The Emergence of Rules That Govern Financial Reporting in Kuwait

Subject: Financial Marketing
Pages: 83
Words: 27576
Reading time:
101 min
Study level: PhD


The purpose of this dissertation is to analyze the materialization and the progress of governing rules of financial reporting in Kuwait experience by observing the real scenario of Kuwaiti Stock Market to evaluate to what extent the existing rules of financial reporting are effectual to retain investors by increasing share prices and capable to respond to any market collapse. Moreover, the corporate fraud recent global financial crisis has escalated the awareness of regulators to take control over the financial accounting tools to rescue the Stock Market of Kuwait and the policy makers are anxious to bring back the investor’s confidence. This study has aimed to assist the academia, regulators, policy makers, and investors with enhanced understanding about the weakness of financial reporting practice and associated corporate frauds including its driving force such as non-holy alliance with the financial managers and non-executive directors of the listed companies. With the outcomes of this investigation, the listed companies will get a potential investment environment in the stock market of Kuwait and get a better level of inventor’s confidence, which will endow with the companies a practical advantage for the financial managers and policy makers.

The paper has been grounded with the methodical framework of PEA along with primary and secondary research taking into account of tools of Marxist interpretations to the views of globalization. The literature research of the study floated to explore the research questions with the most legendary authors and theoreticians of financial accounting. The researcher has conducted a field survey with a predetermined questionnaire and analyzing the collected data the finding has deliberated. With a discussion from secondary sources regarding the topic area, the conclusion and recommendation have well designed to argue for the emergence and the development of the rules that govern financial reporting in Kuwait.

Problem Statement


This dissertation critically illustrates the perceptions and attitudes of the rules that govern financial reporting in Kuwait and factors touching their motivation and exploration within the existing rules have been emerged and developed through direct influence and closeness with the International Accounting Standards. The prescriptions those issued by the IAS1from being seventies, the Kuwaiti legislation has integrated most of them, but there is no evidence to establish any sustainable standard of financial accounting to deliver appropriate financial reporting, The dissertation has been organized and contained the six major episodes designed below-

Problem Statement

This episode of the dissertation has well thought-out with a study in wide-ranging among the selected area of financial accounting, endow with the underlying problems of the rules that govern financial reporting in Kuwait. It also addresses the hypothetical principles of financial reporting connecting with stock market listing rules and agendas for the research; raises the research questions and affirms the limitations and scope of the study used within this present dissertation.

Literature Review

This part of the dissertation launches with a chronological indication to the existing rules that have been emerged and developed linking with the motivation of the interest groups; then, recites too more up-to-date literature integrating modern corporate governance measures and accounting standards with the aim to theoretically answering and arguing to the research questions. Moreover, the expression on accomplishment of conceptual framework of regularity authority in Kuwait has engaged to ensure suitable stock market situation and sustaining investor’s confidence while the influencing groups are continuously shaping of existing rules of financial reporting;

Research Methodology

The prime objectives of this section is to demonstrating the process how the chosen research methodology will set out with the foremost goal of the present dissertational inquiry and how it will complete throughout this concurrent study pointed to the engaged processes. The author of this dissertation will conduct the research in accordance with six major steps for research approach definite to than the case study approach and should point out that the researcher had the opportunity to adopt case study approach guided that this approach may not be applicable. This episode of this dissertation furnishes the explanation and way out on how the research would be conducted, describes position and population selection, data assembly and treatment, develops a qualitative analysis of the data, gives an explanation of the process and states limitations of this study towards financial reporting in Kuwait;


This segment of the dissertation specifies the collected data, refine and denotes unexpected results by concreting on the findings as well as hypothetical uses for the information delivered from the rules that govern financial reporting in Kuwait and proposes idea generation for the research from secondary data. This section will then statistically analysis the collected data to generating the outcomes of the interview generated with the intention to present primary research;


Moreover, this section also enlightens the results in reflecting the outcomes of the research and discuss on validation of findings that will ultimately argue to justify the findings from the real life perspective linking to practical evidence of influencing trend of the global capitalism in the existing rules;


This is the final episode of the dissertation summaries the process, advises sensible outcomes that construct the key recommendations; and promotes conclusions as well as implications of this study pointing to the further research as well.

Background of the problem

The Financial Times (2010) published a new of corporate scandal connecting the Kuwaiti financing company ‘Investment Dar’ the owner of automaker Aston Martin who unduly sued for financial stability law to initiate a dreadful practice of protecting the creditors. In respond to Investment Dar, the major creditors have driven for legal proceeding demanding US$ 3.50 billion recovery, but the complicacy rose while the Central Bank of Kuwait has approved the inconsistent annual financial reporting of the company for 2008 and 2009. The news that ultimately raise a question mart to the standards and practice of the rules that govern financial reporting in Kuwait

The Kuwait Times (2007) reported that the National Assembly Council of Kuwait urged its members to approve the financial statement law with the aim to introduce legislation for the declaration of the financial positions integrating international standards along with Islamic values to strengthening the transparency of financial reporting.

Al-Shammari (2005) has conducted an empirical investigation with the degree of fulfillment of the international accounting standards by the companies by the GCC2 member counties including Kuwait involving 1996 to 2002, and tried to identify how the companies act in accordance with those standards of financial reporting. Based on the financial reporting of hundred and thirty-seven listed companies in the GCC including Kuwait, he examined to what extent the companies were able to comply with the IAS3 and identified the noteworthy variation in the degree of compliance among the companies though the number of integration of financial reporting standards has increased significantly in this region.

Al-Shammari (2005) also identified that the level of non-compliance with the rules that govern financial reporting in Kuwait has moderately featured with limited supervision and enactment by the regulatory agencies of the state accountable to control financial reporting of the listed companies with imperfect strength of auditing through the external auditors. On the other hand, the role of the regulatory agencies, external auditors, and quite a lot of companies have demonstrated negative attitudes to complying with the code of conduct of the financial reporting as guided by IAS and delivered increasing variation depending on the size, leverage, and company’s identity whether local or international. The other attributes that influenced to the degree of noncompliance with the nature of industry, volume of profitability, nature of ownership and liquidity without giving any credit to the auditor whether it is local or multinational, but not addressed to the historical and critical study that view there are many factors keep vital role in reporting standards.

Al-Qahtani (2006) conducted another research with the financial reporting regulation in GCC with auditing requirements in accordance with the commercial law with the aim to formulate a wide-ranging background to the development of accounting standards in this region taking into account of consequence of the interest groups. Based on the legislation and secondary sources the research pointed out that the associated features of accounting as well as financial reporting in Kuwait has integrated within the auditing practice and performance by means of codes of the Company Act connecting with social and a political phenomenon. With such in a study, there is no evidence of investigating to the historical evidences incorporating with serious study that views there are many factors play role in reporting roles.

Haneh (2009) conducted a study in the area of voluntary exposes of the listed companies of Kuwait linking their uniqueness, economy, and political sustainability of thirty-eight listed firms of Kuwaiti Stock Exchange and argued that the size and age of firm, debt-ratio, and profitability, criteria of ownership are the major factors that influence the voluntary disclosure of the companies. This study also drooped out to examining the historical and critical school of thinking that pointed to the factors those play vital role in the financial reporting.

Within this above scenario, the governing rules of financial reporting system in Kuwait has been passing through an unstable situation facing different changes, and generating huge complicated situation regarding to financial managers, and the regulators while the management suffered from risk of volatility and the shareholder’s interests are not safeguarded. With this background problem, this researcher has decided to conduct a study with the emergence and the development of the rules that govern financial reporting in Kuwait and considered that such a research would determine the way out for the regulators of Kuwait to coming out from the existing dilemmas and the develop a suitable solution.

Rationale for the research

Many scholars tried to find out the solution of the question how financial reporting in a certain company’s accounting practice could influence the investors in the stock market to raise share prices of that company and how the corporate fraud occur breaking the stock market stability and investors confidence in the global financial market including Kuwait from last several era. Most of the remarkable contemporary researchers have concentrated on the accounting standards, corporate governance and regulatory reform in the stock market, but no overarching research agenda has yet been proposed on whether the manipulated financial reporting is a conscious drive of the global capitalism for deliberated cheating or not.

Gonedes and Schnellar (1984) pointed out that while the companies aggressively focus more on financial reporting manipulation with the tools of financial accounting then it is clear that they are trying to retain more investor’s confidence while the large firms would involve to utilizing such tools as a technique of retaining more enhanced share value and huge investors. Rath and Sun (2008) strongly argued that manipulation of financial reports painfully distresses the whole truthfulness of the financial statements as well as conspicuously influence the resource distribution in the economy while the modern academia, regulators, policy thinkers, and investors are enthusiastic to put a stopple to malpractice in the financial reporting.

The rationale of this research is to analyze the rules that govern financial reporting in Kuwait experience by observing the real scenario of Kuwaiti Stock Market to evaluate to what extent the existing rules of financial reporting is effectual to retain investors and increase share prices, but to respond while the stock market collapse. In addition, the corporate fraud of Enron and WorldCom has escalated the awareness of regulators to take control over the financial accounting tools while the global financial crisis already socked the Stock Market of Kuwait and the policy makers are anxious to bring back the investor’s confidence. This dissertation has aimed to will assist the academia, regulators, policy makers, and investors with better understanding about the lacking of financial reporting practice and related corporate frauds including its driving force such as non-holy alliance with the financial managers and non-executive directors of the listed companies. Through this investigation and its outcomes, the listed companies will get a potential investment environment in the stock market of Kuwait and get a better level of inventor’s confidence, which will endow with the companies a practical advantage over the non-executive directors and managers who are involved with the manipulating financial reports.

Research Question and Objectives

There are so may research already conducted with the nature and shape of financial reporting standard and practice in Kuwait, but there is no research agenda has been raised with the historical complexities of financial reporting as well as the fundamental accounting standards and their practice. The legislation of Kuwait is eager to upraise the capabilities of the companies to be capable represent their business and financial status based on their current knowledge and prospects to the future with international standard. The objective of the governmental policy is to supporting the stakeholders while they want truthful reports of companies regarding the operating results and cash flows as well as financial statements to measure and reflect the economic and business reality through which the company is running and it assists the investors to formulating investment decisions.

While the financial reporting misrepresent the economic and business reality of a business, the capital flow would be misguided to the improper entry and such misallocation of resources would hamper the investment environment and the investors have to carry higher opportunity cost more than their return. Consequently, the optimistic business may suffer from lack of investment and will deprive from proper allocation while the customers, employees, and suppliers would make their strategic decision depending on the faulty financial reports. Such situation would give birth of new evidence like WorldCom and Enron, which is quite unacceptable to the stakeholders and to bypass similar risk, it is essential for the regulators to ensure appropriate financial reporting enclosure. Thus, it is most indispensable to investigate why the modern business communities and policy makers are very much concerned with the rules that govern financial reporting in Kuwait, why the accounting standards and disclosures are facing chronological development and quick shift, and what the regulators are trying to accomplish historically.

It is evidenced from the global scenario of the stock market and recent socks of global financial crisis that disclosure requirements around the world have emerged and developed because of social, economic, and political factors rather than the internal factors of the business. As an integral part of global economy, Kuwait cannot keep itself to apart from the impact of global financial crisis and its consequential collapse in the stock market while the rules that govern financial reporting is no different from other countries in that its disclosure requirements have emerged and developed connecting to the same factors. This study scrutinizes the understanding of the emergence and development of the rules that govern financial reporting in Kuwait by adopting the political economy of accountancy and globalization approach as the as the base of theoretical framework to deliver a sustainable financial report.

This dissertation aimed to investigate, does the historical perspectives of financial reporting with earning management is the watchful drive of global capitalism to immoral gambling with the investors in stock market? The more refined and highly structured aim of this dissertation has been designed to respond to the following six research questions; the answer to these questions would facilitate the legislators and regulating authority to organize the policy and towards a greater motivation for increased confidence of investors in the Kuwaiti Stock Exchange with its historical performance. Six research objectives are listed below:

  • How existing rules have been emerged and developed?
  • What are the interests that are served existing rules?
  • Which groups or people have influenced the shaping of existing rules?
  • How are conflicts resolved among these groups?
  • What are their motivations?
  • Is there a global capitalism influence in the existing rules?

Scopes of the study

The researcher of this dissertation has unlimited scopes to develop the topic area, for example –

  • The author has the opportunity to observe to what extent existing listing rules of Kuwait complied the rules of International Accounting Standards (IASs);
  • In addition, this paper has the chance to observe internal financial reporting system in Kuwait considering the Best Practice Report, Business Indicator Report, Financial Standards Report of Kuwait;
  • This paper concentrates on the principles of corporate governance, International Standards on Auditing, objectives and principles of existing listing rules, performance in global best practice indices, taxation policy, and key standards to sound financial systems;
  • However, this study has also scope to give the theoretical framework of financial reporting, the effectiveness of listing rules, the impact of these regulations on the stock market, and the influence to resolve conflicts among these companies;
  • This paper has the opportunity to provide historic development of financial reporting in Kuwait, for instance, the position of Stock Market in 1970s, necessity of new regulation in the period of 1970-1978, the emergence of “Souk Al-Manakh”, the impact of Souk Al Manakh crisis on disclosure requirements and so on;
  • The entire dissertation will assist to give a fruitful, realistic and applicable suggestions and recommendations to develop existing listing rules to reduce corporate fraud in Kuwait;
  • As the total word limit was sufficient to consider most of the aspects to get appropriate outcomes from this study;
  • In addition, the researcher will collect the primary data to discuss the significance of listing rules, current position of financial reporting in Kuwait Stock Market, and other relevant issues.
  • 1.6 Limitations of the study: –

Besides the scopes to conduct research, the researcher has suffered numerous problems to research on financial reporting in Kuwait, for instance –

  • The topic of this dissertation is mixed with legal aspects, for instance, it is essential to concentrate on government rules and regulation, and listing rules to discuss emergence and the development of the rules that govern financial reporting in Kuwait. As a result, it is complicated issue to deal with legal issues and listing because of limitation of data sources and lack of knowledge on specific area;
  • In this case, accounts and financial managers of the large Kuwaiti companies are not interested to disclose the real situation of the development of existing listing rules, so some answers of survey report become confusing.
  • In addition, most of the accounts and financial managers were either busy with their occupation or they were reluctant to give their opinion on the financial reporting in Kuwait; therefore, the low response rate from the respondents was another problem to complete the result section as some respondent completed their questionnaire after completing the whole dissertation;
  • On the other hand, the researcher was not get enough time to carry out face-to-face interview to complete the dissertation;
  • However, limited budget for conducting research was another major difficulty for the author to collect both secondary data and primary data from respondents. In recent times, there are many journal articles upon the development of the rules that govern financial reporting in Kuwait that apparently seem imperative to the author by considering summary of the articles, but the price of the entire articles were not affordable as there is no way to assess whether these resources are appropriate or not for the paper.
  • Furthermore, numerous secondary sources were accessible in the internet, e-books and journals, but most of them were not directly relevant with the topic; for instance, there were many articles on financial reporting, but most of them were for the UK, USA or other countries.

Literature Review

Path of Emerging and Development of the Existing Rules

Theoretical Development of Financial Accounting

Sutton (2009) defined that the financial accounting is the progression of a technology to represent the recording financial transaction of a company and commencing the historical brass tacks, it has evaluated as a focal point to the expansion of insistent socialized capital in association the informational gaps among the holders of capital as well as concerned managers. Gray, Owen & Maunders (1988) pointed out that, with such essential categorization of financial accounting, the agency rapport did not raise any question until sixties, and the GPFR4 has been considered the target equity for both the investors as well as creditors.

Jennings and Happel (2003) added that the grown-up of stakeholder theory and the succeeding progression of critical accounting theory have thrown challenge to the assumptions of conventional GPFR while the mentioned theories quarreled to have a necessary extension of GPFR application and the post-Enron world disclosed to the world that stakeholder theory engaged just on the political views of issues.

The most notable points of stakeholder theory are that it has grounded along with a set of absolute morals those included honesty to handling with the shareholders and customers, the business concerns would be may be the idyllic corporate citizen in requisites of diversity along with benevolence jut like Enron. The practice of this theoretical framework evidenced that huge number of socially painstaking funds had invested in the fraudulent companies as if Enron and such channel did not become aware to the essential moral imperfection of the business operations those indicates very enlightening, but manipulated financial reporting through earnings management. In additional, the pragmatic researchers’ of post-Enron financial accounting demonstrated that the stakeholder theory was not at all superficial to that extends which company tired express to the public connecting their environmentalism and diversity and the implementation of such theatrical framework contributed collapse of a number companies and massive corporate fraud.

