .. the Ministry of Finance Interview questions 1 and 3 of Table 8 (panel A)
sent 35 people from different sectors to London to are examples of areas of IFRS implementation in
study for the ICAEW’s IFRS certificate. But the which the interviewees’ perceptions differ. Q1 relates
political process is dominant in selecting those to politico-institutional factors and Q3 relates to
people . . . [which] is shocking . . . the ministry accounting regulation. From the responses to ques-
selected 35 people from the Ministry of Health, the tions 1 and 3, a relationship is evident between
Ministry of Environment, and some tutors from a interviewees’ perceptions of political influence and
college level who have no knowledge of accountancy accounting regulation. The majority of interviewees
whatsoever, but they are politically involved in the who expressed disappointment with the accounting
government . . .. Ultimately, the government spent
regulation in Bangladesh felt that political influence
£180,000 for nothing. (AP2)
has shaped the implementation of IFRS. Similar
Second, the respondents pointed out that the gov- findings were observed in prior research (Xiao et al.
ernment has a set of predetermined beliefs and a 2004 in China and Leuz & Oberholzer-Gee 2006 in
political manifesto, which excludes accounting- Indonesia).
related issues. Third, some interviewees expressed However, dissimilarities were also observed. First,
the view that the parliamentary process of passing or the views of two of the policy makers (PM4 and

413
...................................................................................................................................................................
Table 8: Quantification of perceptions of interviewees: the first and second round interviews
Panel A: the first round interviews, n = 27
Code Politico-institutional factors Accounting regulation
Q1 Q2 Q3
Positive perceptions (A) 4% 100% 11%
(1/27) (27/27) (3/27)
Negative perceptions (B) 52% 0% 89%
(14/27) (24/27)
No comment (C) 44% 0% 0%
(12/27)
Total (A + B + C) 100% 100% 100%
Panel B: the second round interviews, n = 12
Second round IQs Q1 Q2 Q3(a) Q3(b) Q4
Positive perceptions (A) 0% 100% 8% 17% 8%
(12/12) (1/12) (2/12) (1/12)
Negative perceptions (B) 75% 0% 92% 83% 92%
(9/12) (11/12) (10/12) (11/12)
No comment (C) 25% 0% 0% 0% 0%
(3/12)
Total (A + B + C) 100% 100% 100% 100% 100%
Code (interviewee): PM, policy makers; AP, preparers and professionals; US, users; and AR, academics and researchers. ‘0’ = negative
perceptions, ‘1’ = positive perceptions and ‘9’ = no comment.
Regarding panel A: Q1: ‘0’ = political pressure; ‘1’ = no political pressure and ‘9’ = no comment on political pressure; Q2: ‘0’ = no need for
cooperation and ‘1’ = need for cooperation among institutional bodies; Q3: ‘0’ = negative (non-satisfactory) perceptions and ‘1’ = positive
perceptions on accounting regulation; and Q4 (Regulators) cannot be quantified due to the nature of the questions and perceptions of the
interviewees.
Regarding panel B: Q1: ‘0’ = political pressure; ‘1’ = no political pressure and ‘9’ = no comment on political pressure; Q2: ‘0’ = no need for
cooperation and ‘1’ = need for cooperation among institutional bodies; Q3(a): ‘0’ = negative perception and ‘1’ = positive perception of
accounting regulation; Q3(b): ‘0’ = negative perception and ‘1’ = positive perception of standard setting process; and Q4: ‘0’ = negative
perception and ‘1’ = positive perception of enforcement.
...................................................................................................................................................................
PM7) differed on political issues and accounting appointment’. Therefore, this policy maker is cau-
regulation. For example, PM4 (a BSEC Executive tious of referring to any possible negative role played
Director) was unhappy with current accounting by the government and chose instead to discuss other
regulation, but at the same time saw no political influences.
influence. This is understandable given that the inter- Second, while 52% of respondents were negative
viewee’s position at the time of interview was closely about political influence, 44% of interviewees (12
related to the Ministry of Finance of Bangladesh. out of 27) provided no comment on politics (see
This is contradictory to the findings of Jaggi (1975) Table 8). In particular, the majority of the account
and Belkaoui (1983) who argued that government preparers (9 out of 12) were hesitant to discuss poli-
intervention is necessary in developing economies. tics. This may have been due to feelings of insecurity
PM7 (Deputy Secretary, Ministry of Finance) was toward their jobs. The state establishes accounting
pleased with the accounting regulation but com- regulations, which act as a coercive mechanism, and
mented on politics. It is not surprising that this inter- is also responsible for defining socially accepted cor-
viewee commented on donor agencies’ political porate behavior through various laws such as the
influence rather than the government’s political Companies Act and enforcement-related regulations
influence. This can be attributed to his appointment (e.g. McKinnon 1984 found a high level of govern-
in the current democratic government (in the Minis- ment involvement in accounting regulation in
try of Finance), which is undoubtedly a ‘political Japan). Prior research has also reported that a useful

