NAVIGATING EXTERNAL SHOCKS: THE ROLE OF IFRS COMPLIANCE IN UKRAINIAN COMPANIES DURING WAR
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Abstract
The objective of this study is to examine the profitability and resilience of Ukrainian firms that adopt International Financial Reporting Standards (IFRS) in a context of war-induced uncertainty. The present study focuses on the role of governance mechanisms, particularly the quality of audits and operational continuity, in determining financial outcomes at the firm level. Methodology. A difference-in-differences (DiD) approach is employed, utilising firm-level data and two regression models: a baseline model capturing treatment and time effects, and a triple interaction model incorporating audit quality and operational resilience. The financial data are sourced from ORBIS, and the exposure to regional conflict is determined using humanitarian reports. Results. The baseline regression analysis demonstrates that external shocks, such as exposure to war, do not affect profitability uniformly. However, the triple interaction model posits that firms with high audit quality, which are often audited by Big-4 firms, encounter heightened financial strain during periods of conflict due to more stringent compliance requirements. Concurrently, the investigation revealed that operational continuity significantly enhanced profitability, thereby demonstrating that resilience capacity is a pivotal differentiator during crises. Practical implications. The findings emphasise the necessity for Ukrainian firms and regulators to achieve a balance between transparency and flexibility in their governance practices. In order to ensure the maintenance of economic functionality in high-risk settings, it is imperative that support for operational resilience is prioritised. These insights can be used by international donors and policymakers to tailor financial support mechanisms and reporting requirements in war-affected economies. Value/Originality. This paper is among the first to quantify the combined effects of governance quality and resilience on firm profitability during wartime using International Financial Reporting Standards (IFRS)-compliant data. This study makes a significant contribution to the expanding corpus of literature addressing financial reporting, audit assurance and corporate survival in contexts of fragile geopolitics. It is recommended that future research explore additional dimensions, such as innovation capacity and the regulatory environment, with a view to deepening the understanding of firms' adaptation strategies during crises.
How to Cite
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IFRS compliance, governance practices, audit quality, operational resilience, Russo-Ukrainian war, external uncertainties, firm profitability, conflict-affected regions
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