Applicability of IFRS in Vietnam stock exchange listed companies: Perspective from Theory of Planned Behavior

Nội dung text: Applicability of IFRS in Vietnam stock exchange listed companies: Perspective from Theory of Planned Behavior

1. Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 109 Applicability of IFRS in Vietnam stock exchange listed companies: Perspective from Theory of Planned Behavior Nguyen Thi Ngoc Diep1* 1Ho Chi Minh City Open University, Vietnam *Corresponding author: diep.ntn@ou.edu.vn ARTICLE INFO ABSTRACT DOI:10.46223/HCMCOUJS. The research, based upon data collected from 273 enterprises, econ.en.11.1.1237.2021 uses the Theory of Planned Behavior (TPB) to identify and estimate the degree to which factors the ability to apply IFRS in listed non- financial enterprises has been affected. Through Exploratory Factor Received: October 27th, 2020 Analysis (EFA) and multivariate linear regression approach, the research proves that there are four factors placing impacts on IFRS Revised: January 6th, 2021 adoption in listed companies in Vietnam. Those are management’s Accepted: January 18th, 2021 attitude, costs, economic integration, accounting staff’s knowledge and skills. The research results are the foundation for businesses to be fully prepared for the favorable and successful application of Keywords: IFRS. In addition, the results of this study are also useful references for policy-making agencies and professional associations in IFRS, ability of IFRS promoting IFRS application in Vietnam the next time. adoption 1. Introduction International accounting integration is always a challenging process (Christopher & Parker, 2016). The implementation of IFRS (International Financial Reporting Standards) in Vietnam has been constrained due to economic, educational, political and legal conditions (Tran, 2016). Furthermore, the IFRS are basically built on Anglo - Saxon model (Anglo-Saxon model of corporate governance) and are principle-based, and as a consequence, the standards are, culturally and practically, not easily adapted in Vietnam. The project on application of financial reporting standards in Vietnam (Decision No. 345/QD-BTC on March 16, 2020 - Ministry of Finance) confirms the determination to apply these standards in financial reporting in Vietnam. The main business entities which are considered to have the abilities and conditions and to be encouraged to apply IFRS voluntarily in the period of 2022 to 2025 are listed companies. Can those companies apply IFRS? To what degree should they be involved? 2. Theoretical and hypothetical basis 2.1. Theory of Planned Behavior - TPB The Theory of Planned Behavior (Ajzen, 1991) supposes that any behavior is affected directly by behavioral intentions. The more salient the intentions are the more possibility for according behaviors we have. The main purpose of TPB is to explain human behaviors, not for predictions only, so according to the TPB, behavioral intentions are determined by three factors: attitude toward the behavior, subjective norm concerning the behavior, and perceived behavioral control. Attitude toward the behavior is assumed to be a function of readily accessible beliefs regarding the
2. 110 Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 behavior's likely consequences, termed behavioral beliefs; the subjective norm is the expectation or subjective probability that a given referent individual or group (e.g., friends, family, spouse, coworkers, one's physician or supervisor) approves or disapproves of performing the behavior under consideration; perceived behavioral control is concerned with the presence of factors that can facilitate or impede the performance of the behavior, this is the factor that encourages or discourages the behavior. Attitude Subjective Norm Intention Behavior Perceived Behavioral Control Figure 1. The Theory of Planned Behavior (Ajzen, 1991) 2.2. Research model Based on the results of the research of Djatej, Zhou, Gorton, and McGonigle (2012) and Simegn (2015), as well as the qualitative research by interviewing experts, the authors generalize the factors affecting the possibility to apply IFRS in listed companies as follows. Manager attitudes: Rogers (2010) assumed that the pioneers in innovation are the agents of change in any organization. Therefore, the change in attitudes of those agents is essential for applying changes. In his research on manager attitudes in India and Australia, Bhattacharyya (2014) found that manager attitudes positively affect the decisions in reporting sustainable development. Manager attitudes also play an important role in providing better conditions for applying IFRS in organizations (Bananuka, Kadaali, Mukyala, Muramuzi, & Namusobya, 2019). As a consequence, the hypothesis is: H1: Manager attitudes and the possibility to apply IFRS have a relationship in the same direction Costs: Tyrrall, Woodward, and Rakhimbekova (2007) proves that only 54% of the interviewed and questioned people think that adopting IFRS in Kazakhstan is a costly process. All the questioned people point out the costs relating to the implementation of IFRS such as staff training, accounting software adjustment, cost of new accounting documents and consulting