414
accounting regulatory framework is fundamental for claimed that the standard setting process was already
high-level disclosure (Banerjee 2002; Houqe et al. becoming more cooperative and PM4 was happy with
2012). Although it is a general norm that the state current accounting regulation and with the BSEC’s
establishes regulation, a high level of political con- enforcement actions. This is possibly due to the fact
nectedness has been slowing down the process that at the time, PM1 and PM2 were officials of the
of establishing harder regulations and enforce- ICAB (under the Ministry of Commerce) and PM4
ment mechanisms in Bangladesh (DiMaggio 1988; was an official of the BSEC (under the Ministry
O’Dwyer 2005; Amaeshi et al. 2006; Scott 2008; see of Finance), and they wished to legitimize and
Figure 1). justify their government’s position. The majority of
As has been mentioned, the purpose of the second interviewees provided negative sentiments on
round of interviews was to test the reaction of the accounting regulation, the standard setting process
interviewees, as the second round took place a year and enforcement issues. Peng & Bewley (2009) pre-
after the first (see Research methods section). The first sented similar findings in relation to China, in which
round of interviews was conducted when the present accounting standard setting is directly controlled by
democratic government was in its second year (2010) the government. As mentioned in the institutional
while the second round was conducted in its third year theory section, different regulatory systems can
(2011). The researcher assumed that the interviewees produce different forms of IFRS implementation
might have altered some of their attitudes because of (Amaeshi et al. 2006; Campbell 2007; Irvine 2008;
the maturity of the democratic government as the Nurunnabi et al. 2011). In the case of Bangladesh,
democratic government had been in power for a inconsistencies and a lack of implementation mean
longer period, and the interviewees are, of course, free that there is a need for more stringent regulations and
to comment. In the second round of interviews, the more effective regulatory institutions. However, a
attitudes of some of the interviewees differed from lack of cooperation between different institutional
their previous responses (see Table 8). For example, bodies may create further complexities in accounting
first, the second round interviewees were more criti- regulation implementation (Amaeshi et al. 2006).
cal, in particular, of the possibility of political pres- Some similarities in the interviewees’ perceptions
sure being exerted by the government (75% compared were observed; for example, 100% of interviewees
with 52% in the first round). As mentioned in the felt that cooperation among institutional bodies is
development of propositions section, Mir & needed, across both the first and second rounds of
Rahaman (2005) and Uddin & Hopper (2003) were interviews. With regard to normative pressure, the
previously critical of the financial reporting environ- professional bodies in Bangladesh as social actors
ment in Bangladesh. Secondly, the lower level of ‘no are not engaging stakeholders to set standards (see
comment’ (25% compared with 44% formerly) on Blowfield 2007; Scott 2008; Idemudia 2011; Jamali &
political influence adds some confirmation to the Neville 2011; also see Figure 1). These professional
greater critical sentiments of the second round bodies tend to legitimize their individual positions
respondents. This is due to the fact that the and to blame one another (O’Neill 2002; Hood
interviewees were more open to talking about politics 2009). As a result, corporate behavior tilts away
in the second round of interviews. Similar findings from effective disclosure and hence compromises
have been reported by Cooke & Wallace (1990), good governance mechanisms (Irvine 2008).
Saudagaran & Diga (1997) and Karampinis & Hevas A further observation that can be made
(2011) on disclosure level in developing economies. from Tables 2 and 8 is that no association is
Third, the second round interviewees only mentioned evident between the interviewees’ work experience/
political pressure by the government, while in the first qualifications and their attitudes. For example, the
round, they mentioned political pressure from other group had a spread of similar careers (in terms of
sources (e.g. donor agencies). PM1, PM2 and PM4 years of work experience), in that seven interviewees
provided negative comments on accounting regula- had 20 years and above, 13 had 10–20 years and
tion in the first round of interviews. Surprisingly, in seven had 5–9 years’ experience. However, variations
the second round of interviews, PM1 and PM2 both were observed in their perceptions. Similarly, in

415
terms of their qualifications, 11 are qualified accoun- Conclusions, contributions

tants, two are part qualified CAs, three hold PhDs and limitations
and 11 are postgraduates (e.g. MBA/MSc/MCom/
MAs in Accounting). This study contributes useful empirical evidence
The findings relating to the interviewees’ attitudes regarding the tensions between politics and account-
indicate that politico-institutional factors are stron- ing regulation in the context of a prolonged and
ger factors in terms of adding tensions to accounting incomplete implementation of IFRS in a developing
regulation. The findings reveal that a high level of economy. In particular, IFRSs are being diffused
political connectedness in the regulatory process and into developing countries, but they invariably inter-
a lack of enforcement of the country’s laws have been act with local institutions (e.g. political in this case)
hindering the effective implementation of IFRS during the implementation process, with variable
during the democratic government era, while the mili- outcomes (specifically, there have been negative
tary government era was more depoliticized yet also outcomes for IFRS implementation in the case of
more effective in terms of its stringent enforcement of Bangladesh).
the law. However, stakeholders’ non-participation in This study argues that three types of institutional
policy making is evident in both the democratic and isomorphism could influence the implementation of
military government eras. In comparing the first IFRS and also illustrates how different institutions
and second round of interviews, it becomes clear could affect socially responsible behaviors in Bangla-
that there have been significant changes in the desh and in other developing countries. In terms of
interviewees’ attitudes and reactions regarding politi- low levels of coercive isomorphism, tensions exist
cal factors. The second round interviewees were more within and between the accounting regulations [i.e.
negative about the current democratic government’s they emerge in the form of conflicts and inconsisten-
initiative regarding IFRS implementation. According cies between regulations (low-quality of investor
to the majority of the interviewees (with the exception protection laws) and in the lack of enforcement of
of the views of the policy-making group), political regulations]. Regulatory pressures from the govern-
pressure by the government is impeding IFRS implement are absent, meaning that it is not possible to
mentation. This is possibly because these policy create and maintain an environment conducive to
makers are politically appointed by the present demo- implementing international standards (Jamali &
cratic government. The findings on political influence Neville 2011; Blowfield & Dolan 2014; Buzan &
indicate the complexity of the accounting environ- Lawson 2014). Notably, the study finds that political
ment in Bangladesh. In particular, it is felt that coer- institutional pressures translate into low levels of
cive pressure fails to provide effective regulation, mimetic isomorphism in the context of Bangladesh.
because of political actors and political pressure (i.e. Political institutional pressures stand in the way of
government intervention in the standard setting mimetic isomorphism and constitute negative forces
process, a lack of enforcement, and politically con- that add further tension to accounting regulation
nected firms) (Blake et al. 1996; Scott 2001; Ite 2005; (e.g. the implementation of IFRS) in Bangladesh.
Campbell 2007; Jamali & Neville 2011). Although Mimetic behavior occurs as a reaction to uncertainty
multinational companies operating in Bangladesh are (DiMaggio & Powell 1983). DiMaggio & Powell
confirming a high level of disclosure to provide posi- (1983: 150) also stated that: ‘organizations compete
tive signals in the local market and legitimize their not just for resources and customers, but for political
position internationally (Irvine 2008; Jamali 2010; power and institutional legitimacy, for social as well as
Graafland & Zhang 2014), these best practices are not economic fitness’. In the case of Bangladesh, political
shared more widely among corporate actors in Ban- forces have been undermining mimetic isomorphism
gladesh (Greer & Tonge 2006). This may also raise a because of the high level of government intervention
question regarding mimetic isomorphism’s applica- and the high level of political lobbying. This is also
bility in an environment with a high level of govern- because mimetic pressure had led to goal ambiguity
ment involvement in IFRS implementation, as is the and an uncertain political attitude toward the imple-
case in developing economies. mentation of IFRS in Bangladesh. The more