Here the Author has deliberated to present the theoretical development of financial accounting with the most prevalent option of the theoreticians in the accounting filled with concurrent understating into two subheads firstly ‘Conceptual Framework of Financial Accounting Environment’ and secondly, ‘The Advancement of Financial Reporting Standards’ described as follow-

The Advancement of Financial Reporting Standards

Glandon (2010) argued that the generally accepted accounting principles are the prime source to endow with the hypothetical agenda and it is the basement of theoretical establishment of financial accounting those are overriding the companies to some extent with very particular standards those are obligatory for the companies to maintain at the time of publishing financial statement. The chronological progression of financial accounting practice demonstrates that in 1933, the federal government in the United States of America introduced the regulator authority to administer and look after publicly traded companies in the capital market and formulated legislation for Securities Exchange Act- 1934 in the Congress. Under this legal framework, they initiated the SEC5that has authorized to administer the capital market for trading stocks to the public and setting financial standards for the listed companies. For long standing with both success and collapse, the SEC has enjoyed its authority over companies to sell their stock to the public and pass on the financial accounting standards setting course of action for the listed companies, even though in many times the issued standards faced tremendous challenges and evidenced may changes.

To bring the standards into very specific adoption of financial reporting issues this legislation facilitated to exercise FRR6 on the companies and in the corresponding years, CAP7 that is subordinate body of the AIA8 recognized the financial accounting standards for the listed companies, but there were no academic agenda to support the expansion of the standards. In 1957, the CAP introduced standards where flagged as ARB9 while the name of AIA transformed in to the AICPA10. Shortly thereafter and the level of CAP turned in to the APB11 and within the durations of its practice the APB contributed APBO12, analysis financial statement and kept its effort to ascertain the theoretical frameworks, but failed due to technical grounds.

The first self-regulating body for public accounting occupation ‘Financial Accounting Standards Board’13 has formulated in 1973 by restructuring APB which consist of seven permanent members from the myriad icons of the financial accounting world those represent the direct interest groups. At the very beginning, FASB analyzed all previously issued regulation, direction, and white papers of the previous bodies and identified the way of best practice by modifying the backdrops of the previous practice. FASB concentrated on the practical evidence of accounting practices and developed the theoretical framework of financial accounting, delivered concept papers as FASCs14, designed the statement standards as SFAs15 and remarkable research work on financial accounting.

Within the progression it has been identified that the formulation of accounting standards is the most familiar political module of transformation in the accounting standards those are capable of keeping momentous economic impact on companies as well as industries and entire industries while FASB has kept its keen eyes to cautiously measuring the associated risks to embracing new standards. Due to the presence of tremendous MNCs in the US marketplace and most of them were maintaining their home counties financial accounting, but eager to enlist the US Stock exchanges, with due process FASB made it compulsory to comply with host country’s financial accounting as a primary condition to be enlisted at any stock exchange. This type of embargo to right of entry to the capital market raised the reality to harmonizing the financial accounting standards globally that drove to formulating the International Accounting Standards Committee. IASB16 started its journey with the global reorganization as an organization to settle on the global financial accounting by keeping joint effort with the national standardization authority and it has already issued almost forty-one harmonized standards for global practice and looks forward to having more integrity.

Conceptual Framework of Financial Accounting Environment

Glandon (2010) pointed out that the financial reporting is an imitative by the business concerns to focuses on the concurrent status of that business in context to the previous period to review by the external users such as primarily investors, regulators, and creditors of the company, financial mediators, and other stakeholders. As the financial reporting is the course of action to delivering significant financial information to the above-mentioned third parties, the economic environment of the business including the existing capital markets are the most vital factor where all the vital investors and creditors come in a common platform who needs accurate of the companies to make their investment decisions. Thus, the success and smooth convey of the stock exchange is deeply concerned with highest level of the truthfulness of the financial reporting of the companies.

The Capital market has clarified into two episodes, while the primary capital market concerned to deal with publicly regulated companies to issuing stocks and bonds, the secondary market functions to trading with the issued securities those are distributed among the investors, and to exchange them with existing stock market regulation. While the securities of a company put on the market primary market that company will get no revenues while that issue goes for trading in the secondary market, but the player of secondary market trade with them from a cash flow respective and the transaction continues in the stock market based on a number of anticipated future returns. The most familiar market motivation generated from two perspectives such as periodic payment of dividends by the issuer company and the increase of prices of the share from the concluding sale of the issue. In this context, above two variables are measured by investors with the predictable rate of returns along with the allied risks concerned with the stock issuer company for which the financial reporting is essential to deliver necessary information to the investors for their safe decision-making.

Depending on the information of the financial reporting the investors and creditors can measure the associated risk of future cash flows with an issue and identify the return on their investment within the period while financial reporting also facilitated a major opportunity to providing trustworthy information to which issues are safe for steady earning. In the financial reporting, the investors also get understanding on the cash basis accounting that display the cash basis results of the company’s operations, which is termed as net operating cash flows and it is essential to measure future trend.

Moreover, a financial reporting also gives enough ideas on the short-range operating cash flows, but does not show the sign of the viewpoint concerned with the future cash flows of a listed company. The financial reporting also contended with the accumulation of accounting results of the operation of a company and the accretion accounting has termed as net income, it replicate the revenues that the company earned. The expenses those the company incurred for the duration of the accounting period of the presented results would deliver in either net income or net losses and it is an enhanced reflection of the impending future cash flows of the company (Glandon 2010).

Economic Condition of Kuwait

Indexmundi (2010) suggested that Kuwait has a geologically small, affluent, and comparatively open economy with crude-oil reserves of about 102b barrels, which is approximately nine percent of world reserves; its fuel accounts for almost half of GDP, 95 percent of export-revenues, and 95 percent of government-income; in fact, Kuwait aims to augment oil-production to 4m barrels everyday by 2020. Kuwait sustained in the recession on the strength of budget surpluses engendered by high oil prices, relocating its tenth successive budget surplus in 2008, before falling into discrepancy territory in 2009; moreover, the government in 2009 approved an economic-development-plan to expend $140b to diversify economy away from oil, draw more investment, and enhance private sector partaking in the economy. However, the following table shows some other information regarding Kuwait –

Kuwait country profile.
Table 1: Kuwait country profile. Source: BBC News (2010).

BBC News reported that, Kuwait is one of the emergent as well as oil rich states of GCC region surrounded by other influential Middle East nations like Saudi Arabia, Iraq, and Iran. Since 1930, Kuwait has renowned for its oil stocks and their petroleum industry have developed after independency during 1961. Economic profile of the state has mostly dominated through oil exporting and in addition, 90 % of their export revenues have generated through oil industry where Kuwait has 8/9 % of aggregate world oil reserves. During 2003, invasion of Iraq was greatly affected Kuwaiti economy. Stock market performance over global economic crisis has been satisfactory, additionally, Kuwait is a well promoter for the foreign investors, and hence, Kuwaiti government has succeeded in shifting 95 % state sector workers to the private organization. Here are the major economic facts of Kuwait.

Major economic facts of Kuwait.
Table 2: Major economic facts of Kuwait. Source: Self generated from Indexmundi (2010).

Historical development of Financial Reporting in Kuwait

Country profile of Kuwait is informed that before independent, public companies was started their journey in Kuwait at beginning of 1950. At that time, there was only one bank “the British Bank for the Middle East”, which possessed by the foreign investors and additionally, strongly hold monopoly business of all banking task (Mouhammed, 2010). In order to establish accountability and transparency of financial operations as well as reporting of all business industries, last week of 1952, Kuwaiti National Bank the first public bank in Kuwait established with support of capital KD 19, 465, 875. Most efficient features of the bank where it offered open subscription for public.

After successful continuation of the first Kuwaiti public bank, during first week October 1954, National Kuwaiti Cinema Company formed with KD 1, 630, 263 capitals and followed by the second bank, in mid September 1957, Kuwaiti Oil Tankers appearance with KD 25, 936, 605 capitals where 53 % share owned by the government. Major difference among these three banks was the first had succeeded to fulfill public demands, but rest two were not efficient in stock trading as well as not made significant scope of public participation. In order to recover the difficulties Kuwait formed their first commercial Companies Act No.15 during 1960 and considering public commercial companies following are the key statutes of financial markets as well as for authentic financial reporting. Point should to note that Kuwaiti commercial Companies Act is not only for applying on newly establish companies, but also a commercial standards for the existing companies’ business operation. Moreover, the Act has significantly influenced by the major Arab States17 Company Laws as well as British Company Act (Beblawi, 1984).

Obligatory features of all public companies should to make sure of that newly establish companies must be Kuwaiti, its shareholders must be citizen of Kuwait, and location of head office should to be inside the country.

Annual report of financial operations or profit and loss account of a company should to be inconsistent with the company’s regulation as well as free of fake data.

It is obligatory for all of the companies to submit their financial statements annually towards CCD18 at MCI19 and additionally, submitted financial report should to audit by a registered accountant. During annual meeting of a company, an accountant appointed for auditing.

An auditor is responsible for the entire audit tasks of forming the annual report whether ascertain information and data should correct of the financial report of the company and since consideration by the Company Act; an auditor is termed as an agent of the shareholders. In reference of this statue, shareholders have also right to call the auditors for any type of query as well as clarification.

First balance sheet of a company should to brief last 12 months in form of correct and true financial records.

Alternatively, Kuwaiti commercial Companies Act has kept guidelines for the public companies how to formation and administration, process to wining up as well as final liquidation modes.

The decade of 1960 – 70 is a significant period for Kuwait to establishing shareholding companies as well as formation and impact of financial reporting regulations. Firstly, in between 1960 – 62, large number of shareholding companies was established and proportionately public share issuing was increased significantly. Secondly, from 1963 – 70, was reversed period for the commercial companies due to dramatically reduction of establishing new shareholding companies and amendment of Company financial reporting regulations. At early stage of independence, Kuwaiti economy more focused on shareholding companies as an effective economic segment.

The period 1960-1962

Thirteen new companies were established in consistence with the promulgation of Commercial Companies Act No. 15 of Kuwait during 1960 with aggregate capital of KD 35.80 million. According to the Act No. 15, Kuwaiti government had substantial equity to participating in the investment and occupation of this opportunity made scope to participate by capital of KD 15.40m or 43 % of the companies’ overall investment or by seven of total company number. In 1961, another significant Company Act No. 2 amended in 1982 namely No 68 required financial reporting of a company in terms of Journal featuring three facts such as all financial entries, inventory books along with the mail register.

Another requirement of the journal is authenticated throughout Ministry of Justice where inventory books and mail registers are not for practical use. On the other hand, companies enforced to execute internal reporting as well as financial statements prepare in terms of a general ledger book. A significant point should to quote that at beginning of independency, Kuwait had no legal framework for operating stock market activities though newly formed companies were enthusiastic to execute their job at highest level of professionalism. During that period, stock-holding companies traded either directly by the traders or the stockowners or by the unofficial brokers20. Early independent period of Kuwait, an observer of several substantial tasks by a group of entrepreneurs that harshly threatened stock market prospect of Kuwait as well as its economic development and effects of these soared share prices such level that absolutely isolated from a company’s regulation as well as performances (Khouja, 1979).

The period 1963-1970

Shareholding companies in Kuwait grow and expand slowly compare to the prior time. During this time, only eight shareholding companies formed and established, but none of then could not continued their business operation after 1969 – 70. On the other hand, government announced that they participated by investing 60 % of overall authorized capital in terms of KD 26.30 million of aggregate capital KD 43.75 million. Six of the eight companies was then formed as the industrial entity with aid of government participation by 98.72 % and rest of survived through privatization namely Al Ahli Bank of Kuwait. In Kuwait, there were 23 shareholding companies during end of 1968 where overall, nominal capital was KD 100 million and government private participation was respectively 43 % and 57 %. At the end of Kuwaiti financial history, overall analysis is quoted that since 1963, primary and secondary market’s downward trends was started in term of stock prices dropped. Hence, the investigation to identify misinterpretation of the trading companies as well as common public investors financial reporting got demand for accountability and transparency of the listed companies inconsistent with the accounting standards (Shuaib, 1995).

The period 1977-1982 and Journey to “Souk Al-Manakh”

From 1977 – 1982, KSE was started to trade of diversified products like financial instruments, real estate, and poultry firms. Trade of these products and services in KSE were then termed as the “Souk- Al-Manakh”. Trade of the stocks of these items commonly brought on credit and in addition frequently sold with premium value before rise of stock price. During transaction of that time, buyers had required to pay postdated checks. Consequence of the facts, first half of 1982, the Souk-Al-Manakh traded stocks of over $ 6.0 billion those had book value of only $ 200.0 million. In this way, mid 1982, aggregate postdated checks of buyers floated over market that crossed around $ 96.0 million, and additionally, stock values of the “Souk Al-Manakh” doubled every hour. During August 1982, the “Souk Al-Manakh” market stocks crashed and thus government felt emergence to intervening. Facts of speculation of the “Souk Al-Manakh” make lost of small investors who had less than $ 5.0 million. During leaving of the point it has point that establishment of the “Souk Al-Manakh” assembled through GCC member countries after scandal of the share market crash, government has imposed obligatory regulation to submit yearly three times financial report and no broker would have allowed prior government approval. (Preston)

Emergence of Shareholding Companies in Kuwaiti Economy

Inspiration of historical flow of Kuwaiti financial reporting regulation as well as listing rules of the stock market from 1952 – 60 informed and illustrated significance of shareholding companies in Kuwaiti economy and performance of corporate equity issues of these companies. Financial analysts figured that major issue of large number of Shareholding Company reflected healthy liquidity of an individual’s assets. On the other hand, oil revenues elevated swiftly, government initiatives wall also boomed to develop country roads & housing, effective public services as well as other infrastructural advancement. Alternatively, government was also paid efficient attention on generous compensation towards the people whose property had great potentiality to flourish new planning and development schemes. Management committee of any company voluntarily generated financial reports since 1950 as well as prior to establishment of government regulation for obligatory forming of financial reporting and the accounting statements.

For instance, the National Bank of Kuwait first Shareholding Company in Kuwait stated in their articles of incorporation that their financial statements would have been audited annually at the end of every fiscal year. Since early period of 1960 shareholding companies in Kuwait increased too swiftly and additionally, in order to fulfill economic demand of the state a group of investor were preparing to launch new more commercial companies and hence trade & industrial department of government intervened to regulating financial reporting of new born companies for an authentic and transparent security trading. In discussing emergence of share-holding companies in the economy of Kuwait had patronized through two major dynamics and felt urgent necessity of commercial Company Act No. 15 developed in 1960. First motivation of the government to encourage investors for their significant contribution on state’s economy and secondly, enthusiasm of the investors to establish new more shareholding companies and flow of this motivation noticed that government’s initiative for economic development had more focused on domestic investment rather than foreign investment.

Significance of Political Economy Financial Reporting

Bryer (2008) mentioned that though the new-fangled explanation of neoclassic economists has concentrated to concluding to the limitation of the Marxist view to resolving the renovation crisis of capitalism and tried to demonstrate that the labor theory of value was unintelligible, but the impact of most recent global financial crisis generated the reality of backing to the Marxist views. The global financial crisis and its consequential recession has proved the failure of Keynesian economy and urged to aligning with the Marxist views while careful explanation of Marx has contributed to demonstrate that the major socially essential labor time generates monetary value to commodities and in this regards the neoclassic views were incoherent and controversial to undermine Marxist ideology.

Modern academia argues whether there are renovations crisis into capitalism or not, the transformation of the society has necessarily aligned with labor time that included with the prices of manufacturing to deliver broad-spectrum rate of profit for the capitalists while Marx has resolved carefully the accounting transformation and clarified the core competences of accounting system. Marx elaborately defined that the capitalist accounting has engaged to resolve the turnaround dilemmas of economists to explaining how capitalists are converting the broad-spectrum rate of profit including the costs of production hooked on collectively essential labor time. The capitalist accounting also engaged in due course to effectively calculating and maintaining the accounts and measuring capital in the scale of the monetary value of publicly essential labor time for the capitalists and it is equal for the sampler groups.

Marx (1894) analyzed that the history of capitalism and determined the term “transformation crisis of capitalism” through taking into account of involved sole capitalists to acquiring control over the valorization procedure to practice ‘cost-price’, which the modern accountants or financial managers identify as the target cost of business entry. This study has identified that contribution of Marxist thinking has enriched theory of Political Economy of Accounting in the ‘Das Capital’ Vol. III and to start on hypothesis that the price of any product would be equal to the monetary value of the essential labor time in social context to manufacturing that product.

This paper also analyses the neoclassic economist’s progress and their accounting limitations integrating with the challenges arguing that the accountants and financial managers have no scope to adopt the theory of surplus value to provide explanation for the prices and profits for any product that owned by a capitalist company.

This researcher has engaged to keep effort to elaborate the understanding of Marx’s accounting way out for the makeover of prices into values as well as wrap up that capitalist accountants shored up his arguments and bring into practice rather than verifying through the neoclassic economists. It has also explained and indicated that the total figure of the entire profits of an individual company is obviously the part of the total surplus value of that society where the business is conducting (Marx 1894). This researcher has observed that the theory of accounting by Karl Marx has occupied to resolve the actually irredeemable difficulties of allocating the combined costs together with fixed capital and other operational factors. From the above discussion of Marxist-economy, it is clear that capital generates an incorporated accounting theory on how the capitalists jointly control over any company to manufacture, socialize, and at the same time distribute surplus value among the stakeholders by exploiting of labor while each capitalist search out a proportionate return on their involved capital. Thus, the political economy of accounting is a critical accounting practice that Marx demonstrated to the world for realistic analysis, for any further crisis Marx seriously argued to resolve with analysis of dialectical materialism.

