Does the improvement in accounting standard IAS/IFRS cure the financial crisis and bank profitability? Evidence from banking sector in Lebanon

Abstract This study is to examine the improvement in accounting standards IAS/IRS on the 24 Lebanese banks profitability, concerning the financial crisis. Over the period 2000Q1–2015Q4, the period is divided as pre-IAS/IFRS adoption, post-IAS/IFRS adoption, Post-IAS/IFRS adoption-pre-world crisis, and Post-IAS/IFRS adoption-post-world crisis. Via applying GMM the main results show that assets quality have a positive influence under GAAP on bank profitability, and negatively under the IAS/IFRS with minting their trend after the financial crisis. Also, liquidity and capital adequacy have a negative effect on bank profitability which increased Post-IAS/IFRS adoption-post-world crisis comparing with GAAP, which gives a signal prior the crisis under IAS/IFRS, in turn, it led to increasing the leverage. Moreover, there is a negative relationship between economic activities (Co-Index) under GAAP on bank profitability, whereas the value reduced under the adoption of IFRS which reflect the mark-to-market value of financial assets. Therefore, improvement in standards of transparency and reduction of complexity both increase financial stability and thereby restore participants’ confidence in the financial market.