This study empirically evaluates the validity of IFRS-9's core claims regarding the enhancement of financial instrument reporting with particular focus on fair value disclosures (FVDs). It specifically assesses whether the standard's forward-looking, business-model-aligned classification and measurement approach successfully reflect economic substance and reduce information asymmetry, as intended. While the IASB asserts that IFRS-9 improves the qualitative characteristics, this research scrutinises these assertions within the challenging context of emerging markets, where institutional weaknesses, illiquid markets and geopolitical instability prevail. The study determines whether the standard's theoretical benefits translate into practical relevance under conditions of high uncertainty and varied enforcement, reflecting broader concerns about epistemic injustice.
Drawing upon the BSM model, this research examines the crucial role of IFRS-9 in enhancing FVDs in early-adopting countries, focusing on whether the contextual impact was insignificant. Incorporating all IFRS-9 early adopting commercial banks across the Middle East offered quasi-experimental variation, revealing mechanisms fundamentally inaccessible in mandatory adoption settings with low heterogeneity. Data were gathered from multiple sources: financial instruments FVDs, derivatives, net assets maturity and off-balance sheet items were hand-collected from annual reports; additional variables from Bloomberg; and the peace indicator from the Global Peace Index by the Economist Intelligence Unit (EIU).
Robust findings affirm that the classification criteria for financial instruments under IFRS-9 significantly improve the relevance of FVDs. Equally, under IFRS-9, FVDs for all financial instruments except loans vary the investors' decisions longitudinally over time. It affirms the ability of the business model to capture contextual variations, particularly where the interaction term of deposits in financially stable banks in peaceful countries is found to be insignificant/rendered negligible. Overall, the results support the view that IFRS-9 can generate more relevant instrument-level disclosures across institutionally diverse contexts.
The findings should be interpreted with caution, as they rely on stock price data and only partially capture macroeconomic and crisis effects at the country level, reflecting trade-offs in model design, while fair value estimates remain subject to assumptions and managerial judgement.
The findings have several practical implications. Banks should strengthen classification governance and improve loan-specific disclosures. Regulators and auditors should enhance guidance and oversight of judgement-intensive classification decisions, particularly for loans. Investors may benefit from re-weighting attention towards instrument-level IFRS-9 disclosures and adopting heterogeneity-aware valuation approaches.
More broadly, evidence from early adopters in emerging markets supports a more inclusive evaluation of global standards. This contributes to improved transparency, economic resilience and institutional trust (SDGs 8, 10 and 16). Overall, the study adds value by isolating IFRS-9 classification-stage effects on FVD relevance using an instrument-level balance sheet model and early-adoption variation, informing debates on contextual validity and epistemic inclusivity in financial reporting.