Interests Served Existing Rules in Kuwait

Content and Outcomes of the Existing Rules in Kuwait

Existing listing rules in Kuwait usually segmented their stock market into two major categories regular and parallel. In the area of official market, during 2008 KSE Committee statue Decision No. 2 in order to concern rules, terms and conditions for the listing shareholding companies. Before illustration of the voluntary and obligatory listing rules, it should to quote that during mid–August of 1983, an Amiri Decree issued to organize Kuwait Stock Exchange, and alternatively, in the same time, MCI issued listing rules for KSE in accordance with the Decision No. 35. In 2004, for the first time, KSE Committee segmented stock market into two profiles official and parallel and hence, concerned listing rules under Decision No. 3. KSE committee specialized through two prime terms and the market committee in their Meeting No. 9 at early November of 2008 approved conditions of 2005 in accordance with the Decision No. 7 and during 2007, listing rules and regulation for the official market amended concerning the Decision No. 1 and all of the approvals. Following are the two major results come out from the meeting (KSE, 2008).

  • Obligatory application form for all listing shareholding company: approved laws by the market committee enforced an application form for all the listing shareholding companies available in the KSE therefore market committee would revise their database as well as make problem free future decision-making.
  • Obligatory task of market director: listing rules should to enforceable at the first day of issuing any shareholding company and the market director is assigning to enlist them in the published official gazette as well as have authoritative power to cancel all listing regulations that have span to make collide with the existing rules.

Interests Served in the Regular Market

Following are the brief account of existing listing rules of Kuwait Stock Exchange of the regular market.

  • Listing of share: existing rules have requested the shareholding companies to enlist their number of shares in account of the official market that should satisfy obligatory terms and conditions;
  • Share capital and shareholders equity: listing companies issued share capital to inform of fully paid as well as should not less than KD 10 million or in case of foreign currency share capital to equivalent of the required amount. Alternatively, equity rights of the shareholder should to be equivalent of 115 % of the WACC21 of the fully paid capital during previous two fiscal years individually. All of these financial reporting should approved by the listing companies annual general meeting as well as annual audited need to execute the financial auditor before listing request towards the market committee;
  • Law of share trading: both of the listing rules and commercial Companies Law of Kuwait collectively considered tradable regulations where total number of share to trade should to fulfill obligatory requirements of the market committee.
  • Company profit sharing: It is mandatory for listing request, that the companies should evidenced to achieving at least 7.50 % of the WACC in relation to the entire paid up capital during the end of previous fiscal period separately;
  • Capital structure of a closed company: listing request or application by a closed company should to have an account higher than 50 % capital incensement within an individual fiscal year and in addition, one year period should to bypass after last date of serving notice for capital enhancement;
  • Legal structure of a closed company: if a closed company transformed their legal structure as a shareholding company from the limited liability company, it should have left behind three consecutive years after noticing legal transformation as well as commercial registry;
  • Capital distribution to the shareholders: on behalf of schedule guide authority, it has obligatory for all of the listing companies to distribute their 30 % capital among the shareholders, and they should guide through two trading segment inconsistent with the company book value during recent fiscal year.
  • Account of annual general meeting: it has obligatory for the listed companies to brief their approved annual general meeting in order to listing their shares in KSE;
  • Availability of reliable and correct information: requested companies for listing should to ensure KSE that all of the information provided by them is authentic and correct and additionally, inconsistent with the obligatory listing rules. Available of shareholders’ registry: another obligatory rule of KSE is that listing companies should to provide authentic shareholders’ registry as instructed by the KSE;
  • Listing terms for non-Kuwaiti company: non-Kuwaiti companies should to enlist in their own country stock market;
  • Paid up capital reserve: requesting companies of the KSE should to have reserved of 25 % of their total paid up capital for two years at enlisting date by the KSE and it has obligatory for the board of directors to specifically know about the shareholders account by whom reserve capital owed;
  • Registration fee: according to the listing regulation of KSE, registration fee for a company is KD 10, 000 and additionally, required subscription fee is 0.05 % of company’s total paid up capital and optimal limit of subscription fee is KD 50,000.
  • Market approval notification: four consecutive months after enlisting in the KSE as well as after notification of market approval listed companies should to consider as void inform of incompliance within this timeframe;
  • Authority to rejecting listing of any shareholding company: though proper fulfillment of all obligatory and voluntary regulations as described by the KSE, but the market committee has the authoritative power either to authorize or reject a requesting company from listing by considering their illustrated financial accounts, their significance contribution to national economy as well as their market sustainability potentiality. For this reason, requesting companies permitted to submit specialized areas of their company along with the financial account to reduce scope of rejection by the market committee.

Interests Served in the Parallel Market

In 2007, KSE market committee established and approved Decision No. 2 for forming listing regulation of the parallel market as well as in similar time of issuing Amiri Decree of regular market. Moreover, Decision No. 4 of the KSE in 2000 had significant role to establishing parallel market in KSE. On the other hand, in 2004, Decision No-4 of the KSE adopted some emergent listing rules for both regular and parallel market and conversely, in 2005, KSE Decision No. 7 adopted two emergent regulation of listing rules, which approved in mid – December of 2006. Here are the obligatory listing rules for parallel market.

  • Capital structure: either in term of Kuwaiti Dinar (KD) or equivalent foreign currency capital value of listing parallel market share should to minimum KD 3.0 million and conversely, shareholders equity share should not amount less than paid up capital of any company in accordance with their latest audited annual financial reporting before requesting for listing in KSE;
  • Profit margin: during requesting for listing, company should to have an achievement of healthy profit margin for the previous two years and in addition, aggregate profit in that period should not less than 5.0 % from their paid up capital or aggregate capital value.
  • Number of shareholder: should to have at least fifty shareholders;
  • Rules for tradable share: during trading, companies should earnestly follow the rules of bylaws as directed by the Kuwaiti Companies Act during inception of trade as well as approved listing request and here number of share and the traded period should be inconsistent with prior Companies Act;
  • Application rules for a closed company: a closed company that achieved doubled (50 %) profit compare to their capital value in their previous one-year working period before application for commercial registration has an opportunity to request listing. Conversely, it can point up for a closed company that it should have one-year operational experience with achievement of 50 % its total capital value before listing request through changing their judicial status or form.
  • Registration of a non-Kuwaiti company: Before requesting to listing in KSE, a non-Kuwaiti company should to have a void registration in its own country stock market;
  • Duties of board members: board members of any listing company are responsible and accountable to implementing all of regulations required by KSE and additionally, it has obligatory for the board management of listing company should to confirm that all of the submitted data and information is most authentic as well as correct.
  • Correlation among KSE clearing chamber: listing company should to update their registration processes required by the KSE clearing chamber and in addition adhering towards the entire instructions issued by the KSE market;
  • Approval of annual general meeting of the listing company: in case of annual general meeting, KSE makes obligatory to attaining an approval of listing company’s annual general meeting for trading their shares in market;
  • Strategic share capital for a closed company: In accordance with the KSE listing rules, strategically a closed company should to ensure that at least 5.0% and an optimal rate of 25.0 % company capital owed by all shareholders. On the other hand, when the strategic shareholders have occupied less than 25% of aggregate average capital of any company and this attribute has potentiality to recover the deficiency of company capital by contribution of other shareholders by 5.0 % from any company’s aggregate capital. Moreover, a shareholding company should not have authority to act with 50 % of total aggregate shares for two consecutive years after enlisting in order to balancing. Here, it should to note that strategic shareholders have scope to sell all of their shares to a new shareholder, but they should to abide with the timeframe regulated by the KSE from the moment of approval of listing request;
  • Registration and membership fee: it has obligatory for all of the listing companies to pay KD 3,000 as registration fee along with 0.05 % of total paid up capital as membership fee annually. Point should to acknowledge significantly by all of the companies that both of registration fee and membership fee must not bypass the amount of KD 25, 000 for parallel market trade.
  • Deadline to conform: within 90 days after approval of listing request in the KSE, a shareholding company is oblige to perform all of the obligatory and voluntary regulations as directed by the KSE and the KSE has authoritative right to cancel membership entity of any company for not to adhering terms and condition within mentioned timeframe;
  • Refusal of listing request: KSE market committee has authoritative power to refuse the shareholding companies’ listing request prior affirming any reasonable reason;
  • Cancel decisions by the KSE: finally, the KSE has right to perform concealing all of the aforesaid regulation for shareholding companies from the time of issuing listing request which will be considered a matter of conflict.

Significance of Financial Reporting

For last two decades, demand for application of international accounting standards as well as financial reporting accelerated too swiftly therefore currently, significance of financial reporting globally and also in Kuwait increased speedily. By following the IFRS, significance of financial reporting has now formed as most acceptable accounting model in Kuwait. Alternatively, recent business companies in Kuwait formed as multinational company in order to widen their global accessibility and in addition, request for listing in foreign country’s stock exchange. Consequently, demands for financial reporting inconsistent with the international reporting standards make stronger than before. In describing significance of financial reporting in Kuwait, it should note that goal of financial reporting in the light of IFRS occupied through comparability, reliability, as well as transparency. In this way, financial reporting has developed keen prospect of cross-broader trading as well as capital rising. Moreover, complex procedures of financial reporting would easy during formation through the framework of international standards, have significant influence on identifying positive and negative areas of a company, and hence decision-making. Involved parties who have get enjoyed significant areas of financial reporting primarily classified into three groups. Here are the significant areas of these groups to define significance of financial reporting in Kuwait (Deloitte & Touche, 2003).

  • Key benefit of a business organization: dramatically reduce cost of production and in addition, make easy to access into foreign market by utilizing only one financial report. On the hand, authentic presentation of financial report has benefited by acquiring subsidiaries in international market.
  • Key motivations for investors: reasonably easier to take investment decisions since financial reporting provide a significant guideline to motivate to widen broader investment areas in both domestic and international market.
  • Aid to the national policy makers and regulators: national policy makers have enjoyed a vast and reliable information stocks therefore it has rather easy for them in participating in disclosure based market system.

Global Capitalism Influence in the Existing Rules

To deliberate to what extent the global capitalism influenced on the existing rules of Kuwait, this researcher aimed to based on the methodological ground of Marxist political economy to discovering the fusion of Kuwaiti by analyzing its reality socio economic political elements and by building a conceptual framework that will indicate the common features of global capitalism influenced in Kuwait. With this view, the essential element of the economic reality that affects other elements of the society and the people’s regular life by amalgamation with the global capitalism and how the Kuwaiti legislators uphold the interest of global capitalism rather than national intersect would be reconsidered with the authenticity for the mentioned purpose of testing and prediction. In this context, the methodology stuck on the wide-ranging scholarly knowledge on the dialectic materialism and critique of political economy of Karl Marx. The essential motivation of this section to explain the deep amalgamation of Kuwait with the global capitalism considering with the cerebral relevance of political economy that Marxist analysis presented with the inspiration of economic surplus of Kuwait along with its significance for economic growth and chronological progression with the core of monopolistic capitalism.

Influence of Global Capitalism in Terms of Globalization

Deardorff and Stern (2000) pointed out that the WTO22 is the body that has take the liability to engender the globalization through out the world and defined as immediately ‘the greater economic integration of the world economy than ever’ by opening national economy for the essay access of foreign direct investment. WTO has driven to implement the agenda of GAAT23 by which the developed economy would be gainer and the developing countries would face tremendous challenges.

Anderson (2001) argued that to implementing globalization drive WTO has to revolve and shifting the policy options to mounting and alternating economy and trade strategies with convinced categories of government interference in markets, particularly those are incongruity to escalating the globalization. Moreover WTO has been continuing the pressure on the government of less developed countries to amend the local legislation that can ensure the global capitalists to have easy access in the local market while the business entries of the lees developed countries has no capability to compete with the developed nations. Moreover, globalization has criminalized the trade union, enhanced child labor, created unemployment, and environmental hazard and generated more threats for economic and political.

Oguz (2005) explored that theoretical framework of globalization in the name of internationalization of capitalism has developed by the Marxist interpretation of imperialism which has flourished in the post world war II era while it has shaped as a neoclassic economics and academism theories in seventies. The raise of transnational corporations, free flow of capital in the form of FDI24, increasing stock market, transferring technology, and escalating innovation reshaped the media coverage but presented the dangerous outcome for the national economy but favorable environment for the global capitalism where IMF and World Bank are the major institution to look after the interest of global capitalism.

Liodakis (2003) explained the globalization as global capitalism with the predication of Marxist viewpoint and analyzed the current development of capitalism with a theoretical and historical evaluation of imperialism while the current progression and the expanding globalization of capitalists show the way to a dialectical restraint of imperialism. Analyzing the most up to date of economic conditions along with the existing arguments regarding globalization of capital, it has predicted that the new stage in the expansion of capitalism is at this time rising, which is the highest level of capitalism and its shape and character attempts to confirm the Marxist though by Lenin. The structural individuality of this framework ensures Lenin’s definition of for imperialism and the essential trends of the new phase of capitalism would endeavor to weigh against this hypothetical outset with that of the realm of previous sufficient framework to understanding the existing reorganization of capitalism.

Influence of Americanization in Terms of Globalization

Elwell (2009) pointed out that the historical and contemporary US foreign policy of the starting from post World War II era mainly aligned with its politically influencing the world, military aggression, and dominance of economic power. America along with its European allies leads such anachronistic role all over the world and continues imperialist suppression in the banner of the scattering freedom, upraising democracy, reducing nuclear weapons and fighting against terrorism around the world, to protecting US citizens and their allied. Such unchallenging US races continuing mass destruction, and robbing the natural resources including, foster asserts, mineral resources oil and gas of different countries while the ultimate goal of these actions are to preserve the interest of US capitalists to collecting raw materials, conquering markets, and exploiting labor in different countries.

Capitalism in the colonial ear was eager to conquering different countries to expand market for their commodities, in imperialism the highest stage of capitalism, lend capital to the governments of the developing countries and exploit them by taking highest profit from interest, influencing their policy and freedom. The global leader of imperialists the America is the most hegemonic power at this moment in the core of the global capitalist system, and its lead military aggression against any government who care national interest rather than serving US interest and do not bother to use nuclear weapon on the civilians. The US imperialistic drives become more arrogant in the post cold war era and it is the most notorious inhabitant of British imperialism who speaks out regarding democracy and human rights but all the time violates human right and democracy globally.

Elwell (2009) also added that the US imperialism has shaped had its objectives within very particular bubble of influence all the states of Gulf Council of Cooperation including the Middle East region, Pakistan, ,Afghanistan and ad central Asia to robbing there oil and gas resources and started very antagonistic policy to enlarge its economic and political influence by military aggressions. Another remarkable strategy of US imperialism is to generate unrest among the countries in this region and create rivalry with the intention to sell war weapons to those neighbors. The US has huge stock lots of war weapons stating from World War II to Soviet fall, later on cold war the US imperialists influence the counties to increase their military budget and to purchase those scraps as war weapons. If any national government protest and does not agree to do so, they will create different violence in that country and lead military aggression in the name of rescuing democracy. For instance, Saddam Hussein was a very good friend to the US imperialists until he looked for national interest and protested US exploitation, but did not bothered to use nuclear weapons among the civilian, children and women, to lead such notorious attacks there was no cry for democracy or human rights. The most recent WikiLicks proclaimed that US had influenced Saddam Hussein through Saudi Arabia to attack Kuwait and all this games were to exploit oil resources and selling weapons.

As an integral part of global economy and a major player of GCC Kuwait is not out of US influence and the rules that govern financial reporting in Kuwait has been influencing nakedly by the US government and nongovernmental organization, development agencies like WTO, IMF, World Banks while all of them are eager to exploit oil resources of the country. All these US allies are not always influencing Kuwaiti government to capture its oil economy but always suggest to developing non-oil economy keeping less importance on its strong petrochemical economy. The role of government is very suspicious and looks like a teddy bear to obey US direction rather than national and regional interest. The monarchy of Kuwait also

US UK Straggle to Influencing Kuwait

Venn (2000) pointed out that the United Sates of America and United Kingdom the most anarchy of global capitalism has long been engaged to establishing their imperialist control over Kuwait to ensure the interest by influencing the local constitutional monarchy of the country. UK established British naval base in the Persian Gulf at the beginning of last century to protect British interests in this region and about eighty years afterward in 1980 by means of Carter Doctrine, USA droved to take control over the Persian Gulf to robbing oil resource of Kuwait. German imperialists planned to establish Baghdad Railroad while Soviet Union also engaged to set up naval base in this region but British imperialists protected its supremacy by a treaty with the local rulers. The US drive towards this region abolished the British supremacy of power and American oil companies turned into most significant source of economic movement as well as government revenue of Kuwait by seriously influencing the constitutional monarchy of Kuwait including elites and business communities. At the time of inter-war era, the US oil companies became capable to gain extensive share in the oil reserves of the greater Arabian Peninsula including Kuwait and stated to creating unrest and violence to hamper the local system.

