Development of accounting regulation in Jordan

The International Journal of Accounting 44 (2009) 163 – 186

Development of accounting regulation in Jordan☆ Mahmoud Al-Akra a , Muhammad Jahangir Ali b,⁎, Omar Marashdeh c,1 a

b

New England School of Business, Economics and Public Policy, University of New England Armidale, NSW 2351, Australia School of Accounting, La Trobe University, Bundoora, Vic 3086, Australia c 822 George St Sydney 2000, Australia

Abstract This study examines the development of accounting regulation in Jordan with emphasis on the dominant environmental factors that influence it. In order to have a better understanding of Jordan's present accounting practices, and its future development tendencies, we examine the path of accounting in Jordan since the early days of the nineteenth century, and analyze how Jordan's accounting environment — political, economic, legal and cultural — influenced the development of accounting in Jordan. We also examine Jordan's recent move towards full adoption of International Financial Reporting Standards (IFRS) and find that Jordan's colonial past has exerted a strong influence. In addition, we conclude that political and economic factors, through privatization and the resulting accounting reforms, contributed more to the development of accounting practices than other environmental factors. Privatization led to reforming Jordan's disclosure regulation and laying down of the corporate-governance policy framework. Our conclusions could be of interest to other countries, particularly developing countries, who want to improve the quality of their accounting disclosures and practices. © 2009 University of Illinois. All rights reserved. Keywords: Accounting regulation; International Financial Reporting Standards; Corporate governance; Accounting practices; Jordan

☆

We appreciated the helpful comments and suggestions of Balachandran Muniandy, Pratrick Hutchinson and Stephen Owusu-Ansah. Any remaining errors are ours. ⁎ Corresponding author. Fax: +61 3 9479 2356. E-mail addresses: [email protected] (M. Al-Akra), [email protected] (M. Jahangir Ali), [email protected] (O. Marashdeh). 1 Fax: +61 2 92819040. 0020-7063/$ - see front matter © 2009 University of Illinois. All rights reserved. doi:10.1016/j.intacc.2009.03.003

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1. Introduction Prior international accounting research analyzes and categorizes the reasons for accounting differences between countries (see Ali & Ahmed, 2007; Choi & Mueller, 1984; Doupnik & Salter, 1995; Da Costa, Bourgeois, & Larson, 1978; Frank, 1979; Gray, 1988; Mueller, 1967; Nobes, 1984; Nair & Frank, 1980; Nobes & Parker, 1995; Radebaugh, 1975). These authors identify several factors, such as political and economic influences, legal systems, taxation, culture, religion, international factors, business ownership and organization, and the educational system of a country, that seem to contribute to the differences in accounting systems (patterns). And, the conclusion of this research is that factors that influence a country's accounting patterns are unique to its specific environment. Previous international accounting research has focused on developed countries particularly Europe and northern America, while Jordan (and the Middle Eastern region) has been neglected despite recent changes in its economic and accounting regulatory environments. Understanding the environmental factors that helped shape Jordan's accounting practices and disclosures and documenting their impact takes on a particular importance at this time of change and growth. This paper, therefore, fills a gap in international accounting research. It explores key environmental factors and links them to the development of accounting regulation in Jordan. Further, it discusses the recent economic and accounting reforms in detail, with specific reference to privatization, which resulted from political and economic developments in Jordan. Privatization, in turn, led to significant accounting regulatory reforms which in turn produced the recent governance and disclosure regulations. Our study examines how these reforms influenced accounting practices in Jordan. The paper also discusses Jordan's adoption of International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) and the different factors that contributed to this step. It sheds light on the recent enforcement mechanisms and their effectiveness in improving mandatory disclosure compliance. The remainder of this paper is structured as follows. The next section provides background information about Jordan, followed by a historical overview of the development of accounting in Jordan (Section 3). Section 4 offers a discussion of the environmental factors influencing disclosure practices in Jordan. Section 5 presents recent development and the role of the International Financial Reporting Standards and Section 6 outlines the accounting standards due process in Jordan. The final section concludes the paper. 2. The Hashemite Kingdom of Jordan — a brief sketch A gateway to the Middle East, Jordan is situated in southwest Asia, at the meeting point of Asia, Africa, and Europe with a total area of 88,778 km2 (DOS, 2007). Jordan is bounded on the north by Syria, Iraq on the north east, Saudi Arabia on the east and south, and on the west by Israel. It has a very short coast line on the south west at the Gulf of Aqaba. Ancient civilizations settled around the Jordan River including the Assyrians, the Babylonians, Persians, Seleucids, and Nabataeans. The region became a Roman province around A.D. 100, but was later occupied by Arabs. An Islamic state was established in 622 B.C. Several Islamic states ruled Jordan and the surrounding region: the Ommiad, the Abbasid and the Ottoman Empires. At the end of World War I, the United Nations awarded Jordan (known as Transjordan at that time) and Palestine (now known as Israel, the West

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Bank, Gaza, and Jerusalem) to Britain. In 1922, Britain separated Jordan from Palestine, and on the 22nd of May 1946, the British mandate over Jordan ended (Sharar, 2007). After independence, British troops remained in Jordan for several years and the relations with Britain and the West continued. Jordan's proximity to Israel, a powerful enemy, has contributed to hard political and economic periods. But, recently, Jordan signed a treaty with Israel bringing about stability in the region. Jordan's population is half indigenous Bedouins who are employed mainly in the public sector. The other half is of Palestinian origin and they are largely involved in the private sector and economic activity (Beard & Al-Rai, 1999). The first population estimate of Transjordan in 1922 reported a population of a quarter of a million. In 1928, the population was estimated at 300,000 to 350,000. After World War II, population figures increased to 375,000–400,000. Table 1 shows that Jordan's population has been increasing at varying rates, peaking at certain periods with growth rates over 4% largely due to the continuous influx of Palestinian refugees (DOS, 2007). Since independence, Jordan's economy has been greatly affected by the Arab–Israeli conflicts. In addition, the scarcity of natural resources has resulted in Jordan's economy relying on three main sources: external aid largely, from oil-rich states; Jordanian remittances from Jordanians working in those states; and exports (Marashdeh, 1996) (see Table 2). Table 3 indicates an increase in GDP in the late 1970s to early 1980s followed by a downturn in the late 1980s largely due to the decrease in workers' remittances as shown in Table 2. With government encouragement, industry played an increasingly important part in Jordan's economy. About one-third of Jordan's rapid economic growth was due to the industrial sector. The industrial sector's share of GDP grew at an average rate of around 35% in the 1970s, and, that rate doubled in the last two decades. Despite this enormous growth, the services sector share was even higher than that of industry due to activity in the real estate market (Marashdeh, 1996). Agriculture plays a minor role in the economy. Jordan ranks sixth and seventh in the world in phosphate and potash production, respectively. Potash is the third highest export commodity and fifth-leading industry. Fertilizers (made from phosphate and potash) rank second among export commodities, while cement ranks fourth among industries. Like many developing countries, Jordan runs a trade deficit — with imports at least double exports as shown in Table 4. The high population growth, limited natural resources, and high debt levels hindered Jordan's development efforts and impeded the creation of a more technically sophisticated economy. Nevertheless, Jordan confronted these obstacles and executed an economic adjustment program which included privatization as a significant part (ASE, 2007). These economic changes brought with them the need to change Jordan's accounting systems to facilitate competing in the world market. Section 4 examines these issues in detail. 3. Historical overview of accounting regulation in Jordan 3.1. Prior to independence (1947) Accounting practice is not new to Jordan. Jordan and the surrounding region witnessed different accounting methods as different states occupied the region. Zaid (2004) contends that the establishment of the Islamic state led to the development of various accounting