416
uncertain the relationship among organizations, the implementation issues in a specific institutional
more ambiguity there will be toward certain goals setting. This theory also explains how organizations
(Suddaby et al. 2007). This is also because Bangla- operate and the extent to which structures, policies,
deshi society is largely driven by such practices and procedures, financial performance and competition
political influence comes before regulative pressure. are influenced by their institutional settings. This
It is undoubtedly true that multinational companies theory has been used by prior research focusing
tend to legitimize their best practice in Bangladesh. solely on the adoption of IFRS (Irvine 2008). In it,
They also tend to ensure that global investors are Irvine (2008) called for further research into IFRS
kept informed about their transparency and best implementation. In essence, the present study rests
practice by applying IFRS effectively, which largely on the assumption that IFRS implementation is
explains the mimetic isomorphism as having determined, disseminated and regulated by institu-
occurred for legitimacy reasons (DiMaggio & Powell tional factors. The argument is that the implementa-
1991). tion of IFRS is generally shaped by contextual
Regarding normative isomorphism, the findings factors, and that companies act in response to insti-
suggest that the policy makers are keen to comment tutional pressures in order to remain legitimate.
on donor agencies’ political influence while denying Therefore, the focus of this study was on the drivers
(or at least failing to acknowledge) the existence of of institutional theory isomorphism and it attempted
government intervention or political lobbying. This to contribute to the further understanding of institu-
is because the policy makers appointed by the gov- tional theory in IFRS implementation. However,
ernment represent various government institutions this study does not discount the impact of political
and want, therefore, to be seen to support the gov- forces (mimetic isomorphism) in broadening the
ernment. By contrast, the account preparers and pro- understanding of institutional theory. The study
fessionals who were interviewed in this study seemed explores the possibility that the manifestation of
hesitant to talk about government intervention, and IFRS implementation is mainly a function of insti-
it is possible that these groups felt under pressure tutional isomorphism; namely, coercive, normative
because of fear of losing their jobs if they became and mimetic pressures in the societies of states with
involved in commenting on politics. A lack of coop- developing economies.
eration among accountancy institutions further com- The study has important implications for other
plicates the effective implementation of IFRS developing economies and, more generally, countries
(Suddaby et al. 2007: 334). This study raises a ques- whose economies are in transition. As of 10 January
tion requiring further research on coercive pressure if 2015, 138 countries, including the G-20 states, have
the country has a high level of political influence and adopted IFRS (http://www.ifrs.org/use-around-the
a high level of governmental intervention. Institu- -world/pages/jurisdiction-profiles.aspx). However,
tionalists like Meyer & Rowan (1977) and Scott the question here pertains to the effective implemen-
(2008) have argued that formal structures can tation of IFRS in developing economies. The find-
become decoupled or loosely coupled (resulting in ings of the study are informative and should assist
minimal adoption of rules and a lack of implemen- local and international policy makers such as the
tation). By contrast, when formal structures are IASB, the World Bank, the United Nations and the
tightly coupled, the active adoption of rules and IMF to identify the obstacles to implementing IFRS
effective implementation are assured (DiMaggio effectively in developing economies. Prior research
1988; Scott 2008). The findings of the study are in has suggested that the IASB is concentrating on
sharp contrast to those of Chi et al. (2013) who training issues for accountants and auditors. The
found that regulations limited managements’ influ- IASB argues that better training provision will be
ence over auditors and improved audit quality in sufficient for competent accountants and auditors to
China. apply highly sophisticated and voluminous IFRS.
Institutional theory in this study has been helpful The findings of this study indicate that the low coer-
on a number of levels. In particular, institutional cive, normative and mimetic isomorphism discussed
theory allows for a more precise grasp of IFRS in detail in the preceding sub-sections may pose