In this modern era the Arabian Peninsula including Kuwait has turned the supremacy of US imperialists with a greater political influence and policymaking initiatives, a week democratic environment, limited freedom of speech, simultaneous continuation of family monarchy and parliament has facilitated the US oil companies to prolong their dominance in Kuwait. The US imperialists have acquired almost fifty percent of the Kuwaiti oil allowance to the US multinational of the world’s oil refineries in Kuwait without any renounce for political stability, democratic practice, multi party politics and military resistance for the country and enjoying a heavenly place for ‘Opportunity devoid of responsibility’ in Kuwait.

US Middle East Policy & Kuwait

Noël (2008) argued that the US energy security policy along with its military aggressions are directly connected to its Persian Gulf policy in accordance with Carter Doctrine which has been implementing by deploying US Central Command in this region as a strategic security plan for Middle East. Pointing to the Soviet military presence in Afghanistan, US imperialism ailed with the Middle East countries and argued for protecting them from possible soviet aggression but after Soviet back, from Afghanistan US military do not left this area. Moreover destroying the Afghanistan, it has droved to destabilize in Middle East Considering to the threat evolved within the neighbor countries and strategic context of Gulf region, Iraqi attack in Kuwait, the monarchies of Kuwait became more intimate with the US policy while US intervention increased in this county without any development of democratic institution. Development of education, human rights also not yet improved enough, and the constitutional monarchy suffers from internal and external threat; there is lack of initiatives to protect the world oil resources from US oil companies. Under such political instability, it is quite natural for Kuwait to be influenced by the global capitalism to introducing any legislation for the nation and the rules that govern financial reporting are not out of this consideration. The most alarming issue is that a large number of the US companies as well as oil driven multinationals are working in the Kuwait market but not a single US companies are not listed in the Kuwaiti Stock Exchange.

Global Capitalism in Terms of Globalization

Deardorff and Stern (2000) pointed out that the WTO25 is the body that has take the liability to engender the globalization through out the world and defined as immediately ‘the greater economic integration of the world economy than ever’ by opening national economy for the essay access of foreign direct investment. WTO has driven to implement the agenda of GAAT26 by which the developed economy would be gainer and the developing countries would face tremendous challenges.

Anderson (2001) argued that to implementing globalization drive WTO has to revolve and shifting the policy options to mounting and alternating economy and trade strategies with convinced categories of government interference in markets, particularly those are incongruity to escalating the globalization. Moreover WTO has been continuing the pressure on the government of less developed countries to amend the local legislation that can ensure the global capitalists to have easy access in the local market while the business entries of the lees developed countries has no capability to compete with the developed nations. Moreover, globalization has criminalized the trade union, enhanced child labor, created unemployment, and environmental hazard and generated more threats for economic and political.

Oguz (2005) explored that theoretical framework of globalization in the name of internationalization of capitalism has developed by the Marxist interpretation of imperialism which has flourished in the post world war II era while it has shaped as a neoclassic economics and academism theories in seventies. The raise of transnational corporations, free flow of capital in the form of FDI27, increasing stock market, transferring technology, and escalating innovation reshaped the media coverage but presented the dangerous outcome for the national economy but favorable environment for the global capitalism where IMF and World Bank are the major institution to look after the interest of global capitalism.

Liodakis (2003) explained the globalization as global capitalism with the predication of Marxist viewpoint and analyzed the current development of capitalism with a theoretical and historical evaluation of imperialism while the current progression and the expanding globalization of capitalists show the way to a dialectical restraint of imperialism. Analyzing the most up to date of economic conditions along with the existing arguments regarding globalization of capital, it has predicted that the new stage in the expansion of capitalism is at this time rising, which is the highest level of capitalism and its shape and character attempts to confirm the Marxist though by Lenin. The structural individuality of this framework ensures Lenin’s definition of for imperialism and the essential trends of the new phase of capitalism would endeavor to weigh against this hypothetical outset with that of the realm of previous sufficient framework to understanding the existing reorganization of capitalism.

The US – Kuwait Strategic Integrity in Post Saddam Era

Terrill (2007) added that in 2003, the Iraqi revolt in Kuwait was a most significant aspect into the Kuwait US strategic integrity in post Saddam era where the parties keep hold of a hazard for further prolonging where Kuwait was more eagerness for the expulsion Saddam. At this stage, most of the Kuwaitis consider and blame America for the conspiracy that laid the gulf war and assess it as a mismanaged event due to US strategic plan, though it is not any governmental analysis but most popular public perception. Most of the Kuwaitis consider that the government leadership is particularly reluctant to it’s criticize due to US policy influence and gratuitous creator of tensions and conflict, while they obliged to speak out against the consequences of the Abu Ghraib scandal and consider as an aggression against Muslim.

The Kuwaiti government is interested to have a regional dialogue among the gulf countries including Syria and Iraq to generate a sustainable peace process in the Middle East but the US government tries to motivate Kuwaiti Emirs that while US armed force back from Iraq, it will again attack Kuwait. For the interest of to keep Kuwait safety, USA not yet withdrawal its military force from Iraq. At the same time Kuwait is also suffering from seriously dilemmas with Iraqi refugee crisis those Kuwait allowed in the direction of USA, they are creating different social crisis and there is another risk to drive some an unrestrained civil war while US army leave Iraq. Under such political crisis it is difficult for Kuwaiti government to argue with USA regarding the policy issues, due to lack of higher education and research on social economic aspects, it is also difficult for Kuwait to encounter US prescriptions of interference in the internal policy maters.

Alternative to the Existing Rules

Thatcher (2009) reported that the Kuwait has driven to organize a ten years scheme on sustainable development, practicable corporate governance to responding to the effect of Globalization in the GCC region with multidisciplinary international standards. The scheme engender on focusing the challenges of globalization, agenda of economic development, risk diversification proper utilization of resources by increasing regional cooperation, strengthening trade relations, including energy trading policy, security issues and migration concerns among the GCC member countries.

At the beginning, this scheme initiates among the six GCC members and planned welcome to Yemen, Iraq, and Iran, keeping deep linkage with Russia, China, as well as India while the London Stock Exchange would take the be responsibility to host and direct the program with close cooperation to organize a coordinated stock exchange and to strengthen the local institutes. As part of the new strategic market development and formation of integrated Stock Exchange, this program will engage enough flexible and broader notions as soon as the interests of GCC members have shifted to expand their domestic markets as well as to create a center of attention by the overseas investments. The new drive for national agencies fashioned to emphasis on few sectors, which are economically as well as politically emerging sector and considering as strategic integration among the stock exchanges for the potential stocks of the companies like trading concerns and telecommunication industries. The LSE28 presented a while paper on this Kuwaiti imitative with their analytical framework pedestal on the global best practice governance and presented the outline for limited implementation of IRAs29 among the GCC member counties with reformation of the listing rules in this region as per global standard.

Research Methodology


The main aim of the third chapter is to identify a proper research approach to discuss how the preferred research method will go with the key objectives of the dissertation investigation. However, the purpose of the study to understand the emergence and development of the rules that govern financial reporting in Kuwait by adopting the Political Economy of Accountancy (PEA) and Globalization approach as its methodological framework. Therefore, research methodology is important to get a clear idea how the selected approach practically implemented in the current study. This chapter would firstly consider PEA and globalization as a Theoretical and Methodological Framework, and finally discuss research methodology to analyze the data collection method.

Theoretical and Methodological Framework

Before attempt to analyze data collection, it is necessary to provide a clear perception on the identification of the problem as Malhotra’s first two-step give importance on the problem definition and development of an approach to the problem. However, many scholars recognize that the approaches of marginalist (neo-classical) economics is not sufficient to provide clear inspiration of the developments of regulatory framework of financial reports whereas some scholars suggest the Political Economy of Accounting (PEA) as a appropriate framework for studying the developments of financial reports and the rules that govern them (Abeysekera, 2003; Tinker, 1980).

However, the PEA is an acceptable framework but this single framework will not be able to cover the whole issues particularly in the context of Kuwait while multiple frameworks like PEA and global capitalism may serve the readers with a deeper understanding of the aggregate areas. Shafer, Park and Liao (2002, p.1) and Hooks (1992, p.130) conducted research on the professionalism, self interest and internal conflicts where they suggested “research in the political economy of accounting and the theory of standard setting may provide strong background and interesting interactive material for future research”. To clarify these issues, the questionnaire would be developed considering these frameworks and the research questions, which have already been provided in the first chapter.

Political Economy of Accounting (PEA)

According to the view of Irianto (2004, p.6), PEA is the most prominent framework provided by Tinker in 1980 and developed by Cooper and Sherer in 1984, which intend to understand and assess the emergence of regulation in terms of economic, social, and political situation. However, there may be many different variants of political economy but most highlight the inter-relationship between political and economic forces in society. Tinker has been critically evaluating positivist approach (Owen, 2010, p.136) and examining the fundamental aspects of neo-classical economic thinking (Irianto, 2004, p.35). Cooper and Sherer (1984) stated that regarding the study of financial reports and an evaluation of their value, the PEA suggests that any value of accounting reports is likely to be contested as it is shaped in (and shapes) both the political as well as economic ground.

Features of the Political Economy Approach

Owen (2010, p.27) stated, “PEA indicates the application of the ideas, models and techniques of political economy to the field of accounting, leading to an advanced understanding of accounting while the amalgamation of accounting and political economy brings a practical reality into political economy, assisting comprehend its potential by finding unresolved problems and gaps in the literature”.

This dissertation have been deal with three key attributes of PEA, such as, “power and conflict in society”, “historical and institutional environment of the society”, as well as the adoption of a more emancipated view of “human motivation and the role of accounting in society” to formulate methodological ground for this research while the modern academia concentrated on Marxist view. Tinker (1980) pointed out the limitations in mainstream accounting research compared to PEA and stated initial two features are compatible with the classical definition of political economy while last one is not. Cooper and Sherer (1984) and Selvaraj (1999) stated that the first attribute of PEA concentrate on conflict in society as a foundation to carry out a study of interests; therefore, accounting standard that govern accounting reports should emphasized conflicting interest in the accounting profession and the effects of these standards on the distribution of income, wealth and power in society.

According to the report of eStandardsForum (2010, p.4), Kuwait has accepted the international standards on accounting and auditing, but the compliance rate is only 22.5% and most of the sectors do not comply the standards though banking supervision standard is strong in this country. As a result, Ali, Haniffa and Hudaib (2006, p.687) suggested to apply this framework to scrutinize the development of the auditing profession in Kuwait, as this collective perspective assumes that power is open and equally contested. However, this dissertation will show that the exercise of power as noticeable and very simple though the companies exercise power more covertly in case of financial reporting by the subtle cultural progression, which influence the people, determines their activities and interests (Hill, 1997; Broadbent, Gill and Laughlin, 2002, p.643). In addition, this paper will consider the influence of power on financial reporting in Kuwaiti companies, and demonstrates how the existing rules serve the interest of any particular group.

However, second features of PEA can discuss according to the view of scholars; for instance, Selvaraj (1999) and Cooper and Sherer (1984) argued that PEA in accounting reports requires to take into contemplation the historical and institutional circumstance of the society in which it operates and the function of the state is indeed central to an understanding of disclosure requirements. On the other hand, many scholars like Zeff (1972) and Merino and Neimark (1982) stated the importance of an historical focus in order to comprehend the changing roles of discloser requirements, and Watts (2003, p.207) and Toms (2005, p.637) recognized the significance of government and the state the in determination of financial reports and policies. In addition, Shakleton (1977) focused on the question of government involvement in the improvement of accounting regulations by evaluating experience of the UK and the US policy makers in the historical development of accounting standards.

Cooper and Sherer (1984) mentioned the last attribute of the PEA, which indicates that their view is somewhat radical; for instance, the adoption of a more emancipated view of human motivation and the role of accounting in society, specifically, a view that recognizes the prospective of people and accounting to alter and reflect differing interests and concerns.

Finally it can argued that the PEA is an appropriate framework for considerate the nature of the regulations that govern financial reports in Kuwait, which are formed by power and conflict in a society; however, It does not admit that these regulations are unbiased and serve the public interests as habitually claimed.

Tools of Marxist Interpretation

The political economy of Marx has based on his analytical tools of philosophy that is named as Dialectical and Historical Materialism, for any analytical problem of society he has explore with this tools formed with four most crucial ideological ground.

To opposing the idealism and impracticality of the society Marxist dialectics not at all look upon the nature as a casual amalgamation of belongings, observable separate or isolated fact autonomous from each other, but considered a deeply connected and essentially reliant, dependant and influenced by each other as a whole all incidents are organically associated within the system (Stalin, 1938). Secondly, Marx condemned the capitalist metaphysics by arguing that the nature is not just a state of acquittal and quiet motionless stagnation but also a continuous progression of mobility of transform with spontaneous restoration of progress while some objects are constantly rising and mounting while the others are continuously decomposing and fading always.

Thirdly, Marx predestined the capitalist idealism by arguing that the procedure of development is not just an ordinary method of growth but it is a coherent route of evolution where every small and insignificant quantitative change bring deep-seated elementary qualitative changes and within the process the qualitative changes occur suddenly as a natural consequence of gradually quantitative changes. The next direction of dialectical materialism that Marx ordained the capitalist optimism by explaining that all happenings have its internal core conflicts those are natural event of everything and the conflicting opposite forces reshape gradual quantitative changes that intimately drive into qualitative changes.

Marx and Engles (1848) pointed out that until today history of the society are the stories of class struggles though all the written history has been deliberated with emperor or monarchy but the working class is the vital force for social change. In every society there are two conflicting class while in the capitalist society the owner of the means of production oppress the working class and the capitalists engender their profit from the unpaid wage of working force. The working class led their livelihood with very poor salary and oppress by the capitalist in every aspect of life while the capitalist lead luxurious life due to their ownership on the means of production, the continuous suppression leads the working class to be revolutionary to bring social change by replacing capitalism with proletariat dictatorship that also termed as socialism. Marx also predicted that in a socialist society, the private ownership of property would be abolished with social ownership and the internationalism of working class would bring social change in to communism where the inequality among the humanity would be fully put an end to exploitation.


Armanious (2005, p.2) stated that this is the era of globalization where the stock markets have experienced foremost changes in regulatory, institutional, and financial basics principal due to the pressure from technological development, liberalization as well as globalization, therefore, the globalization is expanding its area with structure, culture, corporate strategies, and accounting reports and managerial process in effective manner. Kose, Prasad & Rogoff (2006, p.12) argued that financial globalization ought to direct to flows of capital from capital-rich economy to capital-poor economy; and Martin (1994) further pointed out that the end of geographical boundaries is a challenge to all participants in the world economy, to developing as well as developed economies and to policy makers.

However, it is hard to define the impact of globalization in true manner on the developing countries or the development of financial reporting system but it is an era where the greater part of our social life is determined by global processes in which the different viewpoint of cultures, trends, and behavior, national economics, and national borders are dissolving. According to the view of Martens & Raza (2010), the main significance of globalisation is to contribute the developed nations with comparative advantage, but it also evidenced that economy of less developed counties are forced to manifesting themselves upon a global scale where they failed to compete with the developed nations though the system has guaranteed greater movement of economic activity. As a result, a protest against globalisation has started from decade, and the move is on going with the rising question of sustainability of globalisation (Martens and Raza, 2010) and the following figures are demonstrating the result or comparative measures of financial integration of globalization between developed and developing regions-

the effects of financial globalization.
Figure 1: the effects of financial globalization. Source: Kose, Prasad & Rogoff (2003).

To broadly examining such inequality, it will be helpful to make a relative classification by segmenting them into two groups considering their financial performance over the past 4 decades and assessment of monetary integration; for example, the first part is composed of 22 nations more financially integrated nations and the later part less financially integrated countries involving 33 individual nations. In addition, Avadhuta (1997) pointed out that developing countries is not hopeful to enjoy absolute benefit of globalization with sustainable growth rate in local economy. However, Kose, Prasad & Rogoff (2003) also noted that most of the governments of the developing countries are economically vulnerable and dependent on external flows in terms of socio- cultural, political, technological, and agricultural and trade factors; so, the concept globalization could not bring economic sophistication in these arenas. Hajeeh, Mahmood & Ramadhan (2005) the overall situation of Kuwait as well as other GCC countries is not hopeful to enjoy absolute benefit of globalization with sustainable growth rate in local economy.

As a result, Hajeeh, Mahmood & Ramadhan (2005, p.109) argued that globalization is the new form of Europeanization, and other researcher stated that globalization is a tool of a new colonization because developing countries have no political and economic power to take part in decision-making activities and have no control on international trade agreements with other developed countries. Moreover, Globalization is the capitalist forms of production, distribution, and consumption at the local and international level as all the decision and policy is designed in accordance with the recommendation of World Bank and IMF.

Rahman (2008) addressed that the developed countries are transferring environmental hazards and industrial pollution from their home country to the foreign country, but recent evidence demonstrates that they are not interested to compensate for such hazards caused by FDI flow; so, FDI is highly concentrated among the advanced industrial economies and developing countries remain marginal in both investment and trade.

However, this dissertation concentrate on globalization and issues related to the development of the rules that govern financial reporting in Kuwait. The following heads of this methodology would discussed the data collection process, and connect information of survey report with the importance of globalization in case of the disclosure requirements. Moreover, the collected information will assist the researcher to evaluate the organizational approach to the development and attitude of accounting reports in Kuwait.