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Table 1 Panel A: Jordan population growth rates (%) Year

Population (thousands)

Growth rate %

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2006 Source: Population Reference Bureau.

472 665 896 1106 1623 1937 2225 2706 3254 4304 4799 5544 5600

2.8 4.1 3.5 2.3 4.7 1.9 1.5 2.2 2.0 3.2 1.2 1.6 1.0

Panel B: Jordan population during 1950–2006

systems to suit the needs of Muslims in compliance with Islamic Share'ah. For instance, an accounting method known as the “Merdiban Method” was first adopted during the 8th century by the Abbasid Empire, and continued to be in use for 11 centuries until it was abandoned in the 19th century by the Ottoman Empire (Guvemli & Guvemli, 2007). Later, the Ottoman Empire replaced the method with double-entry bookkeeping. Commercial matters in Transjordan were dominated by the Ottoman Commercial Code enacted in 1849–1850. This code remained effective until it was replaced after

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Table 2 Sources of foreign exchange earnings (millions JD). Years

Exports

Workers' remittances

Foreign aid

1975–1979 1980–1984 1985–1989 1990–1994 1995–1999 2000–2004 2005– 2006

411.5 1179.9 1901.7 4166.0 6407.4 9875.1 6739.6

86.7 200.4 175.9 323.6 585.1 772.5 469.5

581.0 918.2 876.2 965.8 1351.5 3065.2 804.5

Source: Department of Statistics and the Central Bank of Jordan.

independence by the first Company Law, enacted in 1964, that was applied to both the East and West Banks of Jordan, and the first Commercial Law enacted in 1966 (Sharar, 2007). The following sections offer detailed accounts of these laws. Table 3 Gross domestic product at current market prices (millions JDs). Year

GDP

Growth %

1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

567.3 690.4 795.4 982.5 1164.8 1448.7 1649.9 1786.6 1909.7 1970.5 2240.5 2286.7 2349.5 2425.4 2760.9 2958.0 3610.5 3884.2 4358.1 4714.7 4912.2 5137.4 5609.9 5778.2 5998.6 6363.7 6794.0 7228.7 8081.3 9012.2 9997.4

3.0 2.2 1.5 2.4 1.9 2.4 1.4 8.3 6.9 3.1 13.7 2.1 2.7 3.2 13.8 7.1 22.1 7.6 12.2 8.2 4.2 4.6 9.2 3.0 3.7 6.1 6.5 6.3 11.8 11.5 10.9

Source: Department of Statistics, Jordan.

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Table 4 Foreign trade and balance of payment (annual average in millions of JDs). Year

Imports

Exports

Trade deficit

1970–1974 1975–1979 1980–1984 1985–1989 1990–1994 1995–1999 2000–2004 2005–2006

500.1 2076.2 5080.5 5092.7 10,563.4 13,871.2 19,450.5 13,880.6

110.1 411.6 1179.8 1901.6 4166 6407.4 9875.1 6739.6

− 385.7 − 1664.6 − 3900.7 − 3191.1 − 6397.4 − 7463.8 − 9575.4 − 7141.0

Source: The Central Bank of Jordan.

3.2. From independence until 1997 3.2.1. The 1964 Company Law The first Company Law was Law No. 12 enacted in 1964, administered by the Ministry of Industry and Trade (Naser, 1998; Naser & Al-Khatib, 2000). This law was loosely stated and very limited in scope (Rawashdeh, 2003). The Company Law was amended later and replaced by Law No. 1 of 1989. This Law required Jordanian companies to prepare an annual report with a profit and loss statement, a balance sheet, explanatory notes, and an auditor report.2 However, there was no set form or content for the information disclosed in the financial statements, except that they needed to be in accordance with Generally Accepted Accounting Principles (GAAP) although there was no specification of what constitutes GAAP (Abu-Nassar & Rutherford, 1996). 3.2.2. The 1966 Commercial Law The first Commercial Law was Trade Law No. 12 enacted in 1966 (Sharar, 2007). According to this law all companies are required to keep a general journal, inventory records, and a correspondence register. Again no specification was provided as to the form and content of the information disclosed in the accounts (Ott, Astin, Enoff, Berry, & Linares, 1997). It included four separate parts: trade and traders, commercial contracts, bills of exchange, and creditors and bankruptcy. Several supplementary laws were later enacted to facilitate the execution of Jordan's liberal economic policies. These were: the Encouragement of Investment Law 1972, the Registration of Foreign Companies Law 1975, and the Control of Foreign Business Activities Defence Regulations 1978 (Sharar, 2007). 3.2.3. The accounting profession The accounting profession was regulated by the Accounting Professional Council. The professional law to regulate entrance to the profession was enacted in 1961, allowing accountants that practiced the profession for two years to be licensed. This law was later amended in 1985 allowing an Audit Bureau to regulate the entrance examinations to the profession, the practice of the profession and the professional body (Solas, 1994). Accounting practice in Jordan was largely influenced by the educational background of practicing 2

The audit report must state that the company has complied with Company Law No. 1 of 1989.