417
significant barriers to the successful implementation 2007. This text is available at: http://www.iasplus
of IFRS in developing economies. .com/en/binary/resource/0704tweedieparliament
Some limitations are inherent in this study. First, .pdf [accessed: 25 January 2014]
limitations existed in conducting the interviews. 2 The designation ‘IFRS’ refers to both International
Some interviewees cancelled their appointments, and Accounting Standards (IAS) and International
Financial Reporting Standards (IFRS) throughout.
in some cases, the waiting time was too long. Second,
3 Institutional cooperation in this study means col-
another limitation was in relation to translating and
laboration among various state institutions and
transcribing interviews. Although the interviews professional bodies to implement IFRS.
were conducted in English, the interviewees 4 Aljifri & Khasharmeh (2006: 505) found that 87%
responded mostly in Bengali, and to some extent, in of the sample companies have adopted IAS.
a mixture of Bengali and English. Finally, in terms of However, there is a general consensus among the
documentation, some of the enforcement notices user groups (i.e. auditors, brokers, finance manag-
were illegible, some of the notices were not available ers and financial analysts) on the appropriateness of
on the website, the releases contain repeated infor- adoption of IAS in the UAE.
mation on the same enforcement actions, the band- 5 The Act was originally formulated by the British
width of the BSEC website is very low, no full record authorities in India on 27 March 1913 and came
of enforcement documents was available, there was a into force on 1 April 1914. The Act has been
lack of coordination among various departments in amended on a number of occasions, once quite
extensively, in 1936, in order to bring it into line
the BSEC, and as a general point, the collection of
with the British Companies Act of 1929. This Act
data from state institutions (such as the BSEC) in a
was eventually adopted in Pakistan in 1949 and in
developing economy like Bangladesh is generally Bangladesh in 1972 after these two countries
time consuming. became independent in 1947 and 1971 respectively.
Finally, the Companies Act 1913 was extensively
Acknowledgments amended in 1994 and enacted as a new Act, the
Bangladesh Companies Act 1994 (Hasan et al.
2008).
The author acknowledges the useful comments and
6 The year of listing regulation is unknown (i.e. the
feedback from the editor Professor Dima Jamali and
year is not indicated in the CSE publications or
reviewers. The author also acknowledges construc-
websites; http://www.cse.com.bd/listing-regulation
tive comments from Emeritus Professor Pauline .php).
Weetman, Emeritus Professor David Alexander, 7 For example, SI. No. 3, Date: 09/02/2010, Subject:
Professor Geoffrey Whittington, Professor Mark Warning: Non-compliance of securities laws:
Clatworthy, Professor Falconer Mitchell, Professor Regarding inspection. Available at: http://www
Ingrid Jeacle, Mr. Tom Brown and the discussants at .secbd.org/List%20of%20Enforcement%20Actions
the British Accounting and Finance (BAFA) Doc- %20for%20the%20month%20of%20February
toral Colloquia 2009–2012, the Scottish Doctoral %202010.htm
Colloquia 2011–2012, and the Financial Reporting 8 The values given are in Bangladeshi currency, that is
and Business Communication (FRBC) Conference, the Taka (Tk.). The exchange rate on December 31,
UK (2012–2013). 2014 was Tk. 1 = £0.008259 or £1 = Tk. 121.08
(source: http://www.gov.uk/government/uploads/
system/uploads/attachment_data/file/391345/
Notes exrates-201412.csv/preview).
9 Number of times indicates the number of violations
1 Sir David Tweedie, former Chairman of the IASB, which have occurred against each standard.
addressed the Economic and Monetary Affairs 10 A majority simply means more than 50% of the
Committee of the European Parliament on 10 April interviewees’ perceptions are in agreement.

418
Appendix A1
The first round interview questions

...................................................................................................................................................................
Policy makers [PM] Preparers and Profes- Academics and Users [US]
sionals [AP] Researchers [AR]
1. Is there any high/low 1. Is there any high/low 1. Is there any high/low 1. Is there any high/low
level of political level of political level of political level of political
pressure (e.g. pressure (e.g. pressure (e.g. pressure (e.g.
government government government government
intervention, donor intervention, donor intervention, donor intervention, donor
agencies’ pressure agencies’ pressure agencies’ pressure agencies’ pressure
and political lobbying) and political lobbying) and political lobbying) and political lobbying)
to implement or not to implement or not to implement or not to implement or not
implement IFRS? implement IFRS? implement IFRS? implement IFRS?
2. Do you feel the 2. Do you feel the 2. Do you feel the 2. Do you feel the
institutional and institutional and institutional and institutional and
professional bodies professional bodies professional bodies professional bodies
can work together to can work together to can work together to can work together to
better implement better implement better implement better implement
IFRS? IFRS? IFRS? IFRS?
3. How would you 3. How would you 3. How would you 3. How would you
describe the describe the describe the describe the
accounting regulation accounting regulation accounting regulation accounting regulation
in relation to the in relation to the in relation to the in relation to the
existing laws for existing laws for existing laws for existing laws for
investor protection, investor protection, investor protection, investor protection,
standard setting standard setting standard setting standard setting
process and process and process and process and
enforcement issues in enforcement issues in enforcement issues in enforcement issues in
Bangladesh? Bangladesh? Bangladesh? Bangladesh?
4. Who really regulates 4. Who really regulates 4. Who really regulates 4. Who really regulates
accounting issues in accounting issues in accounting issues in accounting issues in
the country today? the country today? the country today? the country today?
...........................................................................................................................
Appendix A2
The second round interview questions

...................................................................................................................................................................
PM, AP, AR and US

1. How do you regard the political pressure to implement or not implement IFRS?
2. How important is the institutional cooperation to implement IFRS effectively?
3(a). How would you describe the accounting regulatory process in Bangladesh?
3(b). How would you describe the accounting standard setting process in Bangladesh?
4. How effective is the enforcement mechanism in implementing IFRS?
...........................................................................................................................