Research Methodology

Many scholars provide many research approaches besides globalization approach and PEA, for example, Malhotra provides six main steps where as Yin gives case study approach to design the paper. It is important to mention that Yin’s case study approach is difficult to follow while the research questions design with “how and what” as it is appropriate approach for single case (Yin, 2003, p.16). Therefore, the researcher will apply former approach instead of second method. The researcher will apply the following steps –

Marketing research process.
Figure 2: Marketing research process. Source: Self generated from Malhotra (2009, p.9).

In first stage, the researcher will find out the existing problem of the existing listing rules in Kuwait, then he will provide theoretical framework on the topic and raise research questions, and in third stage, he will identify which information is relevant for this study to conduct research on financial reporting.

Research Design

Malhotra (2009, p.85) pointed out that research design is an important stair and it can generally classify as exploratory and conclusive. These approaches are significant as this study will seek to understand the emergence and the development of the rules, which govern financial reporting in the State of Kuwait. Exploratory approach will help to discuss the financial reporting regulations in terms of global, economic, social, and political contexts and such tasks need to follow an appropriate theoretical and methodological framework. On the other hand, conclusive research approach will assist to reach a conclusion by analyzing quantitative data. However, the following figure provides more information about research design –

Classification of Research Design.
Figure 3: Classification of Research Design. Source: Self generated from Malhotra (2009, p.75).

The author will adopt both exploratory research and descriptive research approach in order to organize this paper though there are some differences between these two approaches. In this situation, exploratory research will assist to originate a research problem or describe it more precisely, extend theories, observe research questions, and ascertain priorities for further study etc. In contrast, descriptive research approach will need to find out the perception of the listed companies in Kuwait and to describe financial market characteristics or functions by analyzing secondary data, survey reports, panels, observational and other relevant data. Therefore, exploratory research will help the researcher as many scholars identify that the developments of regulatory framework of financial reports cannot be understood merely from studies that adopt approaches that use marginalist (neo-classical) economics as the theoretical basis of their analyses.

Research Approach

Throughout this dissertation, the researcher will equally consider both primary and secondary data because some chapters will be based on survey report and rest chapters depend on the secondary resources. However, Cohen, Manion & Morrison (2007, p.33) and Malhotra (2009, p.75) pointed out two significant research approaches, such as, qualitative and quantitative researches. In addition, Malhotra (2009, p.137) stated, “qualitative research gives insights and understanding of the problem setting, while quantitative research seeks to quantify the data and, characteristically, applies some form of statistical analysis”. The researcher will concentrate on numerous survey methods to assemble the information from the accounts, elite academics, financial managers, and other researchers. However, the following figure shows the classification of research data –

Classification of Research Data.
Figure 4: Classification of Research Data. Source: Self generated from Malhotra (2009, p.137).

Primary research

According to the view of Zikmund (2006, p.72) and Cohen, Manion & Morrison (2007, p.95), the author gathers the primary data for the exact purpose of addressing the problem in hand, or he generates such data for research from the actual site of occurrence of events. However, they further added that the whole data collection process is time-consuming matter; as a result, the researcher needs to use advance technology to conduct research. The researcher of this dissertation will use primary data because the history of the development of financial reporting in Kuwait can be obtained from available published reports, which will help to understand the role of financial reports, but such information will not contribute to identify research gap and remove research dilemma in many case. To do so, the researcher will select the respondents (accounts, financial managers, economists, and scholars) from eight sectors those have enlisted in the Kuwaiti Stock Exchange. He will focus the effectiveness of existing rules, importance of further develop, corporate governance system, position of listing rules, Kuwaiti Stock Exchange among GCC countries and so on. However, the following table shows more details of the target respondents –

Sectorial Indices Number of Respondents Job Status Service Year Education Background
Banking 20 Most of the respondents are either accounts, or financial managers. But some of them are researcher, and ordinary people Most of the respondents have 1 to ten year, or more than then years job experience or some has close connection with share market M.Com, B. Com, PhD, MA, ACCA, BBA and so on
Investment 10
Insurance 10
Real estate 10
industrial 10
Services 10
Food 10
Non Kuwaitis 10
Mutual Funds 10

Table 3: – Selected Respondents for interview. Source: Self generated.


The researcher decided to gather primary data by applying more instantaneous method like electronic interviewing method. To select proper interviewing method, the researcher has considered the recommendation of the academics. For instance, Saunders, Thornhill and Lewis (2006, p.137) pointed out that electronic interviewing is the flexible way of data collection while personal interviewing method is not possible to apply. In this case, the researcher will not use face-to-face interview method considering the budget and deadline of the project. The researcher will design a questionnaire to send these survey forms to the selected respondents to reply the questions at their convenient time. However, this instantaneous interviewing process has some fundamental problem; for instance, the survey form may be completed by someone who is not competent for participation.

the classification of survey methods.
Figure 5: the classification of survey methods. Source: Self generated from Malhotra (2009, p.170).

Data Analysis process

The researcher will apply numerous techniques, such as the author will prepare an initial plan of data analysis considering selected research approaches. The first step is to check all the completed survey forms to clean incompatible or inconsistent data, and to eliminate unintentional mistakes about the development of the rules regarding financial reporting in Kuwait (Marshall & Rossman, 1999, p.203). The researcher will apply following approach –

Data preparation procedure.
Figure 6: Data preparation procedure. Source: Self generated from Malhotra (2009, p.402).

However, after editing and cleaning the data, the researcher will compare the result of the primary data with the result of the secondary data regarding the development of the rules regarding financial reporting in Kuwait, and graphically represent the result by using Microsoft excel.

Secondary data

Sekaran (2006, p.59) and Zikmund (2006, p.73) argued that secondary data has already exists and organized data, which is a prerequisite to the collection of primary data. According to the view of Cohen, Manion & Morrison (2007, p.86), this data is more reliable as the publishers, universities, academia, and famous scholars have already recognized it. In addition, Malhotra (2009, p.107) pointed out the advantages of this type of data over primary data and stated that secondary data is easy to access at minimal costs within short time.

the classification of published secondary sources.
Figure 7: the classification of published secondary sources. Source: Self generated from Malhotra (2009, p.110).

As a result, this dissertation will be benefited from different sorts of documents like annual reports of Kuwaiti companies, official documents, such as, government documents, which include the Ministry of Commerce, International Monetary Fund, and other related agencies. On the other hand, other unofficial documents like emerald journal articles, law journals, management books, newspapers, and available data from published previous research, statistical bulletin, case studies, e-books, and conference papers will enhance the quality of research paper. However, the researcher will use survey reports of the Hawkamah Institute for Corporate Governance, the International Finance Corporation (IFC), and Best Practice Report, Business Indicator Report, Financial Standards Report of Kuwait will play vital role to organise the paper with fruitful results, as it will help locating the developments of regulatory framework financial reporting in social, economic, and political context.

Questionnaire Design

Designing a survey form or questionnaire is one of the most significant steps to organize this dissertation, as this initiative will direct the researcher to find out the main research dilemmas and draw a conclusion with recommendation (Miles & Huberman, 1994, p.158). In order to give a clear idea about the questionnaire, the subsequent table shows the content of two parts –

Sections Content of the questionnaire
Part A The first part will be opening questions consist of introductory and simple questions with logical order, which need to know basic information of the competent accounts and financial officers
Part B On the other hand, the second part of the survey form is significant as this part only emphasized the research questions, for example, the purpose of the researcher is to examine the influence of social, economic and political factors those influence the existing rules in Kuwait.

Table 4: – content of the questionnaire. Source: – Self generated.

However, the researcher will apply following approach to design a questionnaire to interview –

The questionnaire design process.
Figure 8: The questionnaire design process. Source: Self generated from Malhotra (2009, p.281).

Findings And Results

The main idea of the findings chapter is to scrutinize the results of the actual survey to evaluate and appraise the emergence and the development of the rules that govern financial reporting in Kuwait. It is essential to state that the researcher distributed the questionnaire to 145 interviewees, out of which the feedback was received from 100 people. The rest 45 interviewees were reluctant to cooperate and to fill up the survey questions.

Information About the Respondents

Name, Address, and Phone number of the Respondents

This was a common question, which was essential to carry out a brief introduction with the respondents of the survey.

Nationality of the Respondents

This question has frequently asked to the interviewees in order to assess the extent to which foreign companies are enlisted in the Kuwaiti Stock Exchange and to find out if these international business organizations put and significant impact over the social, economic, and political factors, consequently affecting the disclosure requirements of the national corporate bodies. According to the survey, 82 percent of the respondents were Kuwaiti, where as the rest 18 percent were non-Kuwaiti.

Nationality of the Respondents.
Figure 9: – Nationality of the Respondents. Source: – Self generated from collected primary data.

The figure illustrates that there are higher numbers of Kuwaiti respondents; this indicates the fact that there are higher numbers of national organizations rather that international. Therefore, it can be argued that the impact of international business organizations over the social, economic, and political factors are insignificant.

The Highest Education Level of the Interviewees

This general question has asked to the respondents with the intention to know the number and frequency of people who have done their intermediate studies, received their university degrees, diploma, PhD, or other any educational degrees in order to join in their respective job positions. A better knowledge about the educational background of the respondents will help the researcher to find out the most reliable feedbacks in order to construct the prospective results. The survey has indicated that there are 25 percent employees done with their intermediate studies, 37 percent employees achieving their university degrees, 18 percent people with a diploma, 7 percent people with a PhD, and 13 percent people with some other educational degrees.

Education Level of the Interviewees.
Figure 10: – Education Level of the Interviewees. Source: – Self generated from collected primary data.

The result shows the fact that different people has employed in different job positions having come from diverse education backgrounds. However, in conducting the research, the researcher has emphasized more on responses from the interviewers who possess the highest qualifications.

Name of the Industry sectors of the Respondents

In order to make an evaluation of the industry sectors that each company belongs to, it is important for the researcher to ask this question deliberately to all the interviewers. Identification of the industries in which different corporate bodies operate in will help the researcher to sort out the different listing rules that bind each of those corporations influencing survey procedure. In many cases, these data would be useful to find out how the external influences like the economic environment or socio- cultural concerns dominate in the development of the disclosure rules of those stated companies. It has to be noted that in order to carry out the survey, the researcher has predominantly taken 20 respondents from the banking sector, 10 respondents from the insurance sector, 10 respondents from the investment sector, 10 respondents from the food industry sector, and 50 respondents from some other sectors.

Industry Sector Names of the Respondents.
Figure 11: – Industry Sector Names of the Respondents. Source: – Self generated from collected primary data.

The figure shows the fact that the interviewees selected for carrying out the survey was chosen equally from the insurance, investment, food, and some other industry segments. However, the number of interviewees selected from the banking sector was double in number.

Years of experience of the Respondents

Finding out the experience altitude of the respondents is imperative in the appraisal procedure of the results as it assists to discover the most precise and dependable answers. It is arguable that the survey has suggested that the numbers of employees with experiences below five years and with experiences between five to ten years are more than that of employees who are experienced for over fifteen years. Amid all the respondents, 52 percent employees had an experience of less than 5 years, 34 percent respondents had experience between 5 and 10 years, and 14 percent employees had experience for more than 15 years.

Years of experience of the Respondents.
Figure 12: – Years of experience of the Respondents. Source: – Self generated from collected primary data.

Although, the most experienced people were low in number, the researcher tried to concentrate more on the feedbacks from the experienced people. Most of the time it has expected that the interviewees with high job experience will be having a better knowledge about the external influences over the development of the listing rules.

The job position of the interviewees

This common question has kept forward to the respondents with the aim to recognize the presence of the employees working in diverse of job hierarchy who are working with their highest efforts in their individual job positions. A superior understanding about the job position of the respondents will assist the research work by discovering the main dependable opinions with the purpose of building the potential consequences. In so doing, the researcher tried to focus on various job levels by taking 16 financial managers, 24 accountants, 12 advisers, 36 bankers, and 12 other professionals.

The job position of the interviewees.
Figure 13: – The job position of the interviewees. Source: – Self generated from collected primary data.

The result indicates that the employees were taken randomly from different companies in terms of their job positions.

Respondent’s View

Whether the Respondents Have Clear Perception of Financial Reporting In Kuwait

In order to progress the research work further, it is imperative to ascertain that the respondents have a clear perception of the financial reporting system in Kuwait. Because of improper or inadequate perception of the interviewees over this conception, there are chances that the entire surveying process would be based on incorrect or untrue information. Therefore, in so doing, this question was predominantly asked to the employees working at different job hierarchies. By assessing the feedbacks achieved from this asking, the researcher would be able to identify all those respondents whose feedbacks could be comparatively unreliable than the others owing to their diminutive awareness over the area of financial reporting.

On the other hand, the data received at this point would also be used in the measurement of a number of other factors, such as the identification of the point that to what extent the workforce of Kuwait at different levels of business are skilled, competent, and aware of numerous issues. These issues have interconnection with the enlisting rules and the impact of socio- economical and political concerns in the enhancement of those rules. Nevertheless, it has been found that 74 percent respondents are aware about the issues related to the financial reporting in Kuwait; where as 20 percent of the employees are unaware of these issues. Conversely, 6 percent of this population was not interested to comment anything on this.

Clear Perception of Financial Reporting In Kuwait.
Figure 14: – Clear Perception of Financial Reporting In Kuwait. Source: – Self Generated From Collected Primary Data.

It has noticed that being working at job positions such as financial managers, accountants, advisers, bankers, or some other hierarchies, the employees at different levels in Kuwait possess a quite good knowledge of issues related to financial reporting as the major percentage of them have commented yes on the survey page.

Do the Kuwaiti companies disclose all information or not

In most number of cases, the employees argued that their companies disclose all material information in order to ensure quality, dependability, transparency, and comparability of financial information, and consequently enhancing insight into company performance comparable across nation. According to the survey, amongst 100 respondents, 78 percent peoples exclaimed their companies to disclose all information to the stakeholders. However, 12 percent of the surveyed population said that their companies do not disclose all material fact, whilst 10 percent of them have not commented anything on this matter.

Do the Kuwaiti companies disclose all information or not.
Figure 15: – Do the Kuwaiti companies disclose all information or not. Source: – Self Generated From Collected Primary Data.

The result shows the fact that a good percentage of the Kuwaiti companies disclose all information according to the respondents; however, still a significant percentage of people believe their organizations for not publishing every information or ensuring transparency and reliability.

Whether the Respondents Think That Financial Reporting Has Connection with Corporate Governance

Financial reporting involves a series of annual reports, public filings, and other public disclosures that businesses release for utilization by external groups; though concentrating over extensive variety of constricting scenarios, the appraisal is mostly based in accentuating corporate governance and debt agreements as principal places of concentration (with some dialogue of agreements with auditors and to a degree with regulators).

This reporting is the selection branches fundamentally coming from the surveillance that most of the hypothetical and experiential work on contracting in the accounting prose in current years is within these regions are some of the main arguments underlying corporate governance and its operational information atmosphere progress jointly over time to determine any conflicts. In this context, this question has particularly aimed to observe if the respondents of the survey possess enough competence to create the interconnection between financial reporting and corporate governance. As a response to this question, 82 percent of surveyed population appreciated the fact that financial reporting has connection with corporate governance. On the other hand, 10 percent respondents disagreed to this fact where as 8 percent argued that they are reluctant to provide any information on this matter.

Do Financial Reporting Has Connection with Corporate Governance.
Figure 16: – Do Financial Reporting Has Connection with Corporate Governance. Source: – Self Generated From Collected Primary Data.

The respondents specially pointed out the importance of well-defined rules, and a set of accounting principles to govern financial reporting by stating the condition of Souk Al Manakh, which was created a parallel market, was operating without any laws that governed trading activities and collapsed accordingly. It has observed that the highest number of respondent appreciated to the question optimistically. However, a few numbers of people are still suffering from misconception over this area of the topic.

Whether the Respondents Think That Existing Rule Is Sufficient for Good Corporate Governance

The feedbacks received from this question have been a mix reaction from the side of the respondents. Many of them have argued in favor or in disfavor of the existing listing rules stating that the present rule can affect the corporate governance of the enlisted organization both optimistically and pessimistically. Being the representatives of the respective companies, in many instances the employees have suggested that the existing disclosure rules are sufficient for the formulation of good corporate governance. However, a good number of the surveyed population provided the view that the present rules are not adequate for good governance. However, owing to the fact that in many instances the respondents tried to conceal the idea that the present disclosure rules may not contribute to the creation of good governance because of their insistence from the Kuwaiti companies, it has been a complicated task to construct the accurate results. Amongst 100 respondents, 38 percent people stated that they believe the present rule to be adequate, where as 43 percent people disagreed to this, and 19 percent chose not commenting anything to this.

 Is Existing Rule Sufficient for Good Governance.
Figure 17: – Is Existing Rule Sufficient for Good Governance. Source: – Self Generated From Collected Primary Data.

In majority of cases, a trend has observed amongst the financial managers, accountants, and bankers to state that the existing rule is sufficient for good corporate governance. However, the figure demonstrates the fact that a significant percentage of the population has disagreed to this matter.