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accountants, who received their accounting education in the United States, the United Kingdom, Egypt, Lebanon and Jordanian universities. In 1987, the Jordanian Association of Certified Public Accountants (JACPA) was brought into existence (under Law 42/1987) and became a member of IFAC in October 1992. However, the role of JACPA in accounting regulation was largely advisory and had no authority to issue accounting or auditing standards. 3.3. 1997 onwards Prior to 1997, there was no legally established accounting and auditing standard-setting body in Jordan, and the process of regulating accounting practice in Jordan was purely promulgated by the government (the Ministry of Industry and Trade) with a very minor role for the private sector, JACPA. No enforcement mechanism, particularly punitive, existed to ensure compliance with the disclosure requirements of the law. In addition, accounting practice in Jordan was limited to the deficient recording of transactions, satisfying only the formalities of the outdated law requirements with no set form or content for financial statements. Indeed, and similar to other developing countries, accounting regulation in Jordan suffered from many weaknesses. In 1997, the Jordanian government enacted the Company Law No. 22, and in 2002 the Securities Law No. 76 was enacted. Both laws mandated the use of IAS/IFRS by all Jordanian public shareholding companies. Section 5 provides a detailed explanation of these laws. 4. Environmental factors affecting accounting development in Jordan It has been argued that accounting is the product of its environment (Cooke & Wallace, 1990). Belkaoui (1983, p.207) notes that “the accounting objectives, standards, policies, and techniques result from the environmental factors in each country.” Therefore, this paper considers the influence of environmental factors on accounting development in Jordan, including political and economic influences, legal systems, taxation, culture, religion, international factors, business ownership and organization, and the education system of country. 4.1. Political and economic influences Jordan went through several political and military unrest periods (due to the continuing Arab–Israeli conflict) that deeply influenced Jordan's economy. The following sections illustrate these periods and how they influenced the economy and consequently the development of governance and disclosure regulations. 4.1.1. Independence–1980s In 1948, Israel declared its state on part of the West Bank. This resulted in the first wave of Palestinian migration, tripling the population of Jordan and causing critical economic and social problems. In 1967, Jordan was swept into the Arab–Israeli war which resulted in the loss of East Jerusalem and all the rest of the West Bank. Hundreds of thousands of Palestinians fled to Jordan in this second wave of migration, burdening the already encumbered country. Around 320,000 of these migrants went to work in oil-rich Arab countries (Marashdeh, 1996). In 1970–1971, a civil war erupted between Palestinian

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guerrillas forced out of the West Bank and the Jordanian Bedouin army, ending in the defeat of the Palestinians. The succession of political dilemmas led to the flow of foreign funds into Jordan. Table 5 shows the high dependency of the Jordanian government on external revenues compared to its domestically generated revenues in the 1970s. In the 1970s, Jordan, particularly Amman, the capital, witnessed an economic boom. This was mainly due to the liberalization of foreign investment regulations, with the enactment of the Encouragement of Investment Law 1972, the Registration of Foreign Companies Law 1975, and the Control of Foreign Business Activities Defense Regulations 1978, encouraging many foreign companies to locate their headquarters in Amman. Moreover, due to the civil war in Lebanon in the 1970s, Jordan took Lebanon's place as the financial center of the Middle East, as many companies and businesses shifted to Jordan. This prompted the Central Bank of Jordan to establish the Amman Financial Market in 1978 and license seven new banks and two financial intermediaries to serve the arrivals (Marashdeh, 1996). 4.1.2. The Jordanian capital market The Amman Financial Market (AFM) came into existence in 1978 after extensive studies were carried out in 1975 and 1976 by the Central Bank of Jordan in cooperation with the World Bank's International Finance Corporation (IFC). Originally 57 companies were listed on the AFM, rising to 120 companies in 1988 (Abu-Nassar & Rutherford, 1996). By 2007, 245 public shareholding companies were registered with the Jordan Securities Commission (ROSC, 2005). Table 6 provides key statistics for the Amman Stock Exchange. Listed Jordanian companies must adhere to the requirements of Amman Financial Market (AFM). Article 17 of Amman Financial Market (AFM) Law No. 31 (1976) required listed companies to publicly disclose their performance and any material developments in their affairs that might affect stock prices (Naser, 1998; Naser & Al-Khatib, 2000). However, the AFM did not issue any requirements pertaining to the form and content of the companies' accounts (AbuNassar & Rutherford, 1996; Rawashdeh, 2003). Also, the AFM required companies to prepare audited annual accounts in accordance with Company Law No. 12 of 1964. 4.1.3. 1980–early 1990s In the early 1980s, real GNP increased (as shown in Table 3), aided by the increase of the size of Arab aid to Jordan, due to the rise in the production and prices of oil in the oil-rich countries (Marashdeh, 1996). This growth slowed in the second half of the 1980s, mainly Table 5 The share of external and internal revenues in total government revenues (millions JD). Year

Domestic revenues

External aid

1970–74 1975–79 1980–84 1985–89 1990–94 1995–99 2000–2004 2005–2006

261.8 768.4 1831.6 3015.4 5334.6 7186.1 8717.6 5726.3

265.2 803.9 1330.5 1543.2 1500.4 1351.5 3065.7 804.5

Source: The Central Bank of Jordan.

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Table 6 Key statistics of Amman Stock Exchange (ASE). Year

Number of listed companies

Market capitalization (JD millions)

Listed capital (JD millions)

General weighted price index (point)

Value traded (JD millions)

Value traded as a % of MCAP (%)

1978 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006

57 71 104 105 97 163 161 158 161 192 201 227

286.12 495.53 926.91 1293.21 3495.44 3509.64 4476.7 5029.0 7772.8 13,033.8 26,667.1 21,078.2

242.1 373 532.8 1080.1 2076.9 3454.1 3735.8 4188.7 4468.6 5465.2 7348.7 10,095.3

58.6 75.7 78.6 80.4 159.2 133.1 172.7 170 261.5 424.6 819.2 551.8

5.6 41.4 66.7 268.9 418.0 334.7 668.6 950.3 1855.2 3793.3 16,871.1 14,209.9

2 8 7 21 12 10 15 19 24 29 63 67

Source: Amman Stock Exchange.