419
References standards to the United Arab Emirates environ-

ment’. International Business Review, 15:5, 505–
Abd-Elsalam, O.H. and Weetman, P. 2003. ‘Introduc- 526.
ing International Accounting Standards to an emerg- Amaeshi, K.M., Adi, B.C., Ogbechie, C. and Amao,
ing capital market: relative familiarity and language O.O. 2006. ‘Corporate social responsibility in
effect in Egypt’. Journal of International Accounting, Nigeria: western mimicry or indigenous influences?’.
Auditing and Taxation, 12:1, 63–84. Journal of Corporate Citizenship, 24, 83–99.
Abdelsalam, O.H. and Weetman, P. 2007. ‘Measuring Ball, R. 2006. ‘International Financial Reporting Stan-
accounting disclosure in a period of complex dards (IFRS): pros and cons for investors’. Account-
changes: the case of Egypt’. Advances in International ing and Business Research, 36:Special issue, 5–27.
Accounting, 20, 75–104. Ball, R., Kothari, S.P. and Robin, A. 2000. ‘The effect
Abreu, M.C.S.d., Cunha, L.T.d. and Barlow, C.Y. of international institutional factors on properties of
2015. ‘Institutional dynamics and organizations accounting earnings’. Journal of Accounting and Eco-
affecting the adoption of sustainable development in nomics, 29:1, 1–51.
the United Kingdom and Brazil’. Business Ethics: A Ball, R., Robin, A. and Wu, J. 2003. ‘Incentives versus
European Review, 24:1, 73–90. standards: properties of accounting income in four
Ahmed, K. and Nicholls, D. 1994. ‘The impact of non- East Asian countries, and implications for accep-
financial company characteristics on mandatory dis- tance of IAS’. Journal of Accounting and Economics,
closure compliance in developing countries: the case 36:1–3, 235–270.
of Bangladesh’. The International Journal of Account- Banerjee, B. 2002. Regulation of Corporate Accounting
ing, 29:3, 62–77. and Reporting in India. Calcutta World Press.
Akhtaruddin, M. 2005. ‘Corporate mandatory disclo- Belkaoui, A. 1983. ‘Economic, political, and civil indi-
sure practices in Bangladesh’. The International cators and reporting and disclosure adequacy:
Journal of Accounting, 40:4, 399–422. empirical investigation’. Journal of Accounting and
Al-Akra, M., Eddie, I.A. and Ali, M.J. 2010. ‘The influ- Public Policy, 2:3, 207–219.
ence of the introduction of accounting disclosure Blake, J., Clarke, J. and Gowthorpe, C. 1996. ‘FOCUS:
regulation on mandatory disclosure compliance: evi- aspects of accountancy: the ethics of accounting
dence from Jordan’. The British Accounting Review, regulation – an international perspective’. Business
42:3, 170–186. Ethics: A European Review, 5, 143–150.
Al-Shammari, B., Brown, P. and Tarca, A. 2008. ‘An Bloom, R., Fuglister, J. and Myring, M. 1998. ‘The
investigation of compliance with international state of accounting in Armenia: a case’. The Interna-
accounting standards by listed companies in the Gulf tional Journal of Accounting, 33:5, 633–654.
Co-Operation Council member states’. The Interna- Blowfield, M. 2007. ‘Reasons to be cheerful? What we
tional Journal of Accounting, 43:4, 425–447. know about CSR’s impact’. Third World Quarterly,
Al-Shiab, M. 2003. ‘Financial consequences of IAS 28:4, 683–695.
adoption: the case of Jordan’. Unpublished PhD Blowfield, M. and Dolan, C.S. 2014. ‘Business as devel-
thesis, Newcastle University Business School, New- opment agent: evidence of possibility and improb-
castle University, UK. ability’. Third World Quarterly, 35:1, 22–42.
Albu, C.N., Albu, N. and Alexander, D. 2014. ‘When Blowfield, M. and Frynas, J.G. 2005. ‘Setting new
global accounting standards meet the local context – agendas: critical perspectives on corporal social
insights from an emerging economy’. Critical Per- responsibility in the developing world’. International
spectives on Accounting, 25:6, 489–510. Affairs, 81:3, 499–513.
Alexander, D. and Micallef, M. 2011. ‘Accounting Boross, Z., Clarkson, A.H., Fraser, M. and Weetman,
regulation in Malta’. Accounting in Europe, 8:1, P. 1995. ‘Pressures and conflicts in moving towards
1–21. harmonization of accounting practice: the Hungar-
Ali, M.J., Ahmed, K. and Henry, D. 2004. ‘Disclosure ian experience’. European Accounting Review, 4:4,
compliance with national accounting standards by 713–737.
listed companies in South Asia’. Accounting and Busi- Bushman, R. and Piotroski, J. 2006. ‘Financial report-
ness Research, 34:3, 183–199. ing incentives for conservative accounting: the influ-
Aljifri, K. and Khasharmeh, H. 2006. ‘An investigation ence of legal and political institutions’. Journal of
into the suitability of the international accounting Accounting and Economics, 42:1/2, 107–148.

