         !  "  #$%&’# ($) *++,,,$#$%&’#-($)(. African Journal of Business Management Full Length Research Paper Accounting reforms in the Middle East: A portfolio - returns approach Jamal Barzegari Khanagha Faculty of Economics, Management and Accounting, Yazd University, Iran. Accepted 18 August, 2011 This paper examines the value relevance of accounting information in selected Middle Eastern countries (Bahrain, Saudi Arabia and UAE) for the per-period and post-period of accounting reforms, which could describe the effect of accounting standards reform in these countries. The result obtained from portfolio approach shows accounting information is value relevant to investor in all selected stock exchanges. A comparison of the results for the periods before and after reforms shows an improvement in value relevance of accounting information after the reform in accounting standards in Bahrain and Saudi Arabia stock markets, while the results for UAE stock market shows a decline in value relevance of accounting information after the reform in accounting standards. It could be interpreted that following IFRS in UAE did not improve value relevancy of accounting information. Key word: Value relevance, IFRS, accounting information, Bahrain, UAE, Saudi Arabia. INTRODUCTION Middle East countries have begun to implement econo- mic reforms to stimulate private investment, promote economic growth and support the transition to market economy. Although, it is difficult to define the direct impact of the accounting system reform on economic transformation, as there are many other conditions that have influence on the transition process. However, with the central position of financial reporting and control in the economic system based on market economy, it is reasonable to assume that countries that are more effective in reforming the accounting system would move faster toward economic transformation (McGee, 2008). In this way, Middle East accounting bodies have experien- ced some major changes during the past several years. Prior to 1980, as a result of absence of accounting organizations there were no national accounting stan- dards for countries in this region. Underdevelopment of accounting and auditing standards was one of the main problems for auditors' confirmative job and for investors in making investment decisions. For example, this was one of the main reasons for Kuwait's stock market crash in 1982 (Wagdy, 2001). Therefore, Middle East countries had to use accounting standards of other countries to start the process of making value relevant information. Development of accounting during this period was essentially a result of the influence of several economic factors: multinational enterprises moved in, international accounting firms entered, international financial insti- tutions were licensed, expatriate accountants and foreign technology made a presence (Yapa and Wijewardena, 1995). After 1980 a number of important international forces created significant changes in the Middle East markets and accounting bodies. International economic/ political interdependence, foreign direct investment and multinational corporate strategy, new technology, inter- national financial markets, the growth of business services and activities of international regulatory organizations started to flourish. The core of these reforms was in the financial sectors, which enabled most of the Middle East countries to establish or resurrect their stock markets and /0(()%’. $+*( 1&$’ 2$(3.$(’45$3%’$#’( 6 7