View of Integration of IFRS and FN-IB Applications, as Well as Their Influence on the Value of Iraqi Banks

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Technium

44/2023

2023 A new decade for social changes

Social Sciences

Technium.

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Integration of IFRS and FN-IB Applications, as Well as Their Influence on the Value of Iraqi Banks

Hayder Jameel Ahmed¹, Asaad Mohammed Ali Wahhab²

1Technical institute of karbala- Al-Furat Al-Awsat Technical University, Iraq, ²College of Administration and Economics, University of Kerbala, Iraq

[email protected], [email protected]

Abstract. This study aims to measure the impact on the value of banks in light of the integration of the application between the international financial reporting standards IFRS and the Financial Standard for Sustainability Accounting FN-IB, as well as the performance indicators of the banks in the research sample, using the impact and correlation model. Accordingly, the study was conducted on 12 Iraqi investment banks listed on the Iraq Stock Exchange (2015–2021), i.e., 84 notes (bank/year). The research variables were measured based on the models developed by the previous literature, where the effect of applying the International Financial Reporting Standards (IFRS) was measured by financial performance indicators (return on assets, return on equity, financial leverage, company size (total assets), and earnings per share "before the application year 2015 to 2021"). Hence, the FN-IB variable was measured as the percentage of disclosure of sustainability accounting information for investment banks according to the standards of investment banks FN-IB (18). The dependent variable, the company's value, was measured using the measurement model (Tobin's Q) for the study sample companies, in addition to measuring the effect of integration between the criteria for the two groups using multiple regression. In addition to the statistical methods to test the research hypotheses and find out the size of the correlation and the coefficient of determination using the statistical package for social sciences (SPSS) and the spreadsheet programme (Excel), The study results showed a correlation and effect between the integration of international financial reporting standards and FN-IB and company value. This relationship varies between positive, negative, strong, and medium. The inconsistency may be due to company size, management, and the cultural awareness of investors, customers, and regulators.

Keywords. International Financial Reporting Standards, Financial Standard for Sustainability Accounting FN-IB, Enterprise Value, Iraqi Banks

1. Introduction

The procedures that govern the measurement and disclosure tasks in accounting impact their evolution. After the Accounting Standards Committee was established in 1973, a transition was made to the gradual issuance of international financial reporting standards to replace global accounting standards; these standards emerged during this period. As a result of thorough reviews, numerous nations, continental unions, and international organisations (including the World Bank and the International Monetary Fund) have adopted international financial reporting standards (IFRS) either voluntarily or mandatorily since 2005, satisfying the needs Technium Social Sciences Journal

Vol. 44, 103-123, June, 2023 ISSN: 2668-7798 www.techniumscience.com

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and hopes of stakeholders. As a result, the Iraq Stock Exchange has begun mandating that the companies trading on its platform comply with IFRS. However, only a subset of financial institutions (banks and insurers) have fulfilled the certification.

However, there were concurrent assertions for the significance of non-financial reporting, following calls for and demands that businesses be socially accountable to survive and remain competitive. Due to the global economy's complexity and overlap, conventional financial reporting fell short of expectations. Consequently, there has been a rise in reporting on sustainability accounting during the past twenty years. Several causes have led to the rise of corporate social responsibility reports, with them, the argument that businesses should report on their sustainable practises in their yearly financial statements. Then, as sustainable accounting requirements and related disclosures emerged, the jargon took shape. The International Integrated Reporting Council IIRC was established in 2003 due to a global alliance between investors, regulators, specialists, non-governmental organisations, and professional organisations to address the non-financial aspects of sustainability accounting within financial reporting. It is at the forefront of the sustainable accounting movement. To improve disclosure, raise the likelihood of accountability, and maximise value for all stakeholders, not just shareholders, these groups advocated for adopting integrated reporting by businesses. The Sustainability Accounting Standards Board (SASB) was founded in 2011 by Jean Rogers as a non-profit organisation to create such standards.

In 2015, the council issued its first set of criteria across multiple industries; by 2018, that number had risen to 79. After being revised and improved, the final edition was released.

The Value Reporting Foundation (VRF) was subsequently announced in June 2021, following the merger of the Sustainability Accounting Standards Board (SASB) and the International Integrated Reporting Council (IIRC), based in London. It was also stated in November 2021 that the VRF Standards Board and Climate Disclosure Standards would be merged into the International Sustainability Standards Board (ISSB), established in July 2022 by the International Financial Reporting Standards Foundation (IFRS). According to Caglio et al., investors should be able to process different types of information better thanks to integration, which they believe brings together financial and non-financial disclosures to promote a more coherent and practical approach to corporate reporting (Caglio et al., 2020: 2). (Churet et al., Lee & Yeo) agree that the company's evaluation is positively associated with integrated reporting because it includes some proven benefits, such as a focus not just on financial performance but also on non-financial performance on the needs and interests of key stakeholders. Information connecting is another area of emphasis, as is integrating external factors into the business's strategic and resource allocation processes Churet et al., (2014), Lee

& Yeo, (2016).

This study sheds light on the situation in Iraq by conducting an in-depth analysis of the financial statements of Iraqi investment banks traded on the Iraq Stock Exchange following the 2015 mandate that they adopt the International Financial Reporting Standards and the 2017 mandate that they adhere to the Central Bank of Iraq's Governance Guide. As a result, the current study is significant since it contributes evidence from the Iraqi business environment to the evolution of integrated reporting, which international organisations worldwide will work on in the following years.

