How IFRS influence the relationship between the types of FDI and economic growth

Abstract

Purpose The purpose of this paper is to examine the relationships between International Financial Reporting Standards (IFRS), types of foreign direct investment (FDI) – greenfield investments (GFIs) and mergers and acquisitions (M&As) – and economic growth in 49 African countries between 2003 and 2017. Design/methodology/approach In the study, panel data fixed effects and generalized method of moments estimation techniques are used in order to test the hypotheses. Findings Using country-level data obtained from the World Development Indicators, The United Nations Conference on Trade and Development and World Governance Indicators websites, the authors find that IFRS and the types of FDI are significantly related to economic growth. Moreover, our results provide evidence that the effect of GFIs and M&As on growth is influenced by IFRS positively. Research limitations/implications With a handful of exceptions, most African countries do not have active stock markets. Therefore, the authors were unable to determine the effect of capital markets on growth. Practical implications FDI has the potential to contribute to economic growth and quality of life. Our findings suggest that policymakers should create incentives for attracting FDI and effective enforcement of IFRS in order to unleash the benefits of FDI on their economies. Originality/value The study provides important insights into the effects of types of FDI on the economic growth of African countries and into the role that IFRS play on this relationship.

A bibliometric review of IFRS adoption and compliance research in Africa

“…, 2019). Akusik Orhan and Mangaliso Mzamo P. also collaborated and presented papers titled “IFRS, FDI, Economic Growth and Human Development: The Experience of Anglophone and Francophone African Countries” and “How IFRS Influence the Relationship between the Types of FDI and Economic Growth: An empirical Analysis on African Countries” (Akisik and Mangaliso, 2020; Akisik et al. , 2020).…”

The Effect of IFRS Adoption on the Business Climate: A Country Perspective

“…Since the beginning, IFRS were adopted by numerous countries worldwide, which motivated several studies about the determinants of adoption (Alon and Dwyer 2014;Christensen et al 2013;Judge et al 2010;Ramanna and Sletten 2014;Stainbank 2014). Overall, studies indicate that the adoption of IFRS has a positive impact on economic growth in both developed and developing countries (Akisik and Mangaliso 2019;Lungu et al 2017;Oppong and Aga 2019). A study of how IFRS adoption has affected EU economic growth from 2005 to 2014 found a positive and significant relationship between IFRS adoption and economic growth and that full adoption of IFRS has a significant impact on economic growth in both developed and developing countries, in contrast with partial adoption of IFRS that only impacts developing countries economic growth (Oppong and Aga 2019).…”

A systematic literature review on AAOIFI standards

“…A question of interest is whether the adoption of AAOIFI was beneficial in attracting international firms to the hosted markets for IFIs. The future research can extend this debate into the macro level by measuring the macroeconomics consequences for AAOIFI by testing the effects on foreign direct investments (Akisik and Mangaliso, 2019), economic growth (Oppong and Aga, 2019) and international stock listings (Khan et al , 2020) Several literatures as presented above measure the factors behind AAOIFI compliance. Most of these studies focus mainly on firm features and CG of BOD with scarcity in the impact of macroeconomics factors such as GDP, inflation and education level and religious awareness. Most of the related previous studies emphasize on measuring the AAOIFI disclosure from quantity approach by measuring a dummy variable or based on unweighted checklist index.…”

“…A question of interest is whether the adoption of AAOIFI was beneficial in attracting international firms to the hosted markets for IFIs. The future research can extend this debate into the macro level by measuring the macroeconomics consequences for AAOIFI by testing the effects on foreign direct investments (Akisik and Mangaliso, 2019), economic growth (Oppong and Aga, 2019) and international stock listings (Khan et al , 2020)…”