services. In agreement with Tyrrall et al. (2007), the research of Bassemir (2018) identifies the need for changing IT systems, training and developing the workforce are potential challenges in applying IFRS in private enterprises. Boateng, Arhin, and Afful (2014) conduct a survey on 18 professional accountants from listed companies in Ghana, questioning them about the pros and cons of applying IFRS for companies in Ghana. The research proves that the lack of qualified staff and cost of operation are the big challenges in applying IFRS. Bui, Chuc, and Le (2020) have a survey of 20 experts, asking them about the benefits and challenges in applying IFRS in Vietnam. Their research demonstrate that the high cost in applying IFRS mainly caused by the cost of hiring consultants, as their accountants are not always qualified in IFRS; the cost of recruiting, training and developing the workforce for IFRS, the expenses for building and maintenance of IT system for preparing financial statements under IFRS; the language barrier is also an obstacle, for people in Vietnam have to translate IFRS from English to Vietnamese, the explanation of similarities in terms and concepts. So, the hypothesis is:
3. Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 111 H2: Cost and possibility to apply IFRS have an opposite relationship Economic integration: Business transactions are becoming more and more complicated and the process of recognizing and reporting them goes the same way, national accounting standards turn to be inadequate to meet the requirements of users (Choi & Meek, 2008; Judge, Li, & Pinsker, 2010). Lasmin (2011)) mention that the opening of the economy creates the pressure of imitation, affecting the decision to apply IFRS in emerging economies. Besides, Nguyen and Nguyen (2012) suppose that the increasing number of foreign investors is one of the main factors for Vietnam to apply IFRS. Kossentini and Othman (2014) point out that in the emerging economies, the more globalized and integrated they are, the stronger the tendency they wish to apply IFRS. Oppong and Aga (2019) suppose that globalization in economic activities urges the reorganization of them to comply with international accounting standards. Along with that, transparent and comparable financial reports are the ground for enterprises in their seek for foreign direct investment and also enforcement of their globally competitive positions. So, the hypothesis is: H3: Economic integration and the possibility to apply IFRS have a relationship in the same direction Accountants’ ability: When the international accounting standards are built on principles, the possibility for them to be practically applied depends largely on accountants’ ability (Choi & Meek, 2008). Countries with a less-developed education system may find the transition to IFRS more costly in comparison with countries with a better education system (Shima & Yang, 2012). Mısırlıoğlu, Tucker, and Yükseltürk (2013) had a survey in Turkey and proved that IFRS could not be applied due to limited ability in accounting. Having the same belief, Ha and Nguyen (2018); Bananuka et al. (2019) use accountants’ ability as an explanatory variable. A limited level of education will be an obstacle in applying IAS/IFRS. So, the hypothesis is: H4: Accountants’ ability and the possibility to apply IFRS have a relationship in the same direction Consequently, there are four factors that affect the possibility to apply IFRS in listed companies in the Vietnam stock market (Figure 2). Figure 2. Research model 3. Research methods To achieve the research’s goals, the author use the deductive research approach, that is to be based on former theories and results of qualitative research by interviewing 10 experts, among them are the persons representing governmental agencies from which accounting standards are
4. 112 Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 issued, members of IFRS translation board, accountants who are experienced in preparing financial reports under IFRS or have good knowledge in IFRS, auditors with experience in auditing IFRS - compliant financial reports, lecturers with experience in teaching and studying IFRS. In combination with the methods mentioned above, the author also uses the inductive approach simultaneously for verification. The qualitative results are used to ignore dispensable factors and indicators, as well as the basis for adding new factors and indicators that are suitable for the context and conditions in Vietnam. Supported with the results from Simegn’s research (2015) and using the qualitative method by interviewing experts, the author proposes the model with 4 factors that affect the possibility to apply IFRS in listed companies in the Vietnam stock market. The factors are manager attitudes; costs; the need to integrate into the global economy; accountants’ ability. In the next step, the author conduct surveys with questionnaires which have 24 observed variables (19 independent variables and 5 dependent ones) and are measured by Likert’s scale in which the fifth choice is “completely agree”, the 4th is “agree”, the 3rd is “not decided”, the 2nd is “disagree” and the 1st is “completely disagree”. The data is collected by Google