Do the Respondents Think That Kuwaiti Companies Comply with the Discloser Requirements or Not

In most of the cases, the Kuwaiti companies do not comply with the discloser requirements. Owing to the fact that the surveyed population was members of different Kuwaiti business organizations, a large number of them were not interested to comment anything on this issue. However, it is arguable that the staffs working at different levels in the banking sector of the country had vast amounts of responses in this matter of concern as because this sector of Kuwait is particularly developing in terms of advancement of the compliance with the disclosure rules. Therefore, the representatives of the banking sector of the country said yes to the answer to this question.

On the other hand, the financial managers, accountants, advisers, or other professionals who are working at insurance companies, investment sectors, food industry, or at any other industries have mostly answered this question arguing that their companies do not comply with the discloser requirements. This feedbacks were coupled with some mistaken believes and dilemmas on the part of the respondents due to lack of knowledge about the conformation or non- conformation of the companies with the discloser requirements. It is noteworthy that only about 19 percent of the respondents from the banking sector have stated that their corporations conform with the discloser requirements, where as 52 percent of the interviewees claimed their respective organization to not comply with the rule, where as about 29 percent have not commented anything.

Do Kuwaiti Companies Comply With the Discloser Requirements.
Figure 18: – Do Kuwaiti Companies Comply With the Discloser Requirements. Source: – Self Generated From Collected Primary Data

It could be clearly noted that in most of the circumstances, the Kuwaiti companies do not comply with the discloser rules. This has represented in the figure above.

Whether Strict Discloser Requirement Protect Corporate Fraud or Not

Amid 100 respondents, 60 percent suggested that strict discloser requirement could protect corporate fraud. Even then, it is arguable that a huge percentage of the surveyed population disagreed the argument that strict discloser requirement could protect corporate fraud. As a reason behind this believes, these interviewees stated that although strict discloser requirement is present in Kuwait for a long period, until now, it has hardly helped preventing corporate fraud in business organizations. This people tried to emphasize in the issue that it is not sufficient for the country to merely have strict discloser rules, but what important is for the companies to conform to these listing rules and adopt these in their regular organizational practice. About 37 percent of the interviewees tried to focus on this issue. In addition, 3 percent respond have not commented anything as answers to this question.

Strict Discloser Requirement Protect Corporate Fraud.
Figure 19: – Strict Discloser Requirement Protect Corporate Fraud. Source: – Self Generated From Collected Primary Data.

It is arguable that although a good number of the interviewees believe that strict discloser requirement could protect corporate fraud, an essential part of them focused on implementation and adoption of the disclosure rules in organizational practices, which can in turn contribute to lessening the number of corporate frauds.

Whether the Accounting Standards Such As PEA Have Inspired To Practice Good Governance or Not

There has been a wide range of feedbacks as responses to this question. It has been one of the questions most widely answered by all the interviewees. In addition, some of the bankers, financial managers, accountants, advisers, and other professionals argued that the accounting standards such as PEA have inspired to practice good governance in every business at any particular industry, whilst others have opposed to this statement. About 83 percent of the respondent was able to come up with their decisions that the accounting standards such as PEA have inspired to practice good governance, where as 17 percent have been found to resist this conceptual framework.

Do the Accounting Standards Such As PEA Have Inspired To Practice Good Governance.
Figure 20: – Do the Accounting Standards Such As PEA Have Inspired To Practice Good Governance. Source: -Self Generated From Collected Primary Data.

Although it is widely believed by the people working at different job hierarchies that accounting standards, for instance, Political Economy of Accounting have stimulated the practice of good governance, still some of them who opposed this theory. It is arguable that in fact, the PEA framework promotes the integration of good corporate governance, as one of the features of PEA states this to be ensured.

Whether the Respondents Think That Existing Rules or Discloser Requirement Developed Because of Social Factors

The researcher has put forward this question to the respondents with the aim to find out what the respondents (who are playing a major role in their respective business organizations in Kuwait) think about the development history of the existing rules or discloser requirement and its connection with the social factors. There have been various reactions to this question. However, the largest proportion of the surveyed population has indicated that the social factors are one of the development tools of the existing rules or discloser requirements. On the other hand, it can be argued that the rest percentage of the interviewees had a bit of confusion or inadequate knowledge over this area of research. Amongst the total population, 31 percent of the interviewees tried to pursue that the social factors are one of the development tools of the existing rules or discloser requirements by agreeing to this fact. About 26 percent of people have strongly agreed to this, whilst 15 percent was neutral. Conversely, 18 percent of them has been opposing to this matter, where as 10 percent was not able to appreciate this matter mainly because of lack of expertise, and sufficient understanding and has consequently strongly disagreed to this.

Additional Comments

Numerous interviewees have suggested that the social factors indeed a have powerful influence over the development of the listing rules, since, for example, the socio- cultural factors of Kuwait have a big deal of persuasion over the business environment of the country. For example, the development of the discloser requirements has greatly affected by the conformist or conservative attitude of the Kuwaiti society, which include the implication of religious sentiments, ethical practices in communal lives, assurance of the introduction of Islamic laws in spheres of the businesses, and so on.

Do the Existing Rules or Discloser Requirement Developed Because of Social Factors.
Figure 21: – Do the Existing Rules or Discloser Requirement Developed Because of Social Factors. Source: – Self Generated From Collected Primary Data.

The figure above shows that the social factors are one of the development paraphernalia of the listing rules or discloser requirements in Kuwait, as indicated by the majority of respondents.

Whether the Existing Rules or Discloser Requirement Developed Because of Political Factors or Not

This question has intended in order to assess whether or not the employees believe the political factors to be one of the concerns that has contributed to the development of the existing rules or discloser requirements of companies. As per the survey suggests, 37 percent of the surveyed respondents have argued that they agree that the existing rules or discloser requirement developed because of political factors. On the other hand, 29 percent people have stated that they strongly agree to this question, where as nine people were neutral. In context, 13 percent respondents have disagreed to this and the rest 12 percent said they strongly disagree to any such concern.

Additional Comments

Amongst the people who have provided their valuable additional comments, it can be observed that a mixed reaction has achieved in the results of the survey. In addition, it has suggested that a necessary connection exist between political environment and listing rules in terms of various important political indicators. The development of the discloser rules, for example, are affected by changes in governmental attitudes towards business environment of the country, such as taxation policy, legislative bindings, and some other important factors like unstable political environment, strikes, etc. In Kuwait, the Islamic legislative barriers, as argued by the respondents, plays an important role in all these factors.

 The Existing Rules or Discloser Requirement Developed Because of Political Factors.
Figure 22: – The Existing Rules or Discloser Requirement Developed Because of Political Factors. Source: – Self Generated From Collected Primary Data.

It is clearly visible from the figure above that the financial managers, bankers, accountants, advisers, and other employees who are working in the business organizations in Kuwait are more or less concerned about the features that are inter related with the concept of disclosure rules and its connection with the political factors. However, still a good number of respondents who are unaware of this necessary relationship between the political factors and disclosure rules.

Whether the Existing Rules or Discloser Requirement Developed Because of Economic Factors or Not

It is important to note that about 45 percent of the surveyed interviewees have agreed to the fact that the economic factors are a significant element, which has contributed to the development of the existing rules or discloser requirement of the Kuwaiti business organizations. Similarly, 29 percent of these people have strongly agreed to this statement, where as, at the same time, eight people has described their neutral position to answer this question. On the other hand, about 14 people have claimed that they do not appreciate any necessary connection between economic factors and the development of disclosure requirements in the Kuwaiti economy. Besides of that, 4 percent respondent argued that they strongly disagree in this point of statement.

Additional Comments

By analyzing the additional comments given by the respondents, it has noticed that the people who have been either neutral, disagreeing, and strongly disagreeing to the above statement are either suffering from some kind of misconception, lack of knowledge, or low level of understanding to support the theory proposed. In addition, people who have agreed or disagreed to this statement suggested that the economic structure of any particular economy, which either could be in Kuwait or in any other country, are specifically considered as an essential instrument that helps in the development of the disclosure requirements. These economic factors, for example, could include elements such as fiscal policy of Kuwait, as well as the exchange rates, tariffs, quotas, or other factors like the policies, which states what should be the issues that could be concern during recessions.

The Existing Rules or Discloser Requirement Developed Because of Economic Factors.
Figure 23: – The Existing Rules or Discloser Requirement Developed Because of Economic Factors. Source: – Self Generated From Collected Primary Data.

Indeed, it is widely accepted that there is a necessary connection between economic factors and the development of the disclosure requirements. This has been demonstrated in the figure, where it has seen that the number of respondent appreciating that economic factor and development of listing rule are higher in number.

Whether the Respondents Think That Global Capitalism Influenced the Existing Rules or Discloser Requirement in Kuwait

There has been a range of responses received as answers to this question. Moreover, the respondents have provided their feedback both in favor and in disfavor of the idea proposed. In addition, it is important to argue that there bas been a group of people with some confusions or limited understandings. This group of respondents has noticed to have more and more interest over providing neutral responses. The researcher has made the use of the rest of the responses together with the additional comments in order to build up accurate results. In the middle of 100 respondents, 31 percent of the surveyed populace agreed that global capitalism influenced the existing rules or discloser requirement in Kuwait. On the other hand, 32 percent people strongly agreed to this theory, where as 20 percent people stayed neutral. In addition, 15 percent of the population has seen to have disagreeing to this statement, whilst the other 2 percent have strongly disagreed to the proposed theory.

Additional Comments

Significant additional comments have received from the part of the respondents on this question. A large number of the respondents agreed with the statement because most of the time, the listing rules has designed or changed in accordance with the recommendation of the IMF and World Bank, though these recommendation do not go with the environment of Kuwait.

Do Global Capitalism Influenced the Existing Rules or Discloser Requirement in Kuwait.
Figure 24: – Do Global Capitalism Influenced the Existing Rules or Discloser Requirement in Kuwait. Source: – Self Generated From Collected Primary Data.

The result shows the fact that majority of the population believes the global capitalism to have a significant influenced over the existing rules or discloser requirement in Kuwaiti perspective. From the above figure, it is visible for the surveyor to identify the rest part of the interviewees as well.

Whether the Existing Rules Need Further Modification for Future Development or Not

The survey suggested the fact that about 41 percent of the surveyed population agreed with the fact that the existing rules need further modification for future development. Conversely, the percentage of people who strongly agreed to this statement was about 28 percent, whereas merely 3 percent people stayed neutral. On the other hand, 18 percent of the respondents disagreed that the existing rules need any further modification at all to make future development in terms of the overall perspective of the country, whilst 10 percent people strongly disagreed to the proposed statement.

Additional Comments

There have been many comments from the part of the interviewees. Some respondents suggested that further modifications are need for future development of the disclosure rules in terms of imposition of punishment for breach of governance.

The Existing Rules Need Further Modification for Future Development.
Figure 25: – The Existing Rules Need Further Modification for Future Development. Source: – Self Generated From Collected Primary Data.

It has a widely accepted by the financial managers, bankers, accountants, advisers, and other professionals in Kuwait that the existing rules need additional amendment to make potential improvement in terms of the overall point of view of the country’s social, political, and economic background. Some of the respondents also provided their views in a dissimilar way by disagreeing to this statement. However, a few number of people stayed neutral.

To What Extent the Employees Believe That Kuwaiti Companies Followed International Standards

The aim of this question was to identify what exactly the conditions of the Kuwaiti companies are in terms of following international standards, and what exactly the employees, working at different job positions in diverse Kuwaiti companies think about their respective organizations’ reputations in comparison to the global context. It is arguable that the respondents have been providing their feedbacks quite enthusiastically as compared to any other asking. In addition, in the midst of an array of answers to the proposed question, the most impressive responses has selected in rebuilding the entire perception. It is essential to note that amongst 100 respondents, about 21 percent of the interviewees agreed with the fact that the Kuwaiti companies followed international standards in terms of carrying out regular organizational practices. In an analogous method, it has noticed that 9 percent of the respondents have strongly agreed to this, where as 5 percent stayed neutral. On the other hand, 51 percent peopled disagreed to believe in the statement that the Kuwaiti business organizations maintain any international standards at all, while the rest 14 percent said they strongly disagree to this statement.

Additional Comments

A huge number of the respondents have proposed different ideas through which the companies can make further improvement to comply with international standards.

Do Kuwaiti Companies Followed International Standards.
Figure 26: – Do Kuwaiti Companies Followed International Standards. Source: – Self Generated From Collected Primary Data.

The result shows the fact that the majority of the surveyed population, despite of being a part of their companies, disagree that their companies conform to the standards of the companies who are playing in a global context.


Beneficiary Groups Those Influenced the Shaping of Existing Rules

Local Business communities

In regarding to the influencing group of establishing existing rules of financial reporting in Kuwait KCCI30 is one of the most dominating entities in Kuwait. The KCCI born as a non-profit organization in 1959 in terms of an Amiri Decree and have responsible for entire regulations, terms, and conditions issued and practiced in Kuwait. More specifically, KCCI has mostly deal with the all of Commercial Laws of Kuwait. Besides financial reporting standards monitoring and amendment, KCCI has issued an important amendment during 2006 on Income Tax Law No. 3 of 1955 in order to impose 15.0 % tax on company’s annual profit. On the other hand, KCCI focused a set of recommendations that claiming inappropriate areas of current status quo in accordance with the financial repot released by he Chamber. The KCCI has also executed number of rich researches on analyzing Kuwaiti stock exchange as a result, now it has rather easy for Kuwaiti government as well as business groups to draw domestic, regional, and international hub to trade as well as financial reporting (Zahreddine, 2009).

Local Policy makers and Regulators

In defining existing rules of financial reporting standards in Kuwait, local policymakers and the regulators have great influence in several aspects. Firstly, to make defense from global economic crisis since 2008, regulators of Kuwait more emphasis on liberal market through globalization, adoption of advance technologies and effective linkage among international, regional and domestic financial monitoring standard. Second, in order to foster economic growth of the state, policymakers have enthusiastically attached with the dynamic and sophisticated financial system therefore can enjoy an efficient and effective financial reporting regulation. Functions of the efficient and effective financial reporting assembled through addressing articulate policy objectives and policy instruments. Third, designing and implementing rules for the business organization for a stable economic regulation monitoring with reporting. Four; capital market task force construction, which have the efficiency to make easier financial market reformation, issue and amendment or reporting rules during necessity to resolve challenges (QFCRA, 2010).

Kuwaiti Bureaucracy and Elites

Being a Constitutional Monarchy, at the early of independency Kuwait born as the self-governing political entity where, Al Sabah is the leading merchant family as well as leading political entity in making government. In illustrating influencers of Kuwaiti financial reporting regulation, here it should to notice that Al Sabah family with other tribal elites have empowered to reform political autonomy alone. Consequence of this, both the merchant families as well as other elites have enjoyed complete freedom of bureaucratic formation and in addition, played significant role during decision-making and amendment of regulations of the financial reporting. Since, merchant and elites families of Kuwait have discovered highest position of the states as well as kept rather prominent status of societal and political areas, Kuwaiti bureaucracy have frequently faced transparency crisis and corruption scandals in governing financial reporting regulations (Rush, 2000).

Development Agencies: IMF, World Bank

Summary of the role of development agencies like IMF and World Bank of regulating financial reporting in Kuwait has been achieve several significant merits. For instance, during complex situation like fluctuation of oil prices, alarming moment of regional security system, Kuwaiti financial authority has efficiency to keep stable financial rules and regulation. Suggested financial guideline has effective to supervising banking, fiscal, monetary policies, and stock market regulations. In defining role of IMF and World Bank, it should to quote that Kuwait id rather active in organizing and control of stable equity market among the Arab region as well as GCC states. Moreover, in recent time regulatory and the supervisory guideline of Kuwait empowered more than before by enacting new regulation for AML/CFT (IMF, 2004).

Globalization and Americanization

Globalization and Americanization influence Kuwait financial reporting regulation development identifies that patronized elite privileges than prior, concept of secular region or Islamist divides along with reformation of agendas. In time of bush administration, significant social changes31 had assessed. Consequence of the radical social change of Kuwait by globalization influence has not shaken economic regulation due to constitutional monarchy and all of the governing power captured by the Sabah family (Asia Institute, 2010).

International Accounting Standards

This part of the paper has assign to illustrating significance of International Accounting Standards (IAS) in Kuwait during financial reporting. Most of the financial analysts have pointed that for Kuwaiti financial reporting of different institutions32 have advantages to applying IAS Article No. 32 due to its fair and reliable accumulation of financial statements (Rahahleh & Siam, 2009).

Gulf Co-Operation Council

Similar to the domestic financial reporting of Kuwait, other GCC members have has abided to practice of constitutional regulation for financial reporting in the light of IAS. More specifically, it has mandatory for the six member states of GCC as well as their government bodies to exercise of IAS and its associate principles for auditing and monitoring the financial reporting compliance. Thus, role of GCC to forming existing financial reporting rules in Kuwait have great influence by generating available resources to the enforcement body to draw a reliable and accurate financial report of any business entity. Significant issue of GCC region that major number of member states have protected their investors and other corresponding users from the financial reports since they have enacted with the Company Acts along with Security Marker Rules most of the time. (Al-Shammari 2005)

 Financial reporting regulation of GCC members.
Table 5: Financial reporting regulation of GCC members. Source: Al-Shammari (2005, p. 18).