2. Background

In light of the adoption of international financial reporting standards by Iraqi banks and the development of their financial reporting as a result of the benefits that these standards Technium Social Sciences Journal

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provide to companies and markets, as well as non-financial reporting, which has become one of the basic demands of stakeholders, we will discuss in this paragraph previous research and studies that dealt with international financial reporting standards and sustainability accounting.

And its dimensions as well as integrated reports and their role in maximising the company's value, according to Armstrong et al. (2010), whose study dealt with the market reaction to the adoption of international financial reporting standards in Europe, aiming to reach a discussion of the responses of European stock markets to 16 events related to the adoption of International Financial Reporting Standards (IFRS) in Europe, as 3625 companies from the European Union cou After the mandatory adoption of international financial reporting standards: evidence from a developing country (Kenya), to determine the effects of adopting international accounting standards, specifically international financial reporting standards, at the national level, the researchers discussed two contradictory perspectives, one of which was complimentary. IFRS standards result in improved reporting standards, and their uniform adoption facilitates increased comparability. The results demonstrated that adopting IFRS will enhance the company's information environment and thus reduce its cost of capital; Hilliard (2013), whose research examined the effects of the adoption of International Financial Reporting Standards:

The Canadian Adventure To determine the impact of adopting IFRS on financial statements and equity components, the market's reaction to critical events after IFRS adoption, and the effect of the response factor on retained earnings in the context of IFRS adoption in Canada, the following research was conducted: see Hilliard analysed the impact of adopting IFRS on a critical component of equity, retained earnings, due to its effects on the size of the company and, as a result, the impact on its value as a result of the high prices of its publicly traded shares, as it is possible for the company to adapt some operations that aim to amplify these profits, mainly if the company's shares are trading at a premium. The researcher found a positive correlation between the retained earnings adjustment and the market price of the company's stock. In their study, Manyara and Benuto (2014) describe how adopting international financial reporting standards enhances access to capital in Australia. Examining the effects of IFRS adoption on the listing of Australian firms and the trading volume of Australian-listed firms between 2002 and 2008 As the application was applied to all companies listed on the Australian financial market from 1/1/2002 to 31/12/2008, and as Australia adopted the IFRS standards in 2005, the researchers concluded that the accreditation improved access to the shares of companies, as it increased the transparency of financial statements. Increased foreign investors ' access to company claims resulted in a rise in market volume, Friede et al. (2015) discussed evidence pooled from more than 2,000 empirical studies, attempting to access all primary and secondary data provided by previous academic review studies by pooling the results of approximately 2,200 individual studies to provide a reliable generalisation regarding these factors. Economic, social, and governance, based on which the researchers concluded that the orientation towards long-term responsible investment should be important for all types of rational investors in order to fulfil their fiduciary duties and possibly better align the interests of investors with the broader societal goals (Chen et al., 2017). Did they indicate the effect of corporate value on the correlation between corporate social responsibility and stock returns in their research? In an endeavour to measure the social responsibility performance of Taiwanese businesses. As the model was applied to 1487 observations from 772 companies' published annual reports, the researchers concluded that corporate social responsibility's impact on stock prices depends on the company's value. In other words, CSR activities increase the costs of low- value companies and decrease the company’s value, which hurts stock returns. While Quirós et al. (2018) examined the significance of ESG value in the Brazilian case, high-value companies Technium Social Sciences Journal

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have a greater ability to implement corporate social responsibility, which is counterproductive to the company's share price and market value due to the volume of practices or the level of their reporting. The researchers concluded that the market does not place a high value on the three pillars of ESG, despite their efforts to analyse the social responsibility activities of companies listed on the So Paulo Stock Exchange from 2010 to 2015, as applied to 73 Brazilian companies in 24 sectors. Specifically, while the market positively and significantly values environmental practices undertaken by companies unaffiliated with environmentally sensitive industries, the market values the social governance practices of companies that belong to these sensitive industries. The study by Delsena & Lehr (2019) examined the heterogeneity in the preferences of sustainable investments, as the application was conducted through a questionnaire. Alsayegh et al. (2020) also highlighted the shift in the performance of economic, environmental, and social sustainability of companies as a result of the disclosure of environmental, social, and economic governance to determine the impact of disclosure of ESG information on the performance of environmental, economic, and social sustainability as it was applied to Asian companies in 20 countries. Disclosure of the implementation of environmental and social strategies within an effective corporate governance system improves a company's sustainability performance, according to a study of 1244 companies from 2005 to 2017. In addition, the results indicate that environmental performance and social performance are positively associated with sustainable economic performance, indicating that value is derived from these factors. The company's economics and contribution to society's value creation are interdependent. Consistent with stakeholder and shared value theories.

Beske et al. (2020) examined the disclosure of materiality analysis in sustainability and integrated reports utilising legitimacy filters and stakeholder theory. Between 2014 and 2017, it was applied to 33 businesses. The researchers concluded that companies try to identify essential stakeholders, aspects, and topics. Still, materiality reporting is a means of presentation when reporting sustainability, or at least commitment to stakeholder participation. Due to the multiplicity of frameworks used in the research sample companies and the lack of an analysis of relative importance in the sustainability reports, the researchers could not reach a conclusion that would have allowed them to generalise their results when comparing the sustainability reports to the integration proposals. The use of the two theories entails a great deal of conflict, given that the legitimacy depends on society, i.e. the information he requires. In contrast, the stakeholder theory is primarily concerned with management and investors. In other words, we may discover that the reporting is present, but the quality could be better, so we disagree with their conclusion. According to Christensen et al. (2021), an economic analysis and literature review of mandatory reporting on CSR and sustainability aimed to synthesise the potential economic impacts of mandatory disclosure, CSR reporting standards, and sustainability topics.