due to the reduction of aid from oil-rich Arab countries. This led to a recession, followed by an economic collapse in 1988–1989. In 1990, with the breakout of the Gulf War, Jordan was further burdened by the return of most of the Jordanians working in the oil states, the loss of a lucrative export market, and the loss of the cheap Iraqi oil supply. Jordan also suffered due to its support of the Iraqi regime, which upset the U.S. government and led to termination of Western aid. Jordan's economy reached its worst point — unemployment rose to 30–35%, inflation was high, and about 25–30% of the population fell below the poverty line (Table 7 provides a summary of the financial impact of the Gulf Crisis). 4.1.4. The 1990s and privatization Unable to repay its commitments after the Gulf War, Jordan reached agreement with the IMF to pursue an economic reform program in exchange for bridge financing. In 1994, Jordan signed a peace treaty with its Israeli neighbor. In 1998, Jordan concluded an agreement with Israel and the United States establishing the Qualifying Industrial Zones (QIZs), and in 2000, Jordan joined the World Trade Organization (WTO), resulting in an improvement in its relations with the U.S. and with the oil states. The Jordanian government negotiated another structural-adjustment program with the IMF which called for a number of economic reforms that would create a more open, market-oriented economy (EPC, 2007). Among the economic measures adopted by Jordan were privatization, the liberation of trade policies, and abolishing price regulations (EPC, 2007). Privatization commenced in 1996 with the help and encouragement of international organizations such as the World Bank Group, USAID (the U.S. Agency for International Development), and other development partners. Privatization led the Jordanian government to relinquish shares in 50 major corporations such as Jordan Telecommunication, the national airlines, and the Royal Jordanian, which increased the market capitalization of the Amman Stock Exchange to over $7 billion in 2002 and to $11.3 billion in 2004. At present, the government has a

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Table 7 Financial impact of the Gulf Crisis on the Jordanian economy (estimated loss in millions of JDs).

Exports to Iraq and Kuwait (loss) Exports to other countries (loss) Remittances from Jordanians working in Kuwait (loss) Increase in import bill Increase in transportation and insurance premiums Loss in transit business Emergency relief for evacuees Loss in tourism income Loss in budget support from Arab countries Loss of repayment of Iraqi's debt Total Unemployment (%) Inflation (%) GDP growth (%) Poverty (%) Real GDP Growth (%)

Aug–Dec, 1990

1991

1992

16.8 90.0 41.7 206.6 98.8 69.5 15.0 63.9 97.4 112.7 812.4 16.8 21.6 1.7 22.0 − 8.0

97.8 213.3 103.2 495.8 85.1 166.7 – 187.7 261.7 112.7 1724.4 18.82 12.7 1.8 33.0 − 7.3

112.4 224.0 166.3 503.5 81.6 160.0 – 89.3 261.7 112.7 1711.5 15.1 6.7 11.3 27.9 4.6

Source: Marashdeh (1996).

share in major infrastructure companies such as Arab Potash, Jordan Phosphate Mines, and Jordan Petroleum Refinery. Table 8 shows the major completed transactions yielding sizable revenues and leading to considerable investments by the private sector both domestic and foreign (EPC, 2007). Privatization proceeds amounted to around US $1271 million. The program has successfully attracted over US$850 million in investments (EPC, 2007). To pave the way for privatization and ensure its success, Jordan revamped its governance systems and corporate disclosure rules through the enactment of the 1997 Company Law and the 2002 Securities Law. These laws laid down the corporategovernance framework and focused on the adoption and enforcement of the International Accounting Standards/International Financial reporting Standards (ASE, 2007). Further, in 1997 the Temporary Securities Law was enacted to develop the capital market by setting up three new institutions to replace the old Amman Financial Market (AFM), namely: the Jordan Securities Commission (JSC), the Amman Stock Exchange (ASE) and the Securities Depository Commission (SDC). These three institutions are responsible for setting and enforcing accounting regulations, protecting investors, and ultimately promoting an investment culture in Jordan (see Fig. 1 and Table 9). 4.2. Legal systems The legal system of a country has been identified as an important influence on accounting systems. Countries have been classified with respect to their legal systems into common law or code law (Salter & Doupnik, 1992). Common-law countries are characterized by their ability to resolve their disputes through judges and precedents from judicial decisions to shape their laws. They formulate their own regulations, and standard setting is largely carried out by the private sector. They are oriented towards more transparent markets (Archambault &

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Table 8 Major completed privatization transactions in Jordan. Company name

Privatization procedure

Buyer/tenet/operator

Proceeds (USD millions)

Date

Jordan Cement Factories Company/JCFC

Partial sale of 33% Block sale of 14.3%

102 10

Total of 112

1998 2000

Jordan Telecommunications

Sale of 40%

Lafarge Social Security Corporation Consortium: France Telecom/Arab Bank Social Security Corporation Provident fund of the JIC Local and regional investors Three local investors Lema/French-Local joint venture French Accor and a local investor Spanish Aldeasa Company British Alpha Company

508

Total of 708.2

2000

Sale of 8% Sale of 1% 10.5% IPO Public Transport

Franchising

Greater Amman Water

Four year management contract 30 year lease and investment Sale for 12 years

Ma'in Spa Complex Airports Duty Free Shops Jordan Flight Catering Ltd

80% Sale of shares

Royal Jordanian Air Academy Arab Potash Company Assamra Water Treatment Plant Aqaba Port/Container Terminal

Total sale

Local investors

26% of shares sold BOT

Canadian PCS American–French consortium Danish AP Moller Finance SA

Management contract

114

2000 2000

86.2

2002

Annual fee: 0.7 in total Annual fee: 2.2

1999 1999

–

1999

60.1, annual 0.5 and 8% of gross sales 20.02 annual payment of 8% of annual sales 5.8

2000

2003

173 –

2003 2002

–

2004

2001

43 companies were sold through JIC with total proceeds of $152 through the years 1997–2003. Source: The Executive Privatization Commission EPC (2007).

Archambault, 2003), and investor protection in these countries is stronger, hence, their capital markets are the dominant source of financing. In contrast, code-law countries rely heavily on legal scholars to ascertain and formulate their rules, their capital markets are smaller, and financing is largely through banks (La Porta, Lopez-De-Silanes, Shleifer, & Vishny, 1997; La Porta, Lopez-De-Silanes, Shleifer, & Vishny, 1998). Megginson and Netter (2001) contend that the legal system is also an essential corporate-governance mechanism that influences the impact of privatization. They argue that privatization is a major change in the governance structure of a firm in terms of changes in ownership structure. Boutchkova and Megginson (2000) conclude that the number of shareholders in privatized companies is significantly higher than that in nonprivatized companies. Thus, the protection of these investors becomes crucial to the privatizing country in terms of gaining the confidence of investors and maintaining the reputation of its capital market.

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Fig. 1. Jordan privatization program.