420
Buzan, B. and Lawson, G. 2014. ‘Capitalism and the Patterns in Organizations, Culture and Environment:
emergent world order’. International Affairs, 90:1, 3–21. Cambridge, MA: Ballinger.
71–91. DiMaggio, P.J. and Powell, W.W. 1983. ‘The iron cage
Campbell, D.R. and Parker, L.M. 1992. ‘SEC commu- revisited: institutional isomorphism and collective
nications to the independent auditors: an analysis of rationality in organizational fields’. American Socio-
enforcement actions’. Journal of Accounting and logical Review, 48, 146–160.
Public Policy, 11:4, 297–330. DiMaggio, P.J. and Powell, W.W. 1991. ‘Introduction’.
Campbell, J.L. 2006. ‘Institutional analysis and the In Powell, W.W. and DiMaggio, P.J. (Eds.), The New
paradox of corporate social responsibility’. American Institutionalism in Organizational Analysis: 1–38.
Behavioral Scientist, 49:7, 925–938. Chicago, IL: University of Chicago Press.
Campbell, J.L. 2007. ‘Why would corporations behave Dolan, C. and Rajak, D. 2011. ‘Introduction: ethnog-
in socially responsible ways? An institutional theory raphies of corporate ethicizing’. Journal of Global
of corporate social responsibility’. Academy of Man- and Historical Anthropology, 60, 3–8.
agement Review, 32:3, 946–967. Faccio, M. 2010. ‘Differences between politically con-
Chaney, P.K., Faccio, M. and Parsley, D. 2011. ‘The nected and nonconnected firms: a cross-country
quality of accounting information in politically con- analysis’. Financial Management, 39:3, 905–928.
nected firms’. Journal of Accounting and Economics, Fekete, S., Matis, D. and Lukács, J. 2008. ‘Factors
51:1–2, 58–76. influencing the extent of corporate compliance with
Chen, G., Firth, M., Gao, D.N. and Rui, O.M. 2005. ‘Is IFRS: the case of Hungarian listed companies’.
China’s securities regulatory agency a toothless tiger? Annales Universitatis Apulensis Series Oeconomica,
Evidence from enforcement actions’. Journal of 1:10, 1–12.
Accounting and Public Policy, 24:6, 451–488. Feroz, E.H., Park, K. and Pastena, V.S. 1991. ‘The
Chi, W., Lisic, L.L., Long, X. and Wang, K. 2013. ‘Do financial and market effects of the SEC’s accounting
regulations limiting management influence over and auditing enforcement releases’. Journal of
auditors improve audit quality? Evidence from Accounting Research, 29:Supplement, 107–142.
China’. Journal of Accounting and Public Policy, 32:2, Files, R. 2012. ‘SEC enforcement: does forthright dis-
176–187. closure and cooperation really matter?’. Journal of
Choi, F.D.S. and Mueller, G.G. 1978. An Introduction Accounting and Economics, 53:1–2, 353–374.
to Multinational Accounting. Englewood Cliffs, NJ: Fogarty, T.J. 1992. ‘Financial accounting standard
Prentice-Hall. setting as an institutionalized action field – con-
Chowdhury, A. 2002. ‘Politics, society and financial straints, opportunities and dilemmas’. Journal of
sector reform in Bangladesh’. International Journal of Accounting and Public Policy, 11:4, 331–355.
Social Economics, 29:12, 963–988. Frynas, J.G. 2005. ‘The false development promise of
Christensen, H.B., Hail, L. and Leuz, C. 2010. ‘Capital- corporate social responsibility: evidence from multi-
Market Effects of Securities Regulation: The Role of national oil companies’. International Affairs, 81:3,
Implementation and Enforcement’. Working Paper 581–598.
No. 241, George J. Stigler Center for the Study of the Gao, Y. 2009. ‘Corporate social performance in China:
Economy and the State, The University of Chicago, evidence from large companies’. Journal of Business
USA. Ethics, 89:1, 23–35.
Cohen, J.E. and Hamman, J.A. 2003. ‘Interest group Georgiou, G. 2004. ‘Corporate lobbying on accounting
PAC contributions and the 1992 regulation of cable standards: methods, timing and perceived effective-
television’. The Social Science Journal, 40:3, 357–369. ness’. Abacus, 40:2, 219–237.
Cooke, T.E. and Wallace, R.S.O. 1990. ‘Financial dis- Gillham, A. 2000. Research Interviews. London: Con-
closure regulation and its environment: a review and tinuum International Publishing Group.
further analysis’. Journal of Accounting and Public Giroux, G. 1989. ‘Political interests and governmental
Policy, 9:2, 79–110. accounting disclosure’. Journal of Accounting and
Creswell, J.W. and Miller, D.L. 2000. ‘Determining Public Policy, 8:3, 199–217.
validity in qualitative inquiry’. Theory into Practice, Graafland, J. and Zhang, L. 2014. ‘Corporate
39:3, 124–131. social responsibility in China: implementation and
DiMaggio, P.J. 1988. ‘Interest and agency in institu- challenges’. Business Ethics: A European Review,
tional theory’. In Zucker, L.G. (Ed.), Institutional 23:1, 34–49.

421
Greer, L. and Tonge, A. 2006. ‘Ethical foundations: Jamali, D. and Neville, B. 2011. ‘Convergence versus
a new framework for reliable financial reporting’. divergence of CSR in developing countries: an
Business Ethics: A European Review, 15:3, 259– embedded multi-layered institutional lens’. Journal
270. of Business Ethics, 102:4, 599–621.
Hasan, T., Karim, W. and Quayes, S. 2008. ‘Regula- Kamla, R., Gallhofer, S. and Haslam, J. 2012. ‘Under-
tory change and the quality of compliance to man- standing Syrian accountants’ perceptions of, and
datory disclosure requirements: evidence from attitudes towards, social accounting’. Accounting,
Bangladesh’. Research in Accounting Regulation, 20, Auditing & Accountability Journal, 25:7, 1170–
193–203. 1205.
Hassan, E.A., Rankin, M. and Lu, W. 2014. ‘The devel- Karampinis, N.I. and Hevas, D.L. 2011. ‘Mandating
opment of accounting regulation in Iraq and the IFRS in an unfavorable environment: the Greek
IFRS adoption decision: an institutional perspec- experience’. The International Journal of Accounting,
tive’. The International Journal of Accounting, 49:3, 46:3, 304–332.
371–390. Kaufmann, D., Kraay, A. and Mastruzzi, M. 2010.
Hood, C. 2009. ‘Risk Management and Blame- ‘The worldwide governance indicators: a summary of
Avoidance: A Political Science Perspective’. Paper methodology, data and analytical issues’. World
presented at Managing the Social Impacts of Change Bank Policy Research Working Paper No. 5430.
from a Risk Perspective’ SCARR, Beijing Normal Available at http://siteresources.worldbank.org/
University, ESRC, RCUK, University of Kent, INTMACRO/Resources/WPS5430.pdf (accessed 2
15–17 April. January 2014).
Houqe, M.N., Van Zijl, T., Dunstan, K. and Karim, Khan, A.A. 2011. ‘The test case for development’ revis-
A.K.M.W. 2012. ‘The effect of IFRS adoption and ited’, The Daily Star, 17 March.
investor protection on earnings quality around the Kothari, S.P. 2000. ‘The role of financial reporting in
world’. The International Journal of Accounting, 47:3, reducing financial risks in the market’. In Rosengren,
333–355. E.S. and Jordan, J.S. (Eds.), Building an Infrastruc-
Houqe, M.N., Easton, S. and van Zijl, T. 2014. ‘Does ture for Financial Stability. Federal Reserve Bank of
mandatory IFRS adoption improve information Boston Conference Series No. 44, Federal Reserve
quality in low investor protection countries?’. Journal Bank of Boston, Atlantic Avenue, Boston, MA,
of International Accounting, Auditing and Taxation, 89–102. Available at: http://www.bostonfed.org/
23:2, 87–97. economic/conf/conf44/cf44_6.pdf (accessed 12 June
Idemudia, U. 2011. ‘Corporate social responsibility and 2013).
developing countries: moving the critical CSR La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and
research agenda in Africa forward’. Progress in Vishny, R. 1998. ‘Law and finance’. Journal of Politi-
Development Studies, 11:1, 1–18. cal Economy, 106:6, 1113–1155.
Irvine, H. 2008. ‘The global institutionalization of La Porta, R., Lopez-de-Silanes, F., Shleifer, A. and
financial reporting: the case of the United Arab Vishny, R. 1999. ‘The quality of government’.
Emirates’. Accounting Forum, 32:2, 125–142. Journal of Law, Economics and Organization, 15:1,
Ite, U.E. 2005. ‘Poverty reduction in resource-rich 222–279.
developing countries: what have multinational cor- La Porta, R., Lopez-de-Silanes, F. and Shleifer, A.
porations got to do with it?’. Journal of International 2008. ‘The economic consequences of legal origins’.
Development, 17:7, 913–929. Journal of Economic Literature, 46:2, 285–332.
Jaggi, B.L. 1975. ‘The impact of the cultural environ- Laughlin, R. 2007. ‘Critical reflections on research
ment on financial disclosures’. The International approaches, accounting regulation and the regula-
Journal of Accounting, 10:2, 75–84. tion of accounting’. The British Accounting Review,
Jamali, D. 2010. ‘The CSR of MNC subsidiaries in 39:4, 271–289.
developing countries: global, local, substantive or Leuz, C. 2010. ‘Different approaches to corporate
diluted?’. Journal of Business Ethics, 93:2, 181–200. reporting regulation: how jurisdictions differ and
Jamali, D. and Mirshak, R. 2007. ‘Corporate social why’. Accounting and Business Research, 40:3, 229–
responsibility: theory and practice in a developing 256.
country context’. Journal of Business Ethics, 72:1, Leuz, C. and Oberholzer-Gee, F. 2006. ‘Political
243–262. relationships, global financing, and corporate

