Ali Mohammed Thijeel Post Graduate Institute for Accounting & Financial Studies, University of Baghdad, Iraq.
Email: asst.prof.ali@pgiafs.uobaghdad.edu.iq
Hakeem Hammood Flayyih Al-Fandawi Post Graduate Institute for Accounting & Financial Studies, University of Baghdad, Iraq.
Email: hakeem.hmood@coadec.uobaghdad.edu.iq
Ghazi Maan Faisal Post Graduate Institute for Accounting & Financial Studies, University of Baghdad, Iraq.
Email: ghazi.maan@uobaghdad.edu.iq

Abstract:

This research originated from the recognition that expected credit losses place substantial emphasis on Credit Rating (CR) when assessing loan loss provisions. This emphasis arises due to the pronounced influence of increased provisions in contrast to the relatively diminished effect on non-performing loans under the International Financial Reporting Standards (IFRS). Accordingly, the study sought to explore the mediating function of Corporate Governance Mechanisms (CGMs) in the relationship between IFRS implementation and the CR of Iraqi banks listed on the Iraq Stock Exchange. To achieve this objective, the research employed structural equation modelling to analyse the intermediary role of CGMs within the IFRS–CR nexus. The corporate governance framework was assessed using three specific mechanisms: Board Size (BS), female representation on the board (SEX), and the percentage of major shareholding (MSP). For the measurement of CR, the study adopted the CAMELS model as a proxy. The sample consisted of ten banks listed on the Iraq Stock Exchange over the period from 2013 to 2022. The study produced several notable findings. One key result indicated considerable variation in the degree of compliance with IFRS across Iraqi banks. Furthermore, it was established that both BS and MSP exert a significant influence on CR. However, the analysis revealed that the three selected CGMs did not serve as mediators in the relationship between IFRS and CR. Nonetheless, a marginal indication was observed suggesting that major shareholder ownership might exert some influence on the dynamic between IFRS application and CR. These findings have important policy implications for the agricultural finance sector, suggesting that improvements in the CR of rural banks could be achieved through the adoption of IFRS and the enhancement of banking governance structures. Such reforms may, in turn, facilitate greater access to credit for agricultural stakeholders.

Keywords:IFRS, Credit Rating, Corporate Governance, Agricultural Finance, Rural Banking, Agricultural Credit, Financial Reform, Iraq.