Jordan is classified as a code-law country. Company financing has largely been through banks, basic shareholder rights to participate and vote at the Annual General Meeting were weak, and secure ownership registration was nonexistent. Nonetheless, Jordan's recent economic reforms, resulting in privatization, forced the Jordanian government to lay down a framework for corporate governance. Incorporated in the 1997 Company Law and the 2002 Securities Law its framework focuses on the protection of the rights of shareholders, equitable treatment of shareholders and their role in corporate governance, and the board of directors' responsibilities. Further, the enactment of these laws called for the adoption and enforcement of IAS/IFRS, enhancing the disclosure quality of Jordanian listed firms. The Amman Stock Exchange has thus become one of the largest equity markets in the region, legal investor protection in the country has improved significantly, companies show a strong preference for equity financing, and the quality of corporate disclosure has significantly improved (ROSC, 2005). Empirical studies have provided evidence in support of this argument. For instance, La Porta et al. (1998) examine the legal rules pertaining to investor protection and the quality of these rules for 49 countries, including Jordan, and report that the quality of the judicial system in Jordan is efficient. Further, Booth, Aivazian, DemirgucKunt, and Maksimovic (2001) observe that Jordanian listed companies have increased their reliance on equity to finance their business activities. Finally, Booth et al. (2001) and Aivazian, Booth and Cleary (2003) conclude that the quality of accounting standards in Jordan is adequate. 4.3. Taxation Taxation can have a strong impact on accounting practice. Countries have national tax systems that define how business operates and, consequently, the accounting practices.

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Table 9 Recent accounting regulatory reforms and responsible government agencies. Law

Governmental agency

Major requirements (particularly in relation to company accounts)

Company Law 1997

Ministry of Industry and Trade All public Shareholding accounts kept in accordance with (The Company Controller) the International Accounting and Auditing Standards All annual reports must be audited by an external auditor. The auditor report must address the following at the annual general meeting: data and explanations for satisfactory fulfillment of duties must be obtained; maintaining satisfactory accounting records; company financial statements (balance sheet, income statement, cash flow statement) are prepared according to IAS and ISA; audit procedures have been sufficiently followed; financial statements that are included in the Board of Director's report addressed at the General Assembly, comply with the company's records; and all legal requirements have been reflected in the accounts Listed companies are required to form audit committees comprising three nonexecutive directors Shareholders rights respected and improved investor protection. Temporary Securities Prime Ministry Setting up three new institutions to replace AFM, Law 1997 namely: Jordan Securities Commission (JSC), Amman Stock Exchange (ASE) and the Securities Depository Centre (SDC). The separation of the supervisory and legislative role from the executive role of the capital market. Supervisory and legislative role entrusted to JSC. Executive role left to the private sector, ASE and SDC. Securities Law 2002 Jordan Securities Commission Allowed forming an independent investor protection fund Imposed stricter ethical and professional codes A more stringent observance of the rule of law Strengthened the powers of JSC, ASE and SDC Listed companies must publish the following periodic reports 1. An annual report, including financial statements certified by an auditor, within 90 days of the end of its fiscal year; 2. A semi-annual report within 30 days of the end of its bi-annual fiscal year; 3. A preliminary report about its activities submitted after a preliminary audit within a maximum period 45 days from the end of the fiscal year; 4. A report pertaining to the election of the board of directors or the executive board or any change in the composition or identity of any members.

In some countries, accounting is practiced largely for tax purposes; hence, there is no difference between tax accounting and financial accounting and the tax accounts are the same as the commercial accounts (e.g., Germany). In other countries, tax rules are

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separate from commercial rules, and the annual accounts are published as performance indicators for investment decisions (e.g., the United States, the United Kingdom and the Netherlands). Jordanian firms are required to file a copy of their audited annual reports with the tax department in accordance with Corporate Income Tax Law No. 57 of 1985 and its amendments in 1989, 1992, 1995, and 2002. Moreover, the tax law requires that all deductions claimed for tax purposes must correspond to sums appearing in the annual reports and that Jordanian listed firms must only use the straight-line method to calculate depreciation rates (Abu-Nassar & Rutherford, 1996). Also, the Jordanian government's high reliance on taxes as an internal source of revenues has largely influenced the accounting practices of Jordanian firms, resulting in several incidents of accounting manipulation and departures from established accounting and auditing procedures (ROSC, 2004). Hence, “a culture shift is required to reduce the influence of tax accounting on general purpose financial statements” (ROSC, 2004, p. 1). 4.4. Cultural influence Culture is recognized as a significant dimension in the study of international accounting research (Choi and Mueller, 1984; Gray, 1988; Nobes, 1984). Hofstede (1980) and Gray (1988) offer a theoretical cultural model, which is empirically tested utilizing data from different countries. However, no consensus is reached regarding the influence of culture on accounting. Nobes (1998) contends that the influence of culture on financial reporting seems to be vague compared to the influence of other external factors such as legal systems or the equity market. Jordan's culture has been largely rooted in Islamic values since the establishment of the Islamic state during the 7th century. Further, Jordan is a collective society as encouraged by Islam, indicating the preference for a tightly knit social framework which encourages secrecy. Additionally, Jordan's tribal legacy has resulted in its inclination towards lack of transparency with disclosure requirements (Beard & Al-Rai, 1999). Because Jordan was a British colony for the first half of the 20th century and British troops remained in Jordan during the 1950s, strong trading relations continued to exist between Jordan and Britain and other Western countries. This facilitated the transfer of western accounting practices to the Jordanian business environment and consequently led to the adoption of IAS/IFRS, which mirrors Western accounting. 4.5. Religion Religion is a cultural input, a question of faith that plays a very vital role in certain economies. Islam has a major impact on how Muslims do business and hence on the accounting systems chosen. Western accounting practices are perceived to be incompatible with Islamic values because they draw on assumptions that conflict with Islam. Clarke, Craig, and Hamid (1996) contend that there are conflicts between IAS/ IFRS and Islamic principles: e.g., deferred tax accounting, goodwill accounting, and expense capitalization. Another major difference between Islamic and Western traditions is in the prohibition of interest. However, Islam encourages transparency in

