THE EFFECT OF ORGANIZATIONAL CULTURE ON THE SUCCESS OF INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS) ADOPTION PROJECTS: THE CASE OF PRIVATE COMPANIES IN ETHIOPIA

Abstract

The study has assessed the effect of organizational culture on the success of IFRS first time adoption projects in the case of privately owned companies in Ethiopia with the exception of financial institutions. Thus, the study examined the effect of clan, adhocracy, hierarchy and market oriented organizational cultures on the success of IFRS adoption projects. With regard to the methodology, mixed approach i.e., explanatory sequential research design has been used to investigate the study. In doing so, first, primary data has collected from 256 respondents of the structured questionnaires in the form of 5 scale Likert scale model, and then unstructured interviews were conducted with five purposefully selected respondents. With regard to the analysis, data that has collected through questionnaire was analyzed using descriptive and inferential statistics, and then data obtained through conducting in-depth interview has used to support the quantitative analysis results. Finally, with regard to the study results, the study found a moderate fit (R-squared = 0.488) between the four organizational cultures (market, clan, hierarchy, adhocracy) and IFRS adoption success. In addition, the study found that market culture (β = 0.677, p<0.05) and clan culture (β = 0.429, p<0.05) shows the strongest positive impact on IFRS adoption success in Ethiopian private companies. Conversely, strong adhocracy (β = -0.211, p<0.05) and hierarchy cultures (β = -0.171, p<0.05) were associated with lower success rates of IFRS first time adoption projects. The interviewee response also uncovered that besides the role of organizational culture, mandatory nature of IFRS adoption and competency of external IFRS consultants affect the success of IFRS adoption projects in Ethiopia.