The Effect of IFRS Adoption on Foreign Direct Investment in Africa

  • Alhassan Musah Dominion University College
  • Eunice Adjei Academic City College
  • Ibrahim Anyass Ahmed University of Education, Winneba
Keywords: IFRS, Foreign Direct Investment, Macroeconomic variables, Africa

Abstract

Adoption of International Financial Reporting Standards (IFRS) is supposed to help enhance comparability of financial statement, improve the quality of financial reporting and accounting information of businesses in a country. This is expected to help improve Foreign Direct Investment (FDI) in the adopting countries. This study examined the effect of IFRS adoption on FDI inflows in Africa. Unlike previous studies that sample