The primary characteristics of CSR reports have been determined. Next, sustainability reports for American companies, including impacts on capital markets, as the study (Velte, 2022) aimed to provide a detailed understanding of governance, (non-financial) performance, and determinants related to integrated reporting and their contribution to company value. The sample for the study was With 85 studies between those that focused on the adoption of integrated reporting and those that focused on the quality of integrated reporting; the researcher believes that (1) the composition of the board of directors and (2) stakeholder pressure positively affect the quality of IR integrated reporting, whereas (3) performance leads to insufficient integrated reporting. The relationship between various sustainable corporate governance mechanisms (SCG) and mandatory sustainability reporting (MSRQ) quality was applied to 540 German companies in 2017, per Gerwing et al. Accordingly, The researchers Technium Social Sciences Journal

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discovered that in many instances, enhancement opportunities allow stakeholders to process better and compile sustainability data for decision-making. In addition, a considerable positive relationship exists between four relevant SCG mechanisms and the MSRQ (executive board sustainable compensation, presence of a social responsibility committee, engagement initiatives, and external affirmations). The results indicate the significance of the concept of corporate sustainability governance in Germany to ensure consistency and comparability of information, which may benefit all stakeholders; therefore, it would be prudent to strengthen non-financial information. In addition, using SCG mechanisms can contribute to an increase in the MSRQ, which may help reduce information asymmetries and conflicts of interest between company managers and stakeholders.

2. Literature Review

1.2 International Financial Reporting Standards and Compliance Requirements According to Zeff (2012), frequent international mergers and acquisitions contributed to the emergence of multinational corporations, leading to a worldwide trend of comparing financial statements prepared in different countries. After meeting with accounting organisation leaders worldwide, Benson's initiative in 1973 was more than remarkable. Who globally contributed to establishing the International Accounting Standards Committee (IASC), whose purpose is to promote international compatibility with accounting standards and reduce differences in national accounting practices? George et al. (2016) believe that the reorganisation of the committee and the formation of the International Accounting Standards Board (IASB) are positive developments. The International Accounting Standards Board worked in 2001 to establish the International Financial Reporting Standards Foundation to issue international financial reporting standards to gradually replace international accounting standardsThe . European countries that adopted the new reporting standards in 2005 reacted positively.

According to Bhatia and Tripathy (2018), companies must prepare their financial reports per the prevalent accounting standards. At the beginning of the twenty-first century, there was a near-global consensus regarding adopting international financial reporting standards as a modern reporting system that satisfies the financial reporting requirements of companies. These standards supersede local accounting requirements. According to the theory of obligation, accounting is a product of its environment, so before the mandatory adoption of International Financial Reporting Standards in European Union countries on January 1, 2005, the economic climate was characterised by multinational company pressure. In addition, financial globalisation was viewed as the integration of diverse financial markets and the exposure of all local markets to international markets in order to create a global financial market. In addition, accounting in the European Union required a greater variety of accounting standards, policies, and options, necessitating the compatibility of accounting methods and standards.

The Iraq Stock Exchange approved 2015 the application of IFRS to the companies listed on it, particularly in the financial sector (banks and insurance companies), commencing in 2016, in addition to Iraq's adoption of the application of IFRS to all companies. Due to the conditions of the COVID-19 pandemic and the absence of an optimal environment for accreditation, it was deferred to later years in 2020. The certification of Iraq was a consequence of obligating the environment surrounding businesses (investors and other stakeholders).

2.2 Sustainability and international interest

We believed, etc. According to Wood (2015), sustainability accounting is now an ongoing focus of policy development, and sustainability metrics are becoming central as models Technium Social Sciences Journal

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are continuously updated to better inform operations, and databases are continually improved to provide the most comprehensive and coherent description of a society in which governments and corporations are gaining interest. Due to regulations or laws, international, academic, and professional institutions are concerned about sustainability: Companies are required by government regulations to implement sustainable practises. Noncompliance with regulations is expensive, as the costs of regulatory noncompliance for businesses include penalties, fines, legal fees, production stoppages due to additional inspections, and future reputational effects.

In addition to the relationship with the community, Epstein & Buhovac (2014) believe that identifying important social, environmental, and economic issues for the primary stakeholders improves relationships with them and contributes to enhancing loyalty and trust, while Khodair (2019) adds the cost and revenue requirements as they can affect the relationship with the community. Sustainability also creates financial value for the company by increasing revenues and decreasing costs, as revenues can be increased by increasing sales as a result of the company's improved reputation and societal and moral responsibilities.

We may discover a correlation between these reasons based on the preceding. Large corporations with a substantial market share or economic value recognise the significance of the relationship between their operations and society, prompting them to reconsider their economic, environmental, and social responsibilities regarding the concept of sustainability.