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all activities including accounting and prohibits the hiding of information from shareholders or regulators. As such, we do not see much difference between the current systems, requiring full disclosure, and the Islamic point of view requiring full transparency. Islam is recognized as the Jordanian state religion and it has a very significant influence on business dealings and determining sources of finance. In Jordan, as well as other Muslim countries (i.e., Pakistan and Saudi Arabia), efforts have been made to develop Islamic accounting. The influence of Islam on accounting practice in Jordan led to the establishment of two Islamic banks and an Islamic insurance company that were successful in attracting Muslim Jordanians due to their adherence to Islamic values prohibiting interest on loans. However, and despite the differences between Western and Islamic accounting, Jordanian listed firms responded to the 1997 Company Law and the 2002 Securities Law requirements in applying IAS/IFRS. 4.6. Business ownership and organization Ownership in the Amman Stock Exchange is less highly concentrated than in many emerging markets with an average free float of 40% (ROSC, 2005). Family ownership is typical, with the average control position for the top 48 listed companies being about 30% of shares; around 70 firms are supermajority owned. In addition, the Jordanian government had substantial equity holdings in major listed companies prior to privatization. Given this ownership structure, the demand for public disclosure is generally low (Adhikari & Tondkar, 1992). Having embarked on its privatization program in 1996 the Jordanian government reduced its ownership to less than 6% by 2003. Boutchkova and Megginson (2000) contend that privatization dramatically increases the number of shareholders in privatizing countries. Wider ownership produces more transparent disclosure practices (Chau & Gray, 2002). Thus, it expected that the significant changes in ownership structure brought about by the Jordanian privatization program would increase the need for public disclosure. 4.7. The education system The quality of accounting education plays an important role in the development of the accounting profession. It is noted that the quality of public university teaching in accounting and auditing suffers from a lack of modern curricula and too few teachers (ROSC, 2004). Undergraduate-level accounting and auditing courses focus on elementary topics and not include IAS/IFRS. The quality of accounting education is relatively better at the post-graduate level because the curriculum includes IAS/IFRS and encourages empirical research (ROSC, 2004). Further, the Jordanian Association of Certified Public Accountants (JACPA) does not require its members to undertake regular training under any continuing professional-education scheme as required by IFAC pronouncements (ROSC, 2004). Thus, the quality of university and college curricula in the fields of accounting and auditing needs to be improved by

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establishing guidelines consistent with recent IFAC-issued International Education Standards.

4.8. International factors Pressure to change international accounting practices is getting stronger due to the international pressures of globalization and the integration of capital markets, the greater mobility of monetary and actual goods, and the development of new technologies. Jordan has been under pressure to converge towards a global benchmark, IAS, exerted by several international institutions including the International Accounting Standards Board (IASB), the International Federation of Accountants (IFAC), the International Organization of Securities Commissions (IOSCO), the World Bank, and the International Monetary Fund (IMF). Further, Jordan concluded an agreement with the EC which compelled Jordanian listed companies to adopt IAS/IFRS. Colonization is another strong force that facilitates a shift in a country's accounting culture. Jordan was at one time part of the British Empire. After independence, Jordan remained a monarchy ruled by the family appointed by the British during their rule of Jordan. These associations made the transfer of the British model in regard to the training of accountants and the organization of the profession seem natural (Sale, Salter, & Sharp, 2007). The accounting system in Jordan has been significantly influenced by British accounting and recently, with the adoption of IAS/IFRS, which mirrors British accounting standards, this influence has become greater.

5. Recent developments and the role of International Financial Reporting Standards in Jordan Prior to 1997, Jordanian accounting standards lacked any itemization or guidelines for measurement and disclosure. The disclosure practice in Jordan was dictated by the 1964 Companies' Act (amended in 1989) and the Commerce Code of 1966. Income Tax Laws and the Amman Financial Market required Jordanian firms to prepare annual reports in accordance with Generally Accepted Accounting Principles (GAAP) but did not provide an interpretation of what constitutes GAAP (Naser, 1998).

5.1. The recent accounting regulatory reforms In 1987, the Jordanian Association of Certified Public Accountants (JACPA) was brought into existence and in 1989 JACPA recommended that Jordanian companies adopt International Accounting Standards, effective January 1990. In 1996, Jordan embarked on its privatization program. To pave the way for privatization and ensure its success, Jordan revamped its corporate disclosure rules through the enactment of the 1997 Company Law, the 1997 Temporary Securities Law, and the 2002 Securities Law (ASE, 2007) mandating the adoption of the full version of IAS/IFRS.

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Table 10 Status of adoption of International Accounting Standards in Jordan. Standard number

Name

Date of adoption

IAS 1 IAS 2 IAS 4 IAS 5 IAS 7 IAS 8 IAS 9 IAS 10 IAS 11 IAS 12 IAS 13 IAS 14 IAS 15 IAS 16 IAS 17 IAS 18 IAS 19 IAS 20 IAS 21 IAS 22 IAS23 IAS 24 IAS25 IAS 26 IAS27 IAS 28 IAS 30 IAS 31 IAS 32 IAS 33 IAS 34 IAS 35 IAS 36 IAS 37 IAS 38 IAS 39 IAS 40 IFRS 2 IFRS 3 IFRS 4 IFRS 5

Disclosure of accounting policies Inventories Depreciation accounting Information to be disclosed in financial statements Cash flow statements Net profit or loss for the period, fundamental errors and changes in accounting policies Research and development costs Contingencies and events occurring after the balance sheet date Construction contracts Accounting for taxes on income Presentation of current assets and current liabilities Reporting financial information by segment Information reflecting the effects of changing prices Property, plant and equipment Accounting for leases Revenue Retirement benefit costs Accounting for government grants and disclosure of government assistance The effects of change in foreign exchange rates Business combinations Borrowing costs Related party disclosures Accounting for investments Accounting and reporting by retirement benefit plans Consolidated financial statements and accounting for investments in subsidiaries Accounting for investments in associates Disclosures in the financial statements of banks and similar financial institutions Financial reporting of interests in joint ventures Financial instruments: disclosure and presentation Earnings per share Interim financial reporting Discontinuing operations Impairment of assets Provisions, contingent liabilities and contingent assets Intangible assets Financial instruments: recognition and measurement Investment property Share-based payment Business combinations Insurance contracts Non-current assets held for sale and discontinued operations

1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 1997 2002 2002 2002 2002 2002 2002 2002 2002 2004 2004 2004 2004

5.1.1. 1997 Company Law No. 22 Article 184/Chapter 10 of this law required that public shareholding companies should prepare their accounts in accordance with International Accounting and Auditing Standards. Jordan adopted the full version without amendments, which is a