Route to Resolving Conflicts among the Involved Groups

Practicing Corporate Governance in Kuwait

Hypothetically, the term corporate governance has abide by three issues transparency, accountability and responsibility and the corporate governance practice in Kuwait in the light of establishing financial reporting regulations has mostly focused on strengthening transparency and accountancy as well as fighting against corruption in both public and private business sectors. Regarding this issue, views of common people reflected that similar to the international collapse in US (Enron), Kuwaiti private business sector has also corrupted and additionally, deceive practices of private companies have also harshly influenced diverse economic of sector of their neighbor countries as well. For economic development of Kuwait, private business communities have massive opportunity to playing significant role in the area of economy, politics, as well as socio-cultural reformation of the state.

History of Kuwaiti corporate governance witnessed that socio-economic as well as cultural reform do not yet inherently made any point of conflict during modernization of economic base. Alternatively, business and cultural pattern of Kuwait is absolutely diverse from western and European and in addition, from the ancient period Kuwait had practiced as well as set of good corporate governance principles. However, principles of corporate governance were quite incompatible in practice since they have surrounded by rather problematic standards. On the other hand, intentional business monitoring standards have frequently tried to influence domestic constitution of Kuwait for effective growth of their emerging economy as well as boosts economic co-operation, superior corporate governance development and rewarding local constitution with respect, accountability, transparency and corruption free (Saidi, 2004).

Harmonizing financial reporting under Islamic financial System

Kuwait has practicing Islamic financing system during financial reporting and regarding to the international financial instrument transaction throughout IFRS & AAOIFI33 since it has obligatory requirement of standardize accounting system in local Islamic banking operations and global transaction as well. Although Islamic financing system has enjoyed a rapid growth with cultural diverseness as well as the homogeneous code of Shariah compliant but in contrast, IFRS accounting principles issued by IASB34 have the efficiency to resolve jurisdictional requirements in both of Islamic and global economy.

Alternatively, key limitation of the Shariah compliant has suffered from individual financial reporting guideline, acceptability as well as significance influence on Western, and European accounting system but at same moment, IFRS has great demand by both domestic and international investors as well as have vast global market potentiality without any consistency crisis. On the other hand, IFRS is the only single entity of uniform financial reporting standards that has equal skill in monitoring domestic financial reporting regulation along with conventional banking operation. In order to harmonizing Islamic financial system and reporting, a group of financial analyst advocate that operational area of IFRS has much broader than Islamic financing but considering socio-economic atmosphere of Kuwait numeric principles of IFRS has faced criticism during reporting. Hence, to resolve this dilemma promptly the AAOIFI is a safer strategic tool to mitigate complexity of Islamic accounting standards, auditing and governing Shariah compliant in both domestic and global market (ACCA, 2010).

Mitigating Challenge of the Islamic Accounting

Most of the MEC countries including Kuwait35 have severely suffered from the challenges of Islamic accounting system in contrast with the IASB regulations. Kuwait has taken participating with the IFRS regulations since their economic atmosphere as well as Shariah compliant has limited scope to participating and acceptance into significant world region. In short, Islamic accounting system has mostly faced crisis in three segment of cultural, economic, and accounting system as well as financial reporting in the major world region. Currently, real challenge of Kuwait in preparing and development of financial reporting regulation that IASB has required to complying fully with the IFRS principles and considering the point of IFRS firstly, Kuwait has oblige to redefine their entire business reporting culture as prescribed by the IFRS.

Secondly, crisis of IFRS authorized auditors and at last, IFRS has not yet have workable instruments in Kuwait in consistent with their national standards. Mitigating these dilemmas without hampering FDI36 inflow in their state, Kuwait has currently proposed to establish AGCC37 in order to internationalize of their accounting system as well as modernization of financial reporting and in addition it has to be note that alike few other MEC countries Kuwait has also complying IFRS since 1991. At the end of this part, Kuwait has a set of significant representation national attributes like geographic location and area, GDP growth rate, number of population to have a seat on IASB structure like other reputed international financial institutions38 (Razik, 2008).

Vision towards the Single Currency in the GCC Member States

Prime occupation of the most of GCC members are to trade of natural resources and in specifically importing oil and gas. Economics profile of the GCC members have accounted that 42.0 % of world oil reserve along with 23.0 % of proven gas stock has reserved by them. Considering these economic diversification as well as take an advanced step towards their monetary union like Euro (€), GCC members had approached to launch the single currency since early of 2010. On the other hand, point of motivating GCC members in doing so is that member states characterized throughout a great degree of common attributes of three major aspects politics, economy and societal facts. Moreover, common currency has the potentiality of providing superiors economic values to recovering economic scarcity of many regions. Alternatively, inflation rate of this region is also reasonably lower than some advanced countries until global economic turmoil starting.

In this context, economists had quantified that until 2007 GCC average inflation rate was 5.0 % whereas in global recession turned into 10.0 %. Additionally, exchange rates of the GCC states have been yet rather stable as well as continued throughout prior twenty years. Influence of all these facts, highly pegged towards US dollar ($) and stronger correlation among environmental dynamics GCC regions as well as Kuwait have agreed to launch single currency therefore would have enjoyed a monitoring union of featuring international standard and principles and additionally, financial reporting rules development as well as practice (Alsowaidi, 2007).

Key motivation for single currency in GCC.
Table 6: Key motivation for single currency in GCC. Source: Alsowaidi (2007, p. 5).

Kuwaiti Security Reformation and US Policy

From the very beginning of independency, Kuwait is rather pivotal as well as significant in order to mitigate political dilemmas in the Middle East region especially of Iraq issue. As a result, security reformation of Kuwait has much get contributed by US government as well as their foreign policies. On the other side, political and government style of Kuwait noticed that Al Sabah family has governed the constitutional monarchy for prior twenty years where numeric foreign energy firms permitted therefore Kuwait would get rid from the severe impacts of global economic crisis though recent intra–political wrangle either delayed or cancelled several energy projects. During security reformation of Kuwait, participating in both regional policy and US policy most of the time deferred Saudi Arabia rather than other member of GCC. Before one decade of independency, US consulate started functioning in Kuwait and during Iran Iraq war of the decade of 1980 US defense department had taken initiative to protecting Kuwait and additionally, in mid September 1991, Kuwait agreed to sign a 10–year defense pact39 with the US government.

Consequently, SOFA40 noticed that US government cared Kuwait rather their legal frame and obligations and in addition, the defense pact renewed for next 10–years in September 2001. Since 1991–2003, US military invested around US $ 350 million annually in term of UNIKOM41 as well as for enduring freedom of Afghanistan from Taliban. Alternatively, OIF42 to supporting Bush administration, Kuwait got the opportunity to reform their air and water reformation by $ 266 million as burden sharing support regarding to the combat43. As published by the Defense Department of Kuwait, to support OIF Kuwait participated about $ 210 million for help defray costs of 50, 000 US military personnel and politically, Kuwait is the most significant route of US to exit from Middle East. At this time to leave the point, it can claimed that Kuwaiti security formation as well as naval structure has mostly design and funded by the US administration as a safer region of implementing their foreign policies in MEC states (Katzman, 2009).

US aid towards Kuwaiti security reformation ($ in thousand).
Table 7: US aid towards Kuwaiti security reformation ($ in thousand). Source: Katzman (2009, p.9).

Information Technology Integration in the Financial Reporting

Since second of 1990, besieges companies Kuwait felt necessity of online business and documentation of financial information in terms of financial reporting. In this regard, current scenario of Kuwaiti financial reporting has drawn in this part by focusing integrity of the IFR44 of Kuwait that fulfill adequacy of ruling government’s corporate governance state of affairs. A recent research report has evaluated that 42 companies in Kuwait has voluntarily use internet modes for their financial reporting. On the other hand, 47.60 % of Kuwaiti companies have own website to execute financial statements and reporting (Smith & Pierce, 2005).

Appointing Foreign Auditors by the Kuwait Companies

An empirical study on Kuwaiti financial reporting regulation development has described that, most of the Kuwaiti companies demographic profile has far different from their auditors profile. Since, there have two categories of company financial reporting first, some of the companies appoint local auditors in doing reporting and several have enjoyed service of foreign auditors appointed by them. In appointing foreign auditors, Kuwaiti firms have preferred reputation, performance quality, year of experience and academic background, and in doing so, companies do not care of cost of auditing (Alduwaila, 2008).

Motivations of the Involved Groups & People

Protecting Volatility in the Kuwait Stock Exchange

Human motivation has inspired the development of disclosure requirements and third feature of Political Economy of Accounting (PEA) also concentrated on the adoption of a more emancipated the view of human motivation in conventional accounting that means the rules will develop and scrutinize in accordance with talent, knowledge, prospective of a person, human preferences and motivations.

After the grate depression in the 1930s, many scholars concentrate on the corporate governance system as well as unconstrained managerial power to analyze corporate realism (Lowry & Dignam, 2007, p.394). However, Dodd (1932) argued that company is a real person, so, it has some social responsibilities though it may sometimes be contrary to the economic objectives, which would help to save the system of market allocation of capital and extended public confidence in the capital markets. On the other hand, Berle and Means (1932) opposed to the view of Dodd by stating that Dodd’s theory is practically unenforceable theory, and they concentrated on the company’s accountability mechanism on just the shareholders and managers are the accountable to the shareholders as shareholder profit maximization is the sole corporate interest.

However, Berle’s theory became outdated due to lack of managerial accountability after the Second World War while pluralist approach of Dodd able to act like corporate citizens and balance interests of shareholders, staff, clients, and the ordinary people. Merino and Neimark (1982) recommended that broadening the scope of listing rules beyond their current financial orientation is required to understand the issue of corporate accountability while Porta et al (1998) stated that forms of legal protection for shareholders are essential in determining whether a market-based economy, in which the Berle and Means Corporation plays a vital role will arise. However, Marris (1964) stated that long-term growth was the key purpose of managers, and Williamson (1974) justified the reason of profit maximization, Barnmul addressed narrower managerial model where imposed some external and internal restrictions on the discretion of the managers.

By the 1970s, economic conditions had deteriorated and the managerial firm had become focus of general discontent, so the entire system influenced by the number of economist who had been writing on the nature of the firm during the Greatest Depression and concerned initially with the failure of neo-classical economics to deal with the organizational nature of the firm. Additionally, Jennings & Happel (2003) further mentioned that firm should analyze differently but this theory had failed to explain where the authority of the management came from; therefore, in 1975, Williamson provided different theory similarly dealing with the hypothesis of Coase, but he gave importance on the shareholders’ primacy based on the incapability of the shareholders to renegotiate their situation. In addition, Williamson expressed that shareholders purchase shares without any contractual guarantee whereas employees as well as creditors can seek assurances by contracts or renegotiation, so, he stated that there should have some provision to secure shareholders’ interest, and it is important to change its organizational structure to protect the claim of shareholders.

Serve interest

The corporate world has observed the serious moral corruption, such as, multinational or large companies become bankrupt or collapsed because of corporate fraud or drawing the large payment by the top executives. Devine (2008) reported that Lehman brother’s chief executive Richard Fuld got $480 million, similarly Waxman went on a $US 440,000 spree including $US 23,380 on spa treatments in late September from American International Group. Many large companies like BCCI, Polly Peck, Robert Maxwell Group, Enron, Worldcom, and other companies have collapsed due to the successive impacts of scandal, global recession in the late 1980s and early 1990s, or to corporate fraud by the auditors, profit maximization, and excessive remuneration of the top-level executives. From the above discussion, it can be argued that the listing rules should develop to protect the shareholders from corporate fraud but sometimes this rule serve the personal interest of the elite groups as well as the executives.

However, one of the main purposes of the existing listing rule is to establish good corporate governance to protect the shareholders and the company from unusual situation by broadening the range of disclosure regulations beyond their current financial orientation to understand the corporate accountability concept. IFC (2008) reported that the listing rules provide the guidance for the implementing good board practice; for instance, the disclosure rules give importance on the independence of the Chairman, significance of the board of directors, at least three committees for auditing, determining remuneration of the top level management, and nomination committee, and sub committees for risk management and so on. It is also important to mention that all these requirements absolutely serve the interest of the corporation irrespective of size, profit, and leverage.

Lowry & Dignam (2007, p.412) stated that audit committee is playing a vital role in terms of the monetary responsibility of the organization because it has to supervise the audit procedure and take steps like a principal suggestion identified for the auditor, which help the company to reduce accounting fraud though sometimes top level management was engaged with earning management. In addition, listing rule serve the interest of the companies, for instance, auditors may act against the company by performing non-audit activities considering own interest, executive may request to manipulate information, directors may intend to draw large remuneration and auditor may offer lucrative offer for shareholders though the companies have not sufficient profit to do so. There are some other rules that serve the interest of the company as well as the shareholders, for instance –

  • The listing rules have concentrate on internal controls in order to prohibit insider trading, and to protect minority shareholders’ interest;
  • It recommended that the Board of Directors should disclose all the issues relating to conflict of interest;
  • The listed companies should provide sufficient information timely about the planning to the stakeholders to aware about their rights and get effective cooperation;
  • In addition, these rules included that the Board of Directors should implement a code of conduct to disclose to the ordinary people, which must be approved by the general assembly;
  • Furthermore, companies must focus on CSR issue to make sure its contribution to sustainable financial growth.

Encouraging FDI inflow

The Kuwaiti financial regulator is trying to improve a steady and transparent investment policy through the existing open market economy; as a result, the policy maker should develop the disclosure requirements considering the national interests, companies’ interest, as well as shareholders’ interests. However, the corporate governance strategy should obviously mention how this rule will protect the minority shareholders’ interest while administrative control will change from national company to international company, and how the shareholders will understand the consequences of disobedience of disclosure requirements and able to protect their interests.

On the other hand, listing rules implies the use of standardized and sound managerial climate for enlarging the scope of FDI for a major purpose of utilizing domestic capital, innovative vision, industrial restructuring and regional collaboration between the similar companies. However, these regulations should have some other provisions and supportive policies in order to increase FDI inflows in Kuwait and unusual transactions, for example, the registration process should simple, insider dealing should monitor by the authority, joint venture and sell-offs of a large section of the firm must be disclosed to the shareholders to make it easy to understand. In addition, IBQ (2010, p.1-4) pointed out that the global financial crisis had adversely affected on the economy of the GCC countries but Kuwait experienced comparatively better situation, for instance –

  1. Kuwait was the only GCC country apart from Qatar to observe Foreign Direct Investment growth in 2009, and in its investments overseas, however, Kuwait became the GCC and MENA region’s biggest outward investor same year with $US 8.70 bn. However, the following figure compare the FDI inflows of Kuwait with other GCC countries –
GCC Foreign Direct Investment inflows.
Figure 27: GCC Foreign Direct Investment inflows. Source: IBQ (2010, p.1).

Importance of Financial Statement in Kuwaiti Companies

In Kuwait, the valuation of a closely held corporation for litigation support and expert testimony requires a thorough and all-inclusive financial analysis; this analysis usually consequences in recognition occurrences of whichever dealings that may be appropriately informed but that do not mirror economic realism or financial exposure that has anticipated to disfigure an enterprise’s pecuniary pose and outcomes of functions. The financial analysis segment of the country’s businesses and evaluation sometimes assist the evaluation analyst to find out decisive subject matters that may unswervingly influence the analyst’s assessment with reverence to the disputed evaluation; moreover, the analyst should not plainly acknowledge subject company’s financial statements and other financial data without performing appropriate financial analysis procedures on this data (IFC, 2008). This analysis helps the companies of Kuwait to reveal accounting or reporting problems that may ultimately affect the evaluation conclusion; these financial analysis procedures are particularly important when evaluation of a closely held business base on un-audited financial statements, as because these un-audited statements are not subject to scrutiny of an audit performed in accordance with generally accepted auditing standards.

Additionally, many closely held companies in Kuwait do not prepare formal financial statements; in such cases, the only accessible compilation of data reflecting a company’s results of operation and financial position has reported in the company’s federal income tax returns – the income tax returns often do not conform with commonly accepted accounting doctrines. In order to verify if there are fundamental tribulations in the subject financial data, some Kuwaiti companies analyze the company’s financial statements, in case the fundamental financial analysis point to unusual trends or correlation within the reported financial data, additional investigation may require by a forensic accounting consultant. This forensic research could comprise analysis of detailed transactions, journal entries, accounting work-papers, and other principal documentary verification underneath the financial statements; in fact, this type of forensic research has very focused and has different from an audit conducted in compliance with generally accepted auditing standards.

Often, Kuwaiti companies possess working-knowledge of generally accepted auditing principles to analyze financial statements and decide if certain irregularities, discrepancies, or dubious financial relationships subsist that require further investigation; recognizing specific accounting issues that are typical in industries is important in business valuation process; if any company’s financial statements do not comply with principles, this should be appalling to analyst. The companies may have to reaffirm these financial statements on a pro forma basis (in accordance with generally accepted auditing principles) with the intention of completing the evaluation, where the analyst suppose to read the whole financial statement, particularly the annotations to the financial statement, for any data with regard to concerns that could affect the value.

