Institutional Factors Influencing the Implementation of the International Financial Reporting Standard (IFRS) 9 by Commercial Banks in Kenya

Abstract

The introduction of IFRS 9 requirements has presented challenges in terms of readiness, necessitating management to ensure that implementation initiatives are appropriately organized and conform to the prescribed schedule. To comply with IFRS 9 requirements, it is necessary to configure information systems to include the calculation of credit losses using payment projections, obtainable risk information, and probabilities of default. Therefore, this study examined the institutional factors influencing the implementation of the IFRS 9 by Commercial Banks in Kenya. The specific objectives were to determine the effect of staff competence, technology support systems, management support, and resource allocation on the implementation of the IFRS 9. The theories informing the study were institutional theory, economic network theory, and positive accounting theory. A descriptive research design was adopted. The research focused on a target population consisting of 39 commercial banks that are under the regulatory oversight of CBK as of the year 2022. The respondents for the study consisted of Risk Managers, Finance Managers, Credit Managers, and Internal Auditors. A total of 39 commercial banks were engaged to participate and a response rate of 82% was attained. Questionnaires were used for data collection. Descriptive and inferential statistics were used to analyze the data. The results of the regression analysis revealed that all the independent variables; staff competence, technological support systems, management support, and resource allocation had a positive and statistically significant relationship to the successful implementation of IFRS 9 by commercial banks. The study also found that there is a positive and strong correlation between the independent variables and the success in the implementation of the IFRS 9 among commercial banks. The study concludes that the successful implementation of IFRS 9 among commercial banks in Kenya relies on factors such as staff competence, technology support systems, management support, and strategic resource allocation. The study recommends that commercial banks in Kenya prioritize staff competence through training and consider hiring experienced professionals for IFRS 9 implementation. Emphasis should be placed on enhancing technological support systems and active engagement from senior management. Additionally, banks should develop strategic resource allocation plans to optimize IFRS 9 compliance efforts.