2.3 Aspects of sustainability and business practises

Arowoshegbe & Emmanuel (2016) and Alhaddi (2015) concur that the concept of TBL refers to the economic dimension, as the TBL framework has an impact on the company's business practises and, consequently, its impact extends to the economy, which is regarded as one of the dimensions of sustainability to achieve future survival and development. To provide for future generations. The economic dimension also connects the development of the company to the growth of the economy and the extent of its support for it. In other words, it focuses on the economic value that a company contributes to its environment in a manner that enhances the system's ability to support future generations. According to Tate and Bals (2016),

"sustainable business" is still an economics-centered perspective that employs varying degrees of responsibility. Corporate social requirements (CSR) include energy efficiency, carbon emission reduction, recycling and reuse, employee fairness, and charitable giving. Therefore, companies with this perspective have only resolved a small fraction of the global sustainability issues. It is the opinion of et al. (2022). A sustainable company, according to Andersson, must optimise its performance, and the economic dimension of TBL explicitly considers performance. Consequently, the economic (or profitability) dimension incorporates the company's ability to achieve financial performance through economic growth.

Concerning the environmental dimension, Taplin et al. (2006) believe that one of the most valuable aspects of sustainability accounting is enabling non-environmental experts to make decisions regarding how they interact with the environment and what costs or benefits can be obtained. Integrating environmental data into a suitable and familiar financial accounting framework can improve environmental decision quality. Regarding the year 2022, Alfaro and Sánchez believe that the concept of the environmental dimension has evolved to include elements such as the influence of legal systems, markets, and regulatory policies, which are valued by various groups interested in mitigating climate change. As interest in environmental sustainability grew, Alajeli & Wahhab (2022) explained that the environmental dimension encompasses the efficient use of resources, pollution minimization and disposal, energy efficiency, and risk mitigation.

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According to Tuan (2012), fraud and institutional collapse have made corporate governance a more vital aspect of contemporary management. They are viewed as a system used to secure investors' interests or as a way for corporate finance providers to ensure a return on their investment. Unlike actual performance measures, governance feature measures are not inherently indicators of sustainability performance, according to Schneider and Meins (2012).

Neither does it ensure such performance. Even though governance mechanisms and operating system structures provide a sense of a company's behaviour in this area, these characteristics do not inherently indicate how well a company manages sustainability-related issues.

According to Ntim & Soobaroyen (2013), global institutions such as the European Union, the Organisation for Economic Co-operation and Development, and the World Bank support codes of good governance and evidence for corporate social responsibility practises through the global reporting initiative, which has implications for corporate social responsibility. This impacts governments, and both parties concur. (Dima et al. (2008) and Keasey et al. (2005) that corporate governance is the system through which companies are directed and controlled, as the oversight aspect of corporate governance includes the concepts of compliance, accountability, and transparency and how managers practise their jobs by complying with laws And current regulations and rules of conduct, while Minciullo (2019) sees it as the structure of rights and responsibilities between the parties that have a stake in the organisation.

Andersson et al. (2022) indicate that, according to the social dimension, the company that considers society in its practises is the one that engages inequitable commercial practises in terms of employment and human capital, as it prioritises social justice. Consequently, the social dimension encompasses individuals and implies that businesses that promote the common good or social justice through their business practises "give back to society."

Brower and Mahajan (2013) on corporate social responsibility CSP and its influence on numerous intangible marketing assets of a company CSP increase the extent of customer identification within a business. Better company ratings result in better product ratings and trends, a more significant competitive advantage, and the creation of headers. Intangible money generates "insurance-like" protection against negative information, with increased purchase probability, loyalty, competitor behaviour, and customer satisfaction, which enhances the company's financial performance. Typically, social indicators are developed to comprehend the evolution of social concerns. It provides policymakers with information and feedback about the living conditions of society and, to some extent, reflects the quantitative effects of economic practices and environmental actions.

Researchers have linked social performance to economic growth, which is a key entry that we believe summarises the concept of interdependence between dimensions and how one affects the other in the overall sustainability of the company, whose impact must be reflected economically by maximising the company's market value, setting it apart from competitors, and achieving a better position.

2.4 Sustainability and company value reporting

Dumay et al. (2016) contend that the traditional corporate financial reporting model challenges the accounting profession. It fails to satisfy stakeholder information requirements to evaluate the company's past and future performance. Simultaneously, society questions the primary rationale for the company's existence: Is it to make money? Because this narrow focus excludes the creation of value or justice for people, society, and the environment, the sustainability report, according to Roca & Searcy (2012), provides stakeholders with qualitative Technium Social Sciences Journal

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and quantitative information about the company's success in improving its economic, environmental, and social effectiveness and efficiency during the reporting period. Domingues et al. (2017) indicate that the sustainability report contributes to and supports the delivery of sustainability initiatives throughout the organisation and can help surmount organisational change resistance. Accordingly, Paun (2018) asserts that corporate sustainability reporting is a specific method for enhancing the education of participatory sustainability management and producing future leaders and stakeholders who are more knowledgeable and better prepared to deal with the complex global environment, human rights, responsible business practises, product offerings, and societal issues. Higgins & Coffey (2016) argue that sustainability reporting has evolved into a valuable tool for identifying and addressing sustainability challenges and driving improvements in business operations. According to Opferkuch et al.

(2021), reporting on a company's sustainability performance provides several benefits, including increased credibility, reduced legal risk, enhanced supplier relationships, increased access to capital, and increased ethical behaviour along the supply chain. Ferrero et al. (2015) added additional benefits by strengthening relationships with the community, consumers, and/or suppliers to maximise the benefit for the company and its various stakeholders.

According to Lozano et al. (2016), sustainable practices also promote an acceptable climate and support from regulators and stakeholders, increasing job satisfaction and consumer loyalty.