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common practice among developing countries (Hove 1986). Hence, extant IASs were applicable as stipulated by the Company Law (see Table 10). 5.1.2. The 1997 Temporary Securities Law No.23 The enactment of the 1997 Temporary Securities Law No.23, aimed at restructuring and regulating the Jordanian capital market in conformity with IAS in order to secure transparency, safe trading in securities, and promoting investors' confidence in the Jordanian capital market (ASE, 2007). The Law provided for setting up three new institutions to replace the AFM, namely: Jordan Securities Commission (JSC), the Amman Stock Exchange (ASE) and the Securities Depository Centre (SDC). As the regulator of the capital market, the Jordan Securities Commission is responsible for setting and enforcing regulations, protecting investors and ultimately restoring investor's confidence in the capital market in Jordan (JSC, 2007). The Amman Stock Exchange is in charge of many functions, the most important of which are listing enterprises on the Exchange, monitoring and regulating market trading in coordination with the JSC (such that rules and regulations are enforced and compliance is achieved), attaining a fair market, investor protection, ensuring the provision of timely and accurate information of issuers to the market, and disseminating market information to the public. The Securities Depository Centre (SDC) is responsible for safe custody of securities ownership, registering and transferring ownership of securities, and settling prices among brokers (ASE, 2007). 5.1.3. The 2002 Securities Law No. 76 Securities Law No. 76 of the year 2002 required all entities to fully comply with the IFRS requirements in the preparation of their annual report, and to file annual audited reports at the JSC (see Table 10). Further, an amendment to the Securities Law in 2004, Article 14, asserted on the adoption of IFRS by all Jordanian firms subject to JSC monitoring. 5.1.4. The code of corporate governance The 1997 Company Law introduced the first provisions of the governance-policy framework to focus on the protection of the rights of shareholders, equitable treatment of shareholders and their role in corporate governance, and the board of directors' responsibilities. Further, the 1997 Company Law required listed companies to form audit committees comprised of three non-executive directors. However, the responsibilities of the audit committee, particularly with respect to compliance with the requirements of the JSC, were not laid down until the enactment of the 2002 Securities Law. According to this law, listed entities must form audit committees of three non-executive directors that must meet at least four times a year to examine and discuss the company's internal control mechanisms including the work of both external and internal auditors and to monitor compliance with the requirements of the Securities Law (ROSC, 2004). 5.1.5. The 2003 Accounting Profession Law Recently, and as part of its privatization program, the Jordanian government introduced and enforced the use of the IAS/IFRS. An important step towards Jordan's commitment to this adoption was a new Accountancy Profession Law, issued in 2003, that led to the establishment of a “High Council for Accounting and Auditing” in 2004, headed by the

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Minister of Industry and Trade, and the creation of an improved Jordanian Association of Certified Public Accountants (JACPA) (ROSC, 2004). Previously, JACPA had been attached to the Public Auditing Profession Board; the Accountancy Profession Law gives new powers to JACPA, such as responsibility to draft its own bylaws, disciplinary authority over its own members, and the right to inspect its members' working papers. JACPA's board of directors consists of eight members in addition to the president and is financially and administratively independent (ROSC, 2004). JACPA played an important role in facilitating the adoption of IAS/IFRS, providing interpretation of the IAS/IFRS and calling for early adoption. 5.2. Accounting standards enforcement and compliance Accounting standards and the mechanism used to implement and enforce them are complementary components of an accounting regulatory environment (Benston, Bromwich, Litan, & Wagenhofer, 2003). Enforcement could be achieved using a combination of preventive (ex ante) and punitive measures (Wulandari & Rahman, 2004). In Jordan, the enforcement of financial disclosure rules, particularly punitive measures, is largely the responsibility of governmental agencies. However, the recent regulatory reforms have empowered certain private-sector regulatory institutions. Table 11 provides a summary of the recent enforcement measures utilized in Jordan, preventive and punitive. As the table indicates, the 1997 Company Law and the 2002 Securities Law introduced several preventive and punitive enforcement measures. They required that annual reports be audited by external auditors. While audited annual reports were a requirement by the old Company Law, the JSC required financial statements to be audited in accordance with the International Standards on Auditing (ISA). Further, the 1997 Company Law mandated the formation of audit committees. Also, the 1997 Company Law gave authority to the company controller (the Ministry of Industry and Trade) to dissolve a company's board or Table 11 Enforcement measures adopted by Jordanian authorities. Type of measure Preventive Licensing of auditors Audits by external auditors Audit committees requirements Review of audited accounts

Punitive Dissolve or revoke company boards Imposing fines on companies Suspension or delisting from trading in the ASE

Party imposing the measure The Jordanian Association of Certified Public Accountants (JACPA) Ministry of Industry and Trade by the Company Controller (CL 1997), and the Jordanian Securities Commission (JSC) (SL 2002) Ministry of Industry and Trade by the Company Controller (CL 1997), and the Jordanian Securities Commission JSC (2002) Ministry of Industry and Trade by Company Controller (CL 1997), and the Jordanian Securities Commission JSC (SL 2002)

Ministry of Industry and Trade by the Company Controller (CL 1997) The Jordanian Securities Commission JSC (SL 2002) The Jordanian Securities Commission JSC (SL 2002)

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revoke its registration. Further amendments to the 1997 Company Law gave the controller more powers, such as issuing fines (ROSC, 2005). The 2002 Securities Law spelled out the responsibilities of the audit committees including the examination of periodic financial reports (ROSC, 2005). The review of the quality of disclosure of the annual reports is the responsibility of the JSC staff. Their review, however, is not comprehensive (ROSC, 2005). Further, JSC was empowered by the 2002 Securities Law, particularly articles 17–24, to issue fines, suspend trading, or delist issuers. It also has the right to conduct any investigation, inspection, or auditing to determine if any person has violated any of the provisions of the Securities Law or the JSC regulations and to summon witnesses to testify under oath (ASE, 2007). In 2003, JSC imposed 356 enforcement actions mostly for lack of proper disclosure (ROSC, 2005). After discovering instances of noncompliance, JSC sent letters to errant companies and auditors asking them to correct their accounts. A report on the observance of standards and codes in Jordan by the joint World Bank– IMF (ROSC, 2005) stated that “compliance with filing and disclosure standards is generally good. About 40% of listed companies make a high-quality disclosure” (ROSC, 2005, p.11). Jordan is continuing its efforts to improve levels of compliance with accounting standards by drafting new related regulations. For instance, a new regulation has increased ASE powers to make financial analyses, on a yearly basis, based on the financial statements it received from companies. From this information it can categorize companies in three different markets according to certain criteria based on profitability, capital, and some other factors. Further, the ASE is given the power to delist a company, to downgrade a listing in the market, and to impose penalties in cases of noncompliance. 6. Accounting standards due process Jordan adopted the full version of the IAS/IFRS without any modifications (incorporated in the 1997 Company Law and the 2002 Securities Law promulgated by the Department of the Company Controller at the Ministry of Industry and Trade and Jordan Securities Commission, respectively). The Tax Department has also exercised strong influences on accounting practice by requiring companies to adopt the same accounting policies for financial-reporting purposes and tax purposes. Therefore, the opinion of the tax authorities is always considered before financial accounting standards are approved. Accounting standards due process aims at setting and accepting accounting standards by exposing proposed legislation to the comments and consultation of the government and the private sectors (Diga, 1996). In Jordan, accounting due process starts with the preparation of a draft of the proposed legislation by the governmental department concerned (i.e., the Company Controller Department at the Ministry of Industry and Trade, Jordan Securities Commission). The department begins by holding informal meetings between the department's government officials and various stakeholders, particularly those affected by the legislation. In preparing the draft, the department officials are assisted by experts drawn from former government officials or from consultants in the private sector, both domestic and foreign. The drafting process is thoughtful and meticulous. Several consulting firms are hired to study the problem. The aim is to produce several alternative recommendations for decision