The companies consider to disclosures connecting to accounting systems, mortgage contracts, fixed-assets, intangible-assets, depreciation, extraordinary-items, interest, retirement-plans, tax-deferrals, rental contracts, related-parties, termination of business-segments, and the company’s ability to continue; additionally, these financial statement annotations and disclosures may afford valuable approaching into critical factors to be considered in the evaluation process and the company’s competitive strengths and weaknesses. This deliberation and resolution of the Kuwaiti company’s income tax returns to their financial statements may convey valuable imminent to the companies’ financial complicacies; it is usual for a company to follow diverse accounting regulations for their internal accounting records and for their financial statements. For that reason, an essential financial analysis can appraise the dissimilarities in bookkeeping rules for internal and external reporting functions; in addition, the companies may also reunite the provisional financial statements and the year-end financial statements with the income tax returns, with consideration of any noteworthy variances.

However, Darrat, Topuz & Yousef (2003, pp. 4-5) pointed out that Kuwait’s banking system has experienced serious problem due to series of negative financial and political shocks, such as, the crash of the unofficial stock market “the Souk Al-Manakh”, declining collateral values, and complexity with non-performing loans because of this crash, and other external and internal factors.



It is essential for the regulators to remove the complicacy of the existing roles to make them easygoing for the concerned investors and company management and shareholders.

The most alarming and divesting suggestive point for Kuwait is to decrease it integrity for policy making towards the global capitalism, it has evidenced that the US policy towards the business has been centered to the interest of few capitalists rather than interest the interest of the mass people. Most of their legislation and policies have the opportunities for the capitalist to escape from responsibility, but no way to rescue the people. Even the Sarbanes–Oxley Act of 2002 of the USA and the Company Act 2006 of the UK has argued that to publishing accurate financial reporting is an integral part of corporate social responsibility of the companies, but there is no indication what will happen if a company avoids to publish its financial statement. Thus, Kuwait needs to formulate its own policy and rules pointing to the locale people and their values and culture rather than following the direction of US or any other global capitalists. It is also emergence to developing leadership for local policy making, the constitutional monarchy needed to understand that people of Kuwait is the main source of power, and all policy, rules and legislation would be face only to the people of Kuwait not the global capitalism.

The earning management or the financial statement harmonizing is the misrepresentation of financial reporting with the aim to make them attractive for the investors and shareholders, the concept has been recognized and practiced by the international accounting organizations and has accepted by the Islamic Finance. The focal point of earnings management has already generated tremendous corporate scandals globally and the recent initiatives of financial accounting stated to discourage the practice of earning management. As the core values of earnings management is totally conflicting with Islamic morals of honestly, it is essential for the Kuwaiti regulators to prevent earnings management practice by presenting actual financial reporting.

This researcher would also argue to explore Accounting education in Kuwait integrated with IT and IS strategy applying with political economy of Accounting, this drives may initiated from the school level and the government needed to allocate more funds for higher study in this area.

It is considerable advancement that integration of the Information Technology for the business application is flourishing Kuwait and some of the listed companies have already started to publish their financial reporting. Hoverer there is gaps with the IT professional and business managers with know how among the business communities of Kuwait, to overcome such dilemmas it essential to benchmarking the essential is reporting standards and procedures by the regulators. Kuwaiti Stock Exchange authority may introduce web-based software for the listed companies optimized to input data from any user end without having any higher IT knowledge.

  • From the above discussion, it can be argued that most of the national and international listed companies in Kuwait have not complied the accounting standards and in 2009, Kuwait scored 22.5 out of 100 in Standards Compliance Index. As a result, international Monetary Fund has suggested that the policy maker or regulator build ability to make sure compliance though this country has already enacted the international standards on accounting and auditing;
  • At the present time, many large companies like Enron and Worldcom have been collapsed due to noncompliance of the listing rulers; so, listed companies in Kuwait should comply the Listing Rules of the Kuwaiti Stock Exchange in order to avoid such risk;
  • The existing rule should more improve transparency level by strengthening internal controls, recruiting independent non-executive directors, external audits founded on global standards, disclosing any financial assistance from the nation, and generating collective performance reports;
  • The entire dissertation discussed the social, political and financial effects on the financial reporting regulation by considering mainly exiting research work, but this issue is still a subject of controversy in case of implementation, compliance, and development process; therefore, the researcher should conduct more research work to solve the present dilemmas and contribute to develop the policies;
  • Secondary data demonstrates that smaller companies disclose more than the larger companies do. Kuwait’s financial regulator should know the impact disclosure rules on different companies considering the size, profitability, and leverage of the companies to identify the reaction of companies on the accounting regulation, which will direct the regulators to develop the existing rules and improve transparency in the stock market;
  • Moreover, Human motivation has always influenced the development of disclosure requirements; as a result, it is essential to empower boards by enlightening their authorizations and respecting their independence, separating the function of the chairman and CEO, and increasing the power of boards to appoint CEOs, and methodically observing the performance of the board in accordance with the recommendation of scholars ;
  • In addition, Martens and Raza (2010) identified that the developed countries gained 91% of the outsider liabilities while the developing countries recorded by only 8% in 2004, similarly, IMF reported that developed countries are enjoying considerable financial market growth while the later ones are enjoying less significance in this regard. However, Martin (1994) argued that globalization is the new form of capitalization as the possible global influences may surpass economic influences by transnational corporations in which national policies would be affected, and regulators are no longer be capable to exert control over their regulatory territories; so, the identity of the State of Kuwait may have been affected by global capitalism because of high foreign debt, high budget deficit, high dependency on the IMF and the World Bank;
  • Most of the time, existing discloser rule serves the interest of any particular groups; for instance, director’s remuneration is a most controversial issue in the today’s business world and the range Director’s remuneration seriously varies in different organisation and recently many big business has been collapsed for not to follow the measures designed for expense of remuneration. In this context, the financial regulator of Kuwait has emphasized to have at least three different committees, such as, an Audit Committee, a Compensation Committee and a Nomination Committee (Capital Standards, 2010, p.15) and their should have other committee for risk management, investments, corporate governance and so on;
  • The rules that govern financial reporting in Kuwait has also developed due to the impact of social factors; for instance, there are mainly two communities, such as, Kuwaiti (mostly engaged in production) and non Kuwaiti (mainly engaged in the professional work) who have influenced political and economical environment differently, which also develop the listing rules.
  • On the other hand, social factors influenced the discloser rules, for example, close relationship is one of the main concern to the regulator; so, several reports recommended that the management or Board of Directors should not consist of close family members or friends, and the Chairmen should independent director. However, the regulator should provide a straight forward definition of independent because there are no clear definition or explanation of independence; as a result, listed companies continued to select non-executive directors in the remuneration committee who are relatives or friends, ex-managers and managers of another corporation where he had interest;
  • Historical and institutional environment of the society has also significant influence on the disclosure requirements; for instance, with oil riches Kuwait exhibits extreme wealth, and extreme vulnerability, as the oil companies are not yet come out from their pursuit of profit and their ultimate objective is to influencing political and economical situation. Therefore, the attitude of Kuwaiti oil companies should change their attitude and improve the concept of corporate society by developing financial reporting;
  • At the same time, the key fault of the regulator is the lack of financial reporting and monitoring of their expenditure of revenues; so, the regulation will be more effective if the policy makers develop their monitoring policy to increase the compliance the listing rules and to reduce corruption by imposing penalty on the listed companies for non compliance;
  • However, the researcher has identified that Kuwait scored low for compliance listing rules as there has no stipulation of punishment for disobedience except if the corporation did not obey they had to make clear why they did not follow the listing rules though the auditor must also evaluate this justification. As a result, the regulator should impose some extent of punishment for disobedience of listing rules;
  • Most of the respondents stated that disclosure requirements need further development to establish good governance, as a result, it is essential to develop the effectiveness of internal operations, developments required by board, need to establish effective regulatory system, require to enhance coordination among the stakeholders, improvements required by shareholders, try to attract more external investments;
  • In addition, implementing good corporate governance practices is also depend on the promise of the board and of its chairman but most of the internal members have no clear knowledge about the implementation of broad practice, and the companies have not sufficient external qualified specialists in Kuwait to implement good governance; therefore, the policy maker should arrange corporate governance related training program to comply listing rules and leadership role;
  • Furthermore, the government of Kuwait should encourage multinational companies to collaborate their activities with local companies to serve mutual interests by following the disclosure requirements;
  • Most of the respondents argued that global capitalism influence in the rules that govern financial reports in Kuwait; for instance, Developing countries such as Kuwait has to follow the recommendation of IMF and world bank though these recommendations sometimes not matched with social, cultural, economical and political environment of Kuwait. As a result, the financial regulator should scrutinize the recommendation of IMF and World Bank considering the national interest first to reduce the influence of these organizations over the disclosure requirements.


This dissertational effort has engaged to identify how the governing rules of financial reporting has been surfacing and improving in Kuwait. To do so it has investigated how theoretical framework of financial accounting would work for historical development of governing rules and their implication for financial reporting, to what extent the present status of corporate governance would ensure transparency and accountability of financial reporting in Kuwait. It has also taken into account of what are historical motivating factors those laid behind the regulation of financial reporting in Kuwait, how the conventional values of financial accounting have integrated with the international accounting standard of financial reporting in Kuwait. It has also considered to what extent the governing rules of financial reporting in Kuwait would contribute to overcoming the socks of global capitalism crisis as well as corporate scandal.

The presented research on has demonstrated that global capitalism in the banner of globalization impact as a growth indicator regarding the Kuwaiti region including it policy making and it has involved to present a discussion over a clear understanding of globalization, positive and negative influence of it in different aspects in dependent and independent countries of the country. The political economy of Kuwait over its socio- economic, political and contractual formulation, exploration of various aspects of globalization involving FDI in flow in the country and discriminatory development along with the experienced scopes and limitations of the research.

This researcher has pointed out that globalization has perceived as the materialization of the previous century regarding the community economic, social, cultural and political circumstances of that society as an integral part of the globe, which acts in very essential role to each community gulf region to accelerate economic contribution. Most of the time globalization bases on transportation, scientific achievements, communications, IT integration that influence the Kuwaiti society as an integral part of life, like all other social facts of globalization possess both positive and negative impact in which positive integration states the “knowledge sharing” along with simple achievements of vast assets in Kuwaiti respective to the former one.

This paper also identified the development agencies like WTO, IMF World Bank bodies of global capitalism those have evidenced to nakedly influencing the policy-making Kuwait and most of the time their suggestion, direction and guidelines are against the mass people conflicting to the national interest. These agencies were involved to executing the agenda of the global capitalism, such as, the USA and aimed to keep Kuwait in the vicious circle of underdeveloped by wrong policy selection, prolonged implication. Regaling the reformation of Kuwaiti Stock Exchange, these agencies provided much research report, while paper, but after implication of such rules and direction, the market cannot come out from the massive destruction and collapsed from the effect of the global financial crisis.

The motivations among the conflicts groups with the rules that govern financial reporting in Kuwait has several different viewpoints, while the development agencies like IMF and World Bank is eager to turn the country a most open economy for the global capitalists to access their capital without any hindrance and back from the market easily without sharing any risk. Their influence to the listing and financial reporting rules would be easier for the foreigners, so that the country would be benefited with higher FDI inflow. The motivation of the government and regulators is to improving a sustainable capital market for the local companies by compromising with the development agencies. The motivation of the business community is just to availing the capital market facilities and making profit without considering national interest. On the other hand, the civil society is always eager to look after the national interest and real growth without manipulating or harmonizing the financial reporting

At the concluding notes regarding the financial reporting standard and harmonization based on above emulation that it is essential to have representation criteria for Kuwait to getting an accommodate into the IASB structural framework, as the country has deep integration with remarkable global bodies like IMF and World Bank, if Kuwait get representation in the IASB, harmonization dilemma will resolve. Due to geo-political location of the country including its high GDP and low populace, the representation from GCC by Kuwait in the IASB, would also contribute to standardize the financial accounting harmonization among the member countries through AGCC45.

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Part A

  1. Your name : _____________________________
    • Address : _____________________________
    • Phone : _____________________________
  2. Please select your nationality:
    • Kuwaiti [ ]
    • Non Kuwaiti [ ]
  3. Please select your highest education level –
    • Intermediate [ ]
    • University degree [ ]
    • Diploma [ ]
    • PhD [ ]
    • Other [ ]
  4. Please select Name of your Industry sectors:
    • Bank insurance
    • Investment
    • Food
    • Other
  5. Please mention your Years of experience:
    • Under five years
    • between five and ten years
    • More than Fifteen years
  6. Please select your job position –
    • Financial Manager
    • Accountant
    • Adviser
    • Bankers
    • Other

Part B

  1. Do you have clear perception of Financial Reporting in Kuwait?
    • Yes
    • No
    • No Comments
  2. Do the Kuwaiti companies disclose all information?
    • Yes
    • No
    • No Comments
  3. Do you think Financial Reporting has connection with corporate governance?
    • Yes
    • No
    • No Comments
  4. Do you think existing rule is sufficient for good governance?
    • Yes
    • No
    • No Comments
  5. Do the Kuwaiti companies comply with the discloser requirements?
    • Yes
    • No
    • No Comments
  6. Can strict discloser requirement protect corporate fraud?
    • Yes
    • No
    • No Comments
  7. Do the accounting standards such as PEA have inspired to practice good governance?
    • Yes
    • No
    • No Comments

Part C

Please state to the level you agree or disagree with the following statements:

  1. Do you think existing rules or discloser requirement developed because of social factors?
    • Agree
    • Strongly Agree
    • Neutral
    • Disagree
    • Strongly Disagree
    • Additional Comments:……………………………………….
  2. Do you think existing rules or discloser requirement developed because of political factors?
    • Agree
    • Strongly Agree
    • Neutral
    • Disagree
    • Strongly Disagree
    • Additional Comments:……………………………………….
  3. Do you think existing rules or discloser requirement developed because of economic factors?
    • Agree
    • Strongly Agree
    • Neutral
    • Disagree
    • Strongly Disagree
    • Additional Comments:……………………………………….
  4. Do you think global capitalism influenced the existing rules or discloser requirement in Kuwait?
    1. Agree
    2. Strongly Agree
    3. Neutral
    4. Disagree
    5. Strongly Disagree
    6. Additional Comments:……………………………………….
  5. Do the existing rules need further modification for future development?
    • Agree
    • Strongly Agree
    • Neutral
    • Disagree
    • Strongly Disagree
    • Additional Comments:……………………………………….
  6. To what extent you believe that Kuwaiti companies followed international standards.
    • Agree
    • Strongly Agree
    • Neutral
    • Disagree
    • Strongly Disagree
    • Additional Comments:……………………………………….


  1. International Accounting Standards.
  2. Gulf Co-Operation Council.
  3. International Accounting Standards.
  4. General Purpose Financial Reports.
  5. Securities and Exchange Commission.
  6. Financial Reporting Releases.
  7. Committee on Accounting Procedure.
  8. American Institute of Accountants.
  9. Accounting Research Bulletins.
  10. American Institute of Certified Public Accountants.
  11. Accounting Principles Board.
  12. Accounting Principles Board Options.
  13. FASB.
  14. Statements of Financial Accounting Concepts.
  15. Statements of Financial Accounting Standards.
  16. International Accounting Standards Board.
  17. Lebanon, Syria, Egypt and Iraq.
  18. The Companies Control Department.
  19. The Ministry of Commerce and Industry.
  20. Land and real estate agents.
  21. Weighted Average Cost of Capital.
  22. World Trade Organization.
  23. General Agreement on Tariffs & Trade.
  24. Foreign Direct Investment.
  25. World Trade Organization.
  26. General Agreement on Tariffs & Trade.
  27. Foreign Direct Investment.
  28. London Stock Exchange.
  29. Independent Regulatory Agencies.
  30. Kuwait’s Chamber of Commerce and Industry.
  31. Demographic pressures, graduate unemployment, rising levels of engagement in non-traditional business activity, and technological advances grew increasingly evident.
  32. Banks, auditors and investors (institutions).
  33. International Financial Reporting Standards & Accounting and Auditing Organisation for Islamic Financial Institutions.
  34. International Accounting Standards Board.
  35. Middle Eastern Countries.
  36. Foreign Direct Investment.
  37. Association of Gulf Cooperation Council.
  38. World Bank & International Monetary Fund (IMF).
  39. Which reportedly provides for mutual discussions in the event of a crisis, for joint military exercises, US training of Kuwaiti forces, US arms sales, pre-positioning of US military equipment (armor for a US brigade) and US access to Kuwaiti facilities, such as Ali al-Salem Air Base.
  40. Status of Forces Agreement.
  41. UN Iraq-Kuwait Observer Mission.
  42. Operation Iraqi Freedom.
  43. Including base support, personnel support, and supplies such as food and fuel.
  44. Internet Financial Reporting.
  45. Association of Gulf Cooperation Council.