Other advantages of sustainability reporting include evaluating the company's progress towards sustainability and communicating efforts and progress in economic, environmental, and social dimensions to stakeholders. In addition, it compared the company's sustainability performance over time to that of competitors. Izzo et al. (2020) see it as a strategic tool that engages stakeholders, supports sustainable decision-making processes at all company levels, and directs innovation that improves performance, creates value, attracts investments to the company, and achieves its goals. In contrast, Higgins & Coffey (2016) noted that, among other benefits, it also improves the competitive and social situation by fending off stakeholder challenges and reducing political interference. According to Almeida et al. (2014), reporting on sustainability has various effects, such as increasing the social responsibility of business managers and making sustainable business a priority for businesses, and it also improves management oversight. Horisch et al. (2020) note that sustainability reporting helps companies retain credibility. Consequently, sustainability is incorporated into strategy and operations with the participation of all company stakeholders.

Reporting on sustainability has become one of the main pillars due to the convergence of multiple factors, such as global crises, societal claims, the impact of stakeholders, and other factors, as well as the various benefits sustainability reporting offers to the company and its internal and external stakeholders and how these benefits motivate companies to report on sustainability.

3. Methodology

3.1 The significance of the study

The significance of international financial reporting standards and how they contribute to reporting financial information that is transparent, reliable, and comparable demonstrates the significance of the study. In addition to the global trend of interest in non-financial reporting and defining what is related to sustainability issues in its economic, social, environmental, and governance dimensions, which was translated into global initiatives and sustainability accounting standards (SAS) to encourage companies to contribute to sustainability issues and be held accountable for them, and to use the information reported according to standards Technium Social Sciences Journal

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designed for each sector or industry, add the global trend of interest in non-financial reporting and defining what is associated with sustainability issues in its economic, social, environmental, Therefore, international standards for financial reporting and accounting for sustainability aim to maximise it.

3.2 The study's objective

The study’s objective is to determine the extent to which the International Financial Reporting Standards contributed to the development of the reporting of non-financial information (sustainability information) in accordance with sustainability accounting standards, i.e., to determine the overlap between IFRS and SAS standards. Afterwards, measuring the level of disclosure of information about the dimensions of sustainability accounting for investment commercial banks according to the FN-IB standard, as well as measuring the impact on the value of banks as a result of the integration of the international financial reporting standards IFRS and the FN-IB standard in their application. In addition to assessing the performance indicators of the sample banks, the impact and correlation models are measured.

3.3 The study problem

The mandatory transition from local to international financial reporting standards for investment banks listed on the Iraqi securities market improved reportingIt increased the . comparability and transparency of financial reporting information. As stated previously, the Central Bank of Iraq imposed on banks the application of governance with evidence and reporting governance components, which contributed to the development of non-financial information reporting in addition to the adoption of GRI standards by some banks in response to the following problem:

Does the integration of each international financial reporting standard, the FN-IB standard, impact the company's value?

Consequently, the following issue arises:

1. Does the implementation of IFRS impact the value of a company?

2. According to the FN-IB standard, what is the level of non-financial information disclosure in the investment banking sector by banks listed on the Iraq Stock Exchange?

3. How will the adoption of International Financial Reporting Standards (IFRS) affect the closing price of the share and, as a consequence, the value of the company?

3.4 Study hypotheses:

The study is based on the following hypotheses:

H1: A statistically positive correlation exists between the mandatory implementation of international financial reporting standards and voluntary sustainability accounting standards (FN-IB) and the company's value.

Tobin's Q = σ + β1 disESG + β2 ROA + β3 ROE+ β4 Lev+ β5 Log Firm Size + β6 EPS

H2:There is a statistically positive correlation between the implementation of international financial reporting standards and the company's value.

Tobin's Q = σ + β2 ROA + β3 ROE+ β4 Lev+ β5 Log Firm Size + β6 EPS

H3:There is a statistically positive correlation between share close price after implementing international financial reporting standards and the company’s value.

Tobin's Q = σ + β share close price.

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3.5 Study population and sample:

A community of financial companies consists of the banking services sector in the Iraq Stock Exchange, while the research sample consists of a sample of commercial and investment banks, which were identified as follows:

1- Ashur International Bank for Investment.

2- International Development Bank for Investment.

3- The Iraqi Islamic Bank for Investment and Development.

4- Iraqi Investment Bank.

5- Al-Mansour Investment Bank.

6- Middle East Investment Bank.

7- Cihan Bank for Investment and Islamic Finance.

8- Bank across Iraq.

9- The International Islamic Bank.

10- Noor Iraq Islamic Bank.

11- World Islamic Bank.

12- The National Bank of Iraq.

4. Measure the study variables

4.1 measurement of independent variables

Abdi et al. (2022) find that the disclosure of sustainability accounting dimensions affects the value of the company and its financial performance. They use a multiple regression model to measure the company's value based on Tobin's Q model consisting of indicators of environmental, social, and governance sustainability accounting dimensions according to the Thomson Reuters score and the company's size. The company's age, return on assets, financial leverage, the ratio of paid dividends to realised share earnings each year, and reporting period are considered in sustainability reports. The combined effect of corporate risk disclosure and corporate governance on the company's value is that risk disclosure satisfies the criteria of financial reporting standards, and corporate governance fulfils the requirements of sustainability standards. Salem et al. (2020) utilised multiple regression based on Tobin's Q model, connecting it to governance indicators, firm size, financial leverage, liquidity, and the paid dividend ratio. Albitar et al. (2020) argued for the effect of disclosing the environmental, social, and governance sustainability accounting dimensions on the company's performance before and after implementing integrated reporting, as measured by realised income. Several models were devised to measure the three previously mentioned dimensions of sustainability accounting. They relied on the Bloomberg index, which depends on the company's annual report information, scale, and financial leverage. They concluded that a positive correlation exists between the model's variables, which differ in strength and impact on the company's value.