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makers to consider. These studies also compare the situation in Jordan with that in other comparable countries, thus providing a benchmark against which to measure the analyses. A preliminary draft is then presented to the ministry's secretary general, who handles the technical issues of the draft. This step is followed by general, consultative meetings within the ministry involving other departments that did not participate in the drafting process. These meetings are expected to produce comments or reservations that can be taken into consideration by the concerned department. After alternations, the final draft is presented to the minister concerned. After approval by the minister, the draft is submitted to the Council of Ministers, and the Cabinet. After acceptance by the Cabinet, the draft is sent to the Bureau of Legislation in the Prime Ministry. The Bureau is composed of a panel of legal counsels and senior officials with experience in legal formulations who put the draft of the legislation into a legal format that does not conflict with other existing laws or regulations. After approval by the Bureau, the draft is referred to the Development Committee, a subcommittee of the Cabinet which deals with economic, fiscal and financial matters, for final approval. Once the Development Committee approves the draft, approval by the Cabinet is almost automatic (Kanaan, 2005). The final text of the proposed law is then referred to the Parliament for deliberation and ratification. Finally, the approved law is submitted to the King for endorsement, after which the law is published in the official gazette and its observance becomes mandatory.

7. Conclusion This paper examines the environmental factors that influenced accounting development in Jordan. We also investigate the origins and development of accounting in Jordan since the early days of the nineteenth century, and trace the development of accounting in Jordan through three time periods: prior to independence (1947), from independence until 1997, and from 1997 onwards. We find that while accounting was practiced in the region as early as the Islamic state in the 8th century, the first accounting regulations in Jordan go back to the 1960s and were very limited in scope. We also observe that political and economic factors which led to privatization had an influential impact on Jordan's accounting disclosure and practices. Privatization, in turn, has influenced accounting significantly by introducing governance and disclosure regulatory reforms in 1997 and 2002. Our study also indicates that privatization has significantly influenced Jordan's legal system, prompting the government to improve legal investor protection and enact the new disclosure regulations which significantly improve its disclosure quality. By so doing, Jordan is starting to show some properties of common-law countries. We also examine other environmental factors such as taxation, culture, religion, colonization, business ownership and organization, and the educational system. We find that the influence of colonization is more critical to explaining Jordan's accounting practices than the influence of culture and religion. The study also demonstrates that business ownership has been significantly influenced by privatization. Relinquishing state ownership to a wider group of private owners has increased the need for public disclosure.

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However, taxation, and accounting and auditing education in Jordan might act as a deterrent to the successful implementation of IAS/IFRS. Our study examines in detail Jordan's adoption of IAS/IFRS. We discuss the factors that led to this adoption and the requirements of the recent accounting regulatory reforms that resulted from privatization which triggered enhanced enforcement mechanisms. These include the 1997 Company Law and the 2002 Securities Law, which focused on the adoption of the IAS/IFRS and introduced the governance-policy framework. In addition, the 1997 Temporary Securities Law was enacted to restructure the capital market. This led to the establishment of three institutions to replace the old Amman Financial Market (AFM); the JSC, ASE and JDC. These reforms led to improved disclosure quality. This paper makes several contributions to accounting research, regulation and practice. It fills a gap in accounting research by examining the accounting environment of Jordan, a developing country, which has been neglected in the past. It also makes clear how important it is to study environmental factors in order to understand country's present accounting practices, and to predict their future accounting systems. The study also highlights the efforts of international bodies, particularly the IASB, in compelling countries, including Jordan, to adopt the IAS/IFRS. Further, it provides information about the accounting regulatory reforms that Jordan undertook, particularly with the adoption of IAS/IFRS, which encourages foreign and domestic investors to invest the Amman Stock Exchange. As the paper shows, Jordan's reforms are taking it in the right direction; however, more needs to be done to improve monitoring the quality of financial statements of listed firms and to provide more powers to the Higher Auditing Commission to enforce high auditing standards. The outcome of this study is expected to help other governments, particularly developing ones, make informed decisions when considering changes in their economic and regulatory policies that could promote their countries' investment environments. Future research could examine the Jordanian governance framework in more detail since the Jordanian government has already revamped its governance framework as stipulated in the 1997 Company Law, the 1997 Temporary Securities Law, and the 2002 Securities Law. References Abu-Nassar, M., & Rutherford, B. (1996). External users of financial reports in less developed countries: The case of Jordan. British Accounting Review, 28, 73−87. Adhikari, A., & Tondkar, R. H. (1992). Environmental factors influencing accounting disclosure requirements of global stock exchanges. Journal of International Financial Management and Accounting, 4(2), 75−105. Aivazian, V., Booth, L., & Cleary, S. (2003). Dividend policy and the organization of capital markets. Journal of Multinational Financial Management, 13, 101−121. Ali, M. J., & Ahmed, K. (2007). The legal and institutional framework for corporate financial reporting practices in South Asia. Research in Accounting Regulation, 19, 175−205. Archambault, J. J., & Archambault, M. E. (2003). A multinational test of determinants of corporate disclosure. The International Journal of Accounting, 38, 173−194. ASE (2007). Amman Stock Exchange. http://www.ammanstockex.com.jo Beard, V., & Al-Rai, Z. (1999). Collection and transmission of accounting information across cultural borders: The case of US MNEs in Jordan. The International Journal of Accounting, 34(1), 133−150. Belkaoui, R. A. (1983). Economic, political and civil indicators and reporting and disclosure adequacy: Empirical investigation.Journal of Accounting and Public Policy, 207−219 (Fall). Benston, G., Bromwich, M., Litan, R. E., & Wagenhofer, A. (2003). Following the money: The Enron failure and the state of corporate disclosure.By AEI-Brookings Joint Centre for Regulatory Studies. (pp. ) Washington D.C., USA.

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