CROSS-COUNTRY EVALUATION OF FINANCIAL REPORTING AND GOVERNANCE PRACTICES THROUGH FUZZY C-MEANS AND TOPSIS ALGORITHMS

Abstract

In an era of ever-evolving global economic dynamics-and-govemance-frameworks, this study aims to cluster OECD countries based on their similarities in terms of their compliance with Intemational Financial Reporting Standards (IFRS) and evaluates the performance of the countries in these clusters regarding their adoption of IFRS. For this purpose, 11 indicators as countries adopted IFRS, which essentially measure the quality of governance, were used in Fuzzy C-Means (FCM) and Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) algorithms. The FCM algorithm captures the dynamic interrelations among the indicators, allowing for comprehensive modeling of complex systems. The TOPSIS algorithm further facilitates a sophisticated analysis by ranking countries, providing a clear and insightful classification that reflects their proximity to an idealized spectrum of financial and governance excellence. The findings reveal significant insights into the drivers of financial performance and govemance quality.