422
transparency: evidence from Indonesia’. Journal of Parker, R.H. and Nobes, C.W. 1994. An International
Financial Economics, 81:2, 411–439. View of True and Fair Accounting. London:
Leuz, C., Nanda, D. and Wysocki, P.D. 2003. ‘Earn- Routledge.
ings management and investor protection: an Peng, S. and Bewley, K. 2009. ‘Adaptability of Fair
international comparison’. Journal of Financial Eco- Value Accounting in China: Assessment of an
nomics, 69:3, 505–527. Emerging Economy Converging with IFRS’. Paper
Leuz, C., Pfaff, D. and Hopwood, A. 2004. The Eco- Presented at CAAA Annual Conference 2009,
nomics and Politics of Accounting: International Per- August. Available at http://ssrn.com/abstract
spectives on Research, Trends, Policy, and Practice. =1326004 (accessed 17 January 2014).
Oxford: Oxford University Press. Points, R. and Cunningham, R. 1998. ‘The application
McKinnon, J.L. 1984. ‘The historical development and of international accounting standards in transitional
operational form of corporate reporting regulation societies and developing countries’. Advances in
in Japan’. Unpublished PhD thesis, Macquarie Uni- International Accounting, 1:Supplement, 3–16.
versity, Australia. Rollins, T.P. and Bremser, W.G. 1997. ‘The SEC’s
Marquis, C., Glynn, M.A. and Davis, G.F. 2007. ‘Com- enforcement actions against auditors: an auditor
munity isomorphism and corporate social action’. reputation and institutional theory perspective’.
Academy of Management Review, 32:3, 925–940. Critical Perspectives on Accounting, 8:3, 191–
Meyer, J.W. and Rowan, B. 1977. ‘Institutionalized 206.
organizations: formal structure as myth and cer- Ryan, C., Dunstan, K. and Stanley, T. 1999. ‘Constitu-
emony’. American Journal of Sociology, 83:2, 340– ent participation in the Australian public sector
363. accounting standard-setting process: the case of ED
Miller, P. and Redding, R. 1988. The FASB: The 55’. Financial Accountability and Management, 15:2,
People, the Process, and the Politics. Irwin, IL: 173–200.
Homewood. Saudagaran, S.M. 2009. International Accounting: A
Mir, M.Z. and Rahaman, A.S. 2005. ‘The adoption of User Perspective. Chicago, IL: CCH.
international accounting standards in Bangladesh: Saudagaran, S.M. and Diga, J.G. 1997. ‘Accounting
an exploration of rationale and process’. Accounting, regulation in ASEAN: a choice between the global
Auditing & Accountability Journal, 18:6, 816–841. and regional paradigms of harmonization’. Journal
Naciri, A. and Hoarau, C. 2001. ‘A comparative analy- of International Financial Management & Accounting,
sis of American and French financial reporting phi- 8:1, 1–32.
losophies: the case for international accounting Scott, R.S. 2008. ‘Approaching adulthood: the matur-
standards’. Advances in International Accounting, 14, ing of institutional theory’. Theory and Society, 37:5,
229–247. 427–442.
Nobes, C. 1998. ‘Towards a general model of the Scott, W.R. 2001. Institutions and Organizations.
reasons for international differences in financial London: Sage Publications.
reporting’. Abacus, 34:2, 162–187. Siltaoja, M.E. and Onkila, T.J. 2013. ‘Business in
Nurunnabi, M., Karim, A.K.M.W. and Norton, S. society or business and society: the construction of
2011. ‘The perceived need for and impediments to business–society relations in responsibility reports
achieving accounting transparency in developing from a critical discursive perspective’. Business
countries: a field investigation on Bangladesh’. Inter- Ethics: A European Review, 22:4, 357–373.
national Journal of Managerial and Financial Strauss, A. and Corbin, J. 1998. Basics of Qualitative
Accounting, 3:1, 32–54. Research: Techniques and Procedures for Developing
O’Dwyer, B. 2005. ‘Stakeholder democracy: challenges Grounded Theory. London: Sage Publications.
and contributions from social accounting’. Business Suddaby, R., Cooper, D.J. and Greenwood, R. 2007.
Ethics: A European Review, 14:1, 28–41. ‘Transnational regulation of professional services:
Omar, B. and Simon, J. 2011. ‘Corporate aggregate governance dynamics of field level organizational
disclosure practices in Jordan’. Advances in Account- change’. Accounting, Organizations and Society, 32:4,
ing, incorporating Advances in International Account- 333–362.
ing, 27:1, 166–186. Sunder, S. 1988. ‘Political economy of accounting
O’Neill, O. 2002. A Question of Trust (The 2002 Reith standards’. Journal of Accounting Literature, 7,
Lectures). Cambridge: Cambridge University Press. 31–41.