Moreover, Velte (2022) examines the relationship between the vectors.

Consequently, by analysing the annual financial reports of the banks in the sample, we can use the indicators below to measure the integration between international financial reporting standards and the economic sustainability accounting standard for investment banks. Table 1 displays the indicators incorporated into the multiple regression model to assess the hypotheses.

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Table 1 Summary of the variable indicator definitions.

Terminology Interpretation

MVE It represents the market value of the issued and subscribed ordinary shares multiplied by the closing price of the share at the end of the fiscal year.

PS It represents the value of preferred shares (since not all companies on a stock exchange trade preferred share, they will be omitted from the equation).

DEBT It represents the total value of the firm's liabilities.

TA It represents the total assets of the company.

Disclosure ESG The percentage of disclosure of environmental, social, and governance information for the banks, the research sample, as measured by the indicators of the financial sustainability accounting standard for investment banks over seven years, as well as the results of the percentages of disclosure, are presented in Table 2.

ROA The rate of return on assets illustrates the relationship between after-tax net profit and net invested assets. It indicates whether the assets are exploited efficiently and the company's capacity to generate profits from the assets invested.

ROE Return on equity is a metric used to evaluate the performance of a company's management. It is also one of the most critical measures of the company's financial performance. It measures the ratio between the company's net income after taxes and its shareholders' equity. This indicator demonstrates the company's ability to generate profits for its shareholders.

Lev The financial leverage ratio of a company is determined by dividing its total liabilities by its total assets. This indicator is one of the most essential instruments financial officials and investors use to evaluate a company's ability to finance its activities and expansion. Additionally, the leverage ratio aids in analysing the relationship between the amount of debt a company utilises and the amount of capital it possesses. In addition, a high leverage ratio indicates that the company relies heavily on debt to finance its operations, exposing it to greater financial risk. If the ratio is low, it suggests that the company possesses a more significant proportion of its capital than its debt and therefore faces less financial risk. Additionally, the leverage ratio may be employed.

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Log Firm Size Company size: represents the natural logarithm of the company's total assets (logarithm is used to reduce the discrepancy between numbers since total assets are typically a large number; therefore, we will use logarithm).

EPS Earnings per share is a crucial metric for evaluating a company's stock and is calculated by dividing the profits available to common shareholders by the number of outstanding shares during the period. It is also an important indicator of a company's financial performance and can affect the value of the company and the closing price of its stock.

4.2 Measure the dependent variable.

The text describes a method for quantifying the effect of mandatory financial reporting standards and optional sustainability accounting standards on the value of a company. The company’s value is regarded as the dependent variable, as it is presumed to be affected by the application of these standards. The article suggests using Tobin's Q scale, a formula for calculating a company's value based on its market capitalization and replacement cost of its assets, to assess this impact. Using this scale, researchers can evaluate the impact of these standards on the value of a company and determine whether or not they are advantageous.

𝐓𝐨𝐛𝐢𝐧′𝐬 𝐐 = (𝐌𝐕𝐄 + 𝐏𝐒 + 𝐃𝐄𝐁𝐓) 𝐓𝐀

As the value of Q > 1, the management succeeded in managing the company and, as a result, improved performance and maximised its value.

Nevertheless, if the value of Q is 0.5:0, Poor performance due to the management's failure to manage the company and, as a result, a low value

While the value of 0.5 Q = 1 indicates that the company is in an average state in terms of performance and value.

4.3 Disclosure of the dimensions of sustainability

Comparing 2016 to 2015, Table 2 illustrates the evolution of disclosure following adoption of international financial reporting standards in 2016.

Table 2 Results of disclosure ESG according to FN-IB

2021 2020

2019 2018

2017 2016

2015 Name of the Bank

0.70 0.64

0.53 0.53

0.59 0.55

0.56 Ashur Bank

0.64 0.64

0.59 0.56

0.56 - 0.60

International Development Bank

0.70 0.70

0.67 0.67

0.37 Iraqi Islamic Bank for Investment & Development

0.61 0.60

0.60 0.57

0.57 0.57

0.46 Investment Bank of Iraq

0.67 0.61

0.59 0.59

0.59 0.63

0.55 Al-Mansour Bank for Investment

0.67 0.67

0.66 0.66

0.60 0.54

0.49 Iraqi Middle East Investment Bank

0.60 0.60

0.60 0.57

0.64 - 0.44

Cihan Bank

0.68 0.68

0.73 0.65

0.52 Trans Iraq Bank for Investment

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0.74 0.74

0.74 0.66

0.44 International Islamic Bank

0.67 0.62

0.62 0.60

0.54 - 0.28

Iraq Noor Islamic Bank

0.52 0.52

0.48 0.54

0.46 - 0.46

World Islamic Bank

0.72 0.69

0.61 0.66

0.66 0.54

0.53 National Bank of Iraq

4.4 Financial and non-financial performance indicators, company value, and closing share price.

We observe from Table 3 that Cihan Bank had the highest average closing share price, which will contribute to an increase in the market value of the bank's shares and the value of the bank as a whole. Al-Mansour Bank had the highest average for total assets, financial leverage, and return on equity, but Ashur Bank had the highest average for return on assets. The International Islamic Bank had no stake in the non-financial performance index (the percentage of disclosure of sustainable practices). Tobin's scale favoured Ceyhan Bank as the corporation with the highest market value.

Table 3: Financial and non-financial indicators, closing price, and firm value.

Firm value (Tobin's Q) disESG

ROA ROE

LEV Log Firm Size EPS

share close price Name of the Bank

0.584 0.586

0.026 0.044

0.402 11.647

0.045 0.323

Ashur Bank

0.915 0.598

0.012 0.046

0.675 11.945

0.045 0.808

0.742 0.636

0.014 0.032

0.534 11.780

0.035 0.470

Iraqi Islamic Bank for Investment &

Development

0.697 0.569

0.009 0.019

0.524 11.763

0.022 0.397

Investment Bank of Iraq

0.904 0.604

0.011 0.047

0.749 12.072

0.054 0.719

Al-Mansour Bank for Investment

0.704 0.613

0.002 0.004

0.606 11.835

0.005 0.263

Iraqi Middle East Investment Bank

1.349 0.575

0.017 0.035

0.554 11.850

0.045 2.542

Cihan Bank

0.759 0.660

0.018 0.025

0.247 11.559

0.026 0.700

Trans Iraq Bank for Investment

1.153 0.687

0.003 0.007

0.404 11.360

0.008 1.344

International Islamic Bank

0.988 0.555

0.008 0.009

0.111 11.456

0.009 1.000

0.988 0.497

0.001 0.002

0.130 11.467

0.002 1.000

World Islamic Bank

0.800 0.630

0.012 0.036

0.596 11.864

0.043 0.647

National Bank of Iraq

Table 4 displays the number of observations taken from the sample based on the analysis of the financial statements of the sample (12 banks out of 24 banks whose shares are listed without comment for the years 2015 to 2021), noting the lowest and highest disclosure ratio, return on assets, return on equity, financial leverage ratio, average earnings per share, the closing price per share, and the company's Tobin's value.

Table 4 The results of descriptive statistic

Descriptive Statistics

N Minimum Maximum Mean Std. Deviation

Dis. ESG 79 .28 .74 .60 .050418

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ROA 82 -.002 .04 .01 .007255

ROE 82 -.003 .03 .03 .016893

LEV 82 .111 .83 .47 .204532

log_firm_size 83 11.06 12.26 11.72 .218517

EPS 83 -. 03 .11 .03 .018641

share close price 81 .263 2.542 .85108 .618387

Firm value (Tobin's Q) 81 .584 1.349 .88192 .215689

4.5 The correlation between the company's value and each bank's financial and non-financial indicators

Table 5 displays the relationship between the financial and non-financial performance indicators and the company's market value. The correlation for the non-financial performance indicator (disclosure of information about the dimensions of sustainability accounting) ranges from inverse to direct, weak to moderate, and moderate to high. Describe the bank's sustainable activities, its scale, and what investors can expect. Similarly, the correlation between the remaining financial performance indicators varies in type and strength due to several factors.

Table 5 Correlation between Firm value and financial and non-financial indicators

Correlation between Firm value

& EPS Correlation

between Firm value

& Firm size Correlation

between Firm value

& LEV Correlation

between Firm value

& ROE Correlation

between Firm Value

& ROA Correlation

between Firm Value

& Disc . ESG Name of the Bank

0.57 0.64

0.82 0.54

0.26 0.58

Ashur Bank

0.50 0.95

0.97 0.42

-0.51 0.93

0.30 0.82

0.82 0.30

-0.31 0.45

Iraqi Islamic Bank for Investment & Development

0.86 0.01

-0.29 0.74

0.74 -0.75

Investment Bank of Iraq

0.56 0.68

0.75 0.54

0.23 -0.67

Al-Mansour Bank for Investment

0.21 0.28

0.26 0.21

0.22 -0.81

Iraqi Middle East Investment Bank

0.34 -0.94

-0.97 0.31

0.41 -0.29

Cihan Bank

-0.16 0.76

0.90 -0.17

-0.27 -0.29

Trans Iraq Bank for Investment

0.60 0.73

0.73 0.61

0.60 0.45

International Islamic Bank

-0.92 -0.09

0.13 -0.92

-0.92 -0.19

-0.27 -0.61

-0.48 -0.25

-0.23 -0.37

World Islamic Bank

0.60 0.89

0.95 0.57

0.19 0.55

National Bank of Iraq

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4.6 Testing Hypotheses

1. The table below shows the first hypothesis test.

Table 6. Results of correlation and multiple regression analysis for the first hypothesis

Model Summary

Model R R Square Adjusted R Square Std. Error of the Estimate

1 .733^a .538 -.017- .217506

a. Predictors: (Constant), EPS, disESG, LEV, ROA, log_firm_size, ROE Coefficients^a

Model

Unstandardized Coefficients

Standardized

Coefficients T F

B Std. Error Beta t Sig. f Sig.

