Institutional and economic determinants of IFRS-for-SMEs adoption among Saudi small- and medium-sized enterprises

Abstract
Small- and medium-sized enterprises (SMEs) are pivotal to Saudi Arabia’s economic diversification under Vision 2030, yet their financial reporting practices remain inconsistent. The International Financial Reporting Standard for Small- and Medium-Sized Entities (IFRS for SMEs) was designed to enhance transparency and comparability, but its effective implementation in emerging economies is still uncertain. Grounded in institutional theory, this study examines the extent and determinants of IFRS-for-SMEs adoption among Saudi SMEs, analysing institutional, economic, and capacity-related factors that shape compliance behaviour. Using a mixed-methods approach, survey data from 550 SME operators and twelve semi-structured interviews with owners, accountants, and regulators were analysed through descriptive statistics and thematic analysis. Results show that adoption is partial and uneven: medium-sized enterprises linked to international supply chains demonstrate substantive compliance, while micro- and owner-managed firms display symbolic adoption due to perceived complexity, cost burdens, and limited accounting expertise. External coercive pressures, such as franchisor or lender requirements, and normative supports, including training and professional guidance, positively influence willingness to adopt. Findings highlight that institutional and economic drivers must converge with firm-level capacity to achieve meaningful implementation. The study recommends sector-tailored training, simplified local guidance, and coordinated incentives by SOCPA, Monsha'at, and financial institutions to foster substantive compliance. Overall, the research contributes empirical evidence on how institutional theory explains IFRS-for-SMEs adoption dynamics in developing economies and informs policy initiatives aimed at strengthening SME reporting quality in Saudi Arabia.