423
Tower, G.D. 1993. ‘A public accountability model of Zeff, S.A. 1988. ‘Setting accounting standards: some
accounting regulation’. The British Accounting lessons from the US experience’. The Accountant’s
Review, 25:1, 1–25. Magazine, 92:1, 20–22.
Tweedie, D. 2007. ‘The European Parliament, before Zeff, S.A. 1995. ‘A perspective on the U.S. public/
the Economic and Monetary Affairs Committee private-sector approach to the regulation of financial
of the European Parliament’. 10 April 2007. Avail- reporting’. Accounting Horizons, 9:1, 52–70.
able at http://www.iasplus.com/en/binary/resource/ Zeff, S.A. 2007. ‘Some obstacles to global financial
0704tweedieparliament.pdf (accessed 25 January reporting comparability and convergence at a high
2014). level of quality’. The British Accounting Review, 39:4,
Uddin, S. and Hopper, T. 2003. ‘Accounting for 290–302.
privatisation in Bangladesh: testing World Bank Zeff, S.A. 2012. ‘The evolution of the IASC into the
claims’. Critical Perspectives on Accounting, 14:7, IASB, and the challenges it faces’. The Accounting
739–774. Review, 87:3, 807–837.
Wallace, R.S.O. and Briston, R.J. 1993. ‘Improving the
accounting infrastructure in developing countries’.
Research in Third World Accounting, 2, 201–224. Biographical note
Watts, R.L. and Zimmerman, J.L. 1986. Positive
Accounting Theory. Englewood Cliffs, NJ: Prentice Mohammad Nurunnabi, FHEA FRSA, is an Associ-
Hall. ate Professor in Accounting and Coordinator at
World Bank. 2003. ‘Bangladesh: report on the obser- Department of Accounting, Prince Sultan Univer-
vance of standards and codes: accounting auditing’. sity, Saudi Arabia. He holds a PhD in Accounting
World Bank Country Report No. 35016, May 16. from the University of Edinburgh, UK. He is a
Available at http://www.worldbank.org/ifa/rosc
fellow of Higher Education Academy (HEA), UK
_aa_bgd.pdf (accessed 4 December 2013).
and fellow of the Royal Society of Arts (RSA). He
World Bank. 2009. ‘Report on the observance of stan-
dards and codes: corporate governance country was awarded the ‘Academic Excellence in Research
assessment: Bangladesh’. World Bank Country and Teaching Award’ from Channel S (UK-based
Report No. 62534. Available at http://www TV channel) in 2013. His research has appeared in
.worldbank.org/ifa/rosc_cg_bgd09.pdf (accessed 11 Environment, Development and Sustainability,
January 2012). Advances in Accounting, incorporating Advances in
World Bank. 2011. ‘Economic policy & external debt International Accounting, Research in Accounting
data’. Available at http://data.worldbank.org/topic/ Regulation, International Journal of Critical Account-
economic-policy-and-external-debt (Accessed 4 ing, Journal of Human Resource Costing and
January 2012). Accounting, International Journal of Health Care
World Bank Governance Indicators. 2010. ‘The world- Quality Assurance, Journal of Asia Business Studies,
wide governance indicators: a summary of method-
International Journal of Managerial and Financial
ology, data and analytical issues’. World Bank Policy
Accounting, and Journal of Business Economics and
Research Working Paper No. 5430, Available
at http://info.worldbank.org/governance/wgi/index
Management. His current research interests include
.aspx#home (accessed 2 January 2013). Zakah and taxation; IFRS implementation in emerg-
Xiao, J.Z., Weetman, P. and Sun, M. 2004. ‘Political ing economies; corruption and accounting develop-
influence and coexistence of a uniform accounting ment; politics, regulation and enforcement; theory of
system and accounting standards: recent develop- the role of the state; governance and the sovereign
ments in China’. Abacus, 40:2, 193–218. state; accountability; and Islamic accounting.

424

Nurunnabi (2015) Tensions Between Politico Institutional Factors and Accounting Regulation in A Developing Economy

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Nurunnabi (2015) Tensions Between Politico Institutional Factors and Accounting Regulation in A Developing Economy

Uploaded by

Copyright:

Available Formats

Business Ethics: A European Review

Volume 24 Number 4 October 2015

Tensions between politico-

Introduction necessary to finance their development. . ..There is

© 2015 John Wiley & Sons Ltd

Chartered Accountants of Bangladesh) be main- of conflicts and inconsistencies of regulation, and a

© 2015 John Wiley & Sons Ltd

Institutional isomorphism Propositions

Coercive isomorphism: Proposition 1:

(low quality investor protection laws and lack

Low Normative isomorphism: It is expected that normative isomorphism is

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

because of low-quality ‘investor protection Quality of investor protection laws

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

implementation of IFRS). This is because of an there is no government intervention in IFRS imple-

Mimetic isomorphism (Proposition 3) Government intervention

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

terms of their qualifications, 11 are qualified accoun- Conclusions, contributions

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

The first round interview questions

The second round interview questions

PM, AP, AR and US

© 2015 John Wiley & Sons Ltd

References standards to the United Arab Emirates environ-

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

© 2015 John Wiley & Sons Ltd

You might also like