1 (Constant) 13.295 11.528 1.153 .301 .970 .524^b

disESG -.700- 1.872 -.164- -.374- .724

ROA -25.970- 19.538 -.873- -1.329- .241

ROE -34.281- 24.437 -2.685- -1.403- .220

LEV .091 1.043 .087 .088 .934

log_firm_size -1.039- .961 -1.052- -1.080- .329

EPS 45.840 23.200 3.962 1.976 .105

a. Dependent Variable: Firm value

The correlation between the application of international financial reporting standards (FN-IB) and the company's value is evident from Table 6; we adopt the hypothesis. The results of the multiple regression model indicated that it is significant based on the F value (0.970), as shown in the table above, where the variables (disclosure ratio of sustainability accounting requirements, return on assets, return on equity, financial leverage, company size, and earnings per share) were considered independent variables. The company's value variable was considered a dependent variable. The independent variables (requirements, return on assets, return on equity, financial leverage, company size, and earnings per share) were compared to the dependent variable (company value). Based on the coefficient of determination (R2), the results reveal that the independent variables account for 53.8% of the variance in the company's value. (-.700), and t was calculated to be (-.374). Similarly, the beta value of the return on assets variable was (-25.970), the calculated value of t was (-1.329), and the beta value of the return on equity variable was (-34.281) with a negative inverse effect on the value of the calculated t was (-1.403). The beta value of the financial leverage variable was (.091), as my parcel was buoyant on the financial leverage variable. In contrast, the beta value of the EPS variable was (45.840), indicating a positive direct effect on the company's value, and the calculated value of t was (1.976). Additionally, the regression equation can be expressed as follows:

Tobin's Q = 13.295-.700 (disESG) + 25.970 (ROA) + 34.281 (ROE) + 091.091 (Lev) + 1.039 (Log Firm Size) + 45.840 (EPS).

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2. The table below shows the first hypothesis test.

Table 7: Correlation and multiple regression analysis outcomes for the second hypothesis

Model Summary

1 .724^a .525 .129 .201313

a. Predictors: (Constant), EPS, LEV, ROA, log_firm_size, ROE Coefficients^a

Model

Standardized

Coefficients T F

1 (Constant) 10.387 7.878 1.319 .235 1.325 .366^b

ROA -27.853- 17.473 -.937- -1.594- .162

ROE -34.258- 22.617 -2.683- -1.515- .181

LEV -.182- .688 -.173- -.265- .800

log_firm_size -.814- .696 -.825- -1.171- .286

EPS 46.059 7.878 -.937- 1.319 .235

We adopt the hypothesis because it is evident from Table 7 that there is a correlation between the application of international financial reporting standards and the company's value.

The results of the multiple regression model indicated that it is significant based on the value of F (1,325), as shown in the preceding table, in which the variables (return on assets, return on equity, financial leverage, company size, and earnings per share) were considered independent variables. The variable "company value" was considered a dependent variable. Variables (return on assets, return on equity, financial leverage, company size, and earnings per share) were deemed independent, while company value was considered dependent. The results indicate that the independent variables explain 52.5% of the variation in the company's value, given the coefficient of determination (R2) and the importance of beta, which describe the relationship between the return on assets and the value of the company, given that the ROA negatively affects the value of the company by (-27.853) and that the calculated value of t was (-1.594).

Similarly, the beta value of the return on equity variable came with a value of (-34.258-) with a negative inverse effect on the value of the company, and the calculated value of t amounted to (-1.515), whereas the value of the beta for the financial leverage variable amounted to (-.182) as it was inversely negative on The value of the company and that the value of the calculated t amounted to (-0.265), and the value of the beta for Additionally, the regression equation can be expressed as follows:

Tobin's Q = 10.387 - 27.853 (disESG) - 34.258 (ROA) - 34.281 (ROE) - 182. (Lev) - 0.814 (Log Firm Size) + 46.059 (EPS)

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3. The table below shows the third hypothesis test.

Table 8: Results of correlation and multiple regression analysis for the third hypothesis

Model Summary

1 .944^a .891 .881 .074555

a. Predictors: (Constant), share close price Coefficients^a

Model

Standardized

Coefficients T F

1 (Constant) .602 .038 15.964 .000 82.066 .000^b

share close price .329 .036 .944 9.059 .000

Given that it is evident from Table 8 that there is a correlation between the share's closing price and the company's value, we adopt the hypothesis. The results of the simple regression model also revealed that the value of F (82.066) is significant, as shown in the table, where the variable (share closing price) was considered an independent variable and the variable (company value) was considered a dependent variable. The results indicate that the independent variable explains 89.1% of the variation in the company's value, given the coefficient of determination (R2) and the value of beta, which describes the relationship between the closing price of the share and the company's value, as it positively affects the value of the company by (329). And that the calculated T value was 9.059 with a significance level (.000) below (.01).

Additionally, the regression equation can be expressed as follows:

Tobin's Q = 0.602 plus 0.329 (share closing price).

5. Conclusion

Many researchers have demonstrated the importance of integrated reporting, or integrated reports, in which financial information that reflects financial performance and non- financial information that demonstrates the company's sustainable practises or lack thereof, as well as the company's direction in order to achieve its objectives, so many researchers urge the increasingly popular integrated reports. It is of utmost importance and is sought after in numerous nations or markets. In this study, the researchers attempt to quantify the effect of reporting in light of mandatory international financial reporting standards integration with the financial sustainability accounting standard for investment banks on the value of a company on the Iraqi stock market. Several models were utilised to assess the relationship between the research variables. The independent variables representing mandatory international financial reporting standards and the financial sustainability accounting standard for investment banks were measured using six indicators and three models: disclosure of information about the dimensions of sustainability accounting, return on assets, return on equity, financial leverage, company size, average earnings per share, and a mediator index (share closing price). (the implementation of international financial reporting standards and the financial sustainability accounting standard for investment banks) and the company's value. According to statistical analysis, the level of environmental, social, and governance information disclosure is at most Technium Social Sciences Journal