form sent directly to people surveyed, who are managers and accountants in Vietnam Stock Market listed companies. The number of companies with a direct response or through Google form is 362. After being checked, there are 273 survey sheets with sufficient information to be analyzed. Cronbach’s Alpha indicator is used for reliability analysis with SPSS 22.0. After that, coherent scales are verified once more with explanatory factor analysis (EFA) for necessary adjustments. Person correlation analysis is used to test the relationship between the scales and multivariate regression analysis to examine the differences between the variables. Furthermore, the author also implements the analysis of variance (ANOVA) to compare means of the populations from the 2 groups of IFRS - applied listed companies and non - IFRS ones in consideration of factors that affect the possibility to apply IFRS. The scales were formed based on previous studies and experts’ consultation (Table 1). Table 1 Summary of scales Factors Observed variables Citation MA1: Managers fully support the IFRS application roadmap, which positively affects the ability to apply Ha and Nguyen (2018) IFRS Djatej et al. (2012); Simegn, MA2: Managers are aware of the benefits when (2015); Boumediene, applying IFRS, which positively affects their ability to Zarrouk, and Tanazefti Manager apply IFRS attitudes (2016) MA3: Administrators are aware of the pressure of globalization to push businesses to apply IFRS Bananuka, Tumwebaze, MA4: The manager is determined to build a budget, Musimenta, and Nuwagaba strategy for the IFRS application roadmap, which has (2019) a positive effect on the ability to apply this system of accounting standards C1: It is quite expensive to invest in improving the Boumediene et al. (2016), Costs software and information systems in the process of Al-Absy and Ismail (2019) applying IFRS
5. Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 113 Factors Observed variables Citation Boumediene et al. (2016), C2: The cost of IFRS training for accountants is high Al-Absy and Ismail (2019) C3: Cost of consulting services initially affects the Al-Absy and Ismail (2019) implementation of IFRS C4: Recruiting highly qualified accountants to meet Bui et al. (2020) the needs of applying IFRS is very difficult EI1: Integration with the regional and world economy Ha and Nguyen (2018) has a positive influence on the ability to apply IFRS EI2: Enterprises that are listed in foreign countries are Ha and Nguyen (2018) very likely to apply IFRS Economic EI3: Enterprises with many commercial partners Simegn (2015) integration applying IFRS are highly likely to apply EI4: Enterprises owned by foreign investors can apply Ha and Nguyen (2018), Al- IFRS Absy and Ismail (2019) EI5: Enterprises with foreign loans are more likely to Ha and Nguyen (2018); Al- apply IFRS Absy and Ismail (2019) AA1: The qualifications of accountants affect the application of IFRS AA2: The accountant's work experience affects the application of IFRS AA3: Professional training of IFRS expertise for Accountants’ accountants has an influence on the applicability of Al-Absy and Ismail (2019) ability this set of standards AA4: The accounting staff's ability to read and understand IFRS has a positive effect on the applicability of this set of standards AA5: The level of knowledge about IFRS affects the applicability of IFRS PA1: The enterprise will selectively apply the contents of IFRS Albaskri (2015) PA2: Enterprises will apply a step-by-step roadmap Possibility to from selective to full adoption of IFRS apply IFRS in Vietnam PA3: The application of IFRS is very important for Qualitative survey Stock Market businesses listed PA4: Listed companies are ready for the IFRS companies Qualitative survey application roadmap PA5: Enterprises are afraid of the change due to the Albaskri (2015) lack of easy access to market prices Source: The research’s data analysis
6. 114 Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 4. The results 4.1. Population characteristics Table 2 Sample characteristics Contruct Classification Number Percentage Before 2005 5 1,80% 2005-2010 174 63,70% Listing time 2011-2015 25 9,20% 2016-2020 69 25,30% Total 273 Industry and construction 147 53,85% Scope of Trade and services 50 18,32% business Agriculture, forestry and fisheries 6 2,20% Others 70 25,64% Total 273 300 8 2,93% Total 273 Male 122 44,69% Gender Female 151 55,31% Total 273 Post - graduate 76 38,58% Education University 197 100,00% Total 273 Accounting and auditing 149 54,58% Finance - Banking 88 32,23% Major Business administration 23 8,42% Others 13 4,76% Total 273 Manager 93 34,07% Position Chief / Deputy of Accounting Department 130 47,62% CFO 50 18,32% Total 273 10 years 159 58,24% Total 273 Source: The research’s data analysis
7. Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 115 Table 1 illustrates the demographic characteristics of the participants, including listing time, the scope of the business, number of employees, gender, major, position, working period. The remarkable point in the data is that the number of people who have been working for more than 10 years is the highest rate. The number of enterprises operating in the industry and construction sectors participating in the survey has a rate of 53.85%. Table 3 IFRS application situation, intention to be listed in foreign stock markets and level of IFRS application in Vietnam Stock Market listed companies IFRS Intention to be Total application listed in foreign Level of IFRS application (enterp- situation stock markets rises) IFRS is only IFRS applied transition in completely parent in parent companies companies IFRS are and each (or IFRS applied subsidiary subsidiaries) transition completely Having before and IFRS Already Not No in parent in parent the submitted to transitions to applied applied intention companies companies intention the be made only. and all corporation when (group A) subsidiarie to prepare preparing (Group D) consolidated consolidated financial financial statements statements in (Group B) corporations (Group C) Number of 19 254 140 133 49 29 60 135 273 enterprises Ratio (%) 7% 93% 51% 49% 18% 11% 22% 49% 100% Source: Summarized from data surveyed In 273 samples, there are 93% of companies that have never applied IFRS and 7% have already applied. We can see that the number of listed non-financial companies applying IFRS is quite low. As for the intention to be listed in foreign stock markets, 51% of enterprises are positive and 49% negative. Considered under the level of IFRS application, we summarized from surveyed data to divide the enterprises into 4 groups with 4 levels of applying IFRS as shown in Table 1, the results are Group A: 18%; Group B: 11%; Group C: 22% and Group D has the highest proportion of 49%. The results show that IFRS are applied completely in parent companies and all subsidiaries have the highest percentage. 4.2. Scale reliability (internal validation of measurement scales) As Table 4 shows, most of the factors have Cronbach’s Alpha indicators which are more than 0.6; corrected item-total correlation of the scales is higher than 0.3. After extracting 3 observed variants including C4 (qualified - accountant for IFRS recruitment is difficult), AA5 (accountants’ ability) (many accountants are reluctant to adopt IFRS) and P5 (enterprises are hesitant because IFRS are principle-based), the 21 observed variants left are validated and used for EFA.
8. 116 Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 Table 4 Cronbach’s Alpha indicators Number of variants Minimum corrected item-total Scale Cronbach’s Alpha Before After correlation Manager attitudes (MA) 4 4 .812 .613 Cost (C) 5 4 .861 .667 Economic integration (EI) 5 5 .889 .697 Ability of accountants 5 4 .801 .558 (AA) Possibility to apply IFRS 5 4 .874 .672 (P) Source: Data analysis result of the research with SPSS 22.0 Using EFA with the Principle Component Analysis extraction method and orthogonal rotation (Varimax), the analysis includes 17 observed variants of EFA shown in Table 3, with the KMO test for sampling at 0.856, Barlett’s Test returns the Sig = 0.000; the factors extracted are 4, thus all are compliant with the theoretical model we built. Cumulative variance is 70.316%, and the total variance explained by each component is always bigger than 0.5. So, EFA is suitable for data and observed variables that have a correlation in the population and is used for the next analysis. Table 5 Independent variable EFA Rotated Component Matrixa Component 1 2 3 4 EI5 .832 EI1 .828 EI3 .785 EI2 .774 C2 .825 C1 .825 C3 .762 C5 .735 P3 .795 P2 .783 P1 .766 P4 .755 AA3 .866 AA2 .815 AA1 .793 Extraction Method: Principal Component Analysis Rotation Method: Varimax with Kaiser Normalization a. Rotation converged in 5 iterations. Source: Data analysis result of the research with SPSS 22.0
9. Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 117 4.3. Correlation test Table 6 shows the correlation coefficients of variables, the aim of this correlation analysis is to check the correlation of independent and independent variables to take out the components that may lead to multicollinearity before regression analysis. All the independent variables have Sig < 5%, so they are all have correlations with the dependent variables. The coefficients of the 4 factors are: MA: 0.045, C: 0.732, EI: 0.518, AA: 0.396. The coefficients of independent variables in the model do not exceed 0.8, so in the regression model, there will be little chance for multicollinearity to take place. This proves that dependent variables have linear correlations with the 4 factors, and they have a normal distribution. Table 6 Correlation matrix Correlations P MA C EI AA P Pearson 1 .406 -.732 .518 .396 Correlation Sig. (2-tailed) .000 .000 .000 .000 N 273 273 273 273 MA Pearson 1 -.408 .318 .236 Correlation Sig. (2-tailed) .000 .000 .000 N 273 273 273 C Pearson 1 -.514 -.296 Correlation Sig. (2-tailed) .000 .000 N 273 273 EI Pearson 1 .292 Correlation Sig. (2-tailed) .000 N 273 AA Pearson 1 Correlation Sig. (2-tailed) N . Correlation is significant at the 0.01 level (2-tailed) Source: Data analysis result of the research with SPSS 22.0 4.4. Multivariate linear regression analysis To identify, measure and evaluate the possibility to apply IFRS in Vietnam Stock Market listed companies, the author use a multivariate linear regression method with 4 factors extracted from the EFA mentioned above.
10. 118 Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 Table 7 Multivariate linear regression analysis results Unstandardized Standardized t Sig Collinearity Statistics Coefficients coefficients Standard Beta Beta Tolerance VIF deviation Constant 3.424 .290 11.805 .000 MA .099 .049 .087 2.007 .046 .807 1.239 C -.417 .035 -.572 -11.935 .000 .656 1.524 EI .114 .036 .148 3.204 .002 .704 1.420 AA .146 .037 .163 3.913 .000 .875 1.143 R2 0.595 Adjusted R2 0.589 Sig. F Change 0.000 Durbin-Watson 2.090 Source: Data analysis result of the research with SPSS 22.0 Table 5 shows that R2 = 0,595; the value of R2 demonstrates that the independent variables used in the model can explain 59.5% of the change independent variables, the 40.5% left are the factors left out. The results also let us know that VIF (variance inflation factor) is very small, all of them are less than 2, so multicollinearity does not occur. For the independence of residuals test, the Durbin-Watson statistics is 2.090 < 3, showing that there is no serial autocorrelation, or the estimated residuals of the independent model have no linear correlation. The t value in accordance with Sig. of independent variables are all less than 0.05, so they have no statistical meaning. Table 6 shows that all the 4 observed variables affect the possibility to apply IFRS. Three of them, having relationships in the same direction, are: manager attitudes, economic integration, accountants’ ability and the other one is cost, which has an opposite direction. The standardized regression coefficient equation is as follows: Y = 0.099X1 - 0.417 X2 + 0.114 X3 + 0.146 X4 + 3.424 (1) Where: Y: possibility to apply IFRS in Vietnam Stock Market listed companies X1: manager attitudes X2: costs X3: economic integration X4: accountants’ ability Table 8 Summary of the factorial impact in the possibility to apply IFRS No Factor Value Percentage 1 MA: Manager attitudes 0.099 12.76% 2 C: Costs 0.417 53.74% 3 EI: Economic integration 0.114 14.69% 4 AA: Accountants’ ability 0.146 18.81% 0.776 100% Source: Data analysis result of the research with SPSS 22.0
11. Nguyen Thi Ngoc Diep. Ho Chi Minh City Open University Journal of Science, 11(1), 109-121 119 In Table 8, among the influencing factors, the cost has the strongest effect and the opposite direction on the ability to apply IFRS, specifically: C: cost, takes 53.74%; second: Accountants’ ability, takes 18.81%, third comes economic integration factor, takes 14.69% to the possibility to apply IFRS and last comes manager attitude factor, with 12.76%. 5. Conclusion 5.1. Conclusion The article analyzes and identifies 3 positive factors and one negative that place impacts on the possibility of applying IFRS in non-financial enterprises listed in the Vietnam Stock Market. They are manager attitudes, costs, economic integration and accountants’ ability. With this paper, the author hope to help administrators and policy planners have more specific concepts about the above issues and have better solutions in the coming time, giving better conditions for enterprises to apply IFRS more swiftly and successfully. 5.2. Policy implication Costs, the factor that places the most important impact on the possibility of the application of IFRS, can be easily identified. The higher the initial cost of investment, the bigger the obstacles for enterprises to adapt to IFRS implementation. To cut costs for companies, experts from professional organizations must be involved, they can give good help on IFRS implementation, ensuring the “do right the first time” for enterprises in meeting IFRS requirements. Furthermore, accountants’ knowledge of IFRS is another factor determining the success of IFRS application. If the knowledge in IFRS is widely updated among those staff, the IFRS implementation will no more give difficulties for enterprises. Additionally, the economic integration also pushes the possibility to apply IFRS. Graceful governmental policies to encourage international business activities also give benefits to the implementation of IFRS in Vietnamese enterprises. Lastly, the manager's attitude should be changed and updated towards IFRS adaptation. The more positive the attitude they have, the better chance for IFRS to be applied. So, it is important for policymakers to make business managers understand their benefits and responsibilities in IFRS implementation. References Ajzen, I. (1991). The theory of planned behavior. Organizational Behavior and Human Decision Processes, 50(2), 179-211. Al-Absy, M. S. M., & Ismail, K. N. I. K. (2019). Accountants perception on the factors affecting the adoption of international financial reporting standards in Yemen. International Journal of Financial Research, 10(4), 128-142. Albaskri, I. K. M. (2015). The perception of accountants on IFRS adoption: Evidence from Libya (Unpublished master's thesis). University Utara Malaysia, Malaysia. Bananuka, J., Kadaali, A. W., Mukyala, V., Muramuzi, B., & Namusobya, Z. (2019). Audit committee effectiveness, isomorphic forces, managerial attitude and adoption of international financial reporting standards. Journal of Accounting in Emerging Economies, 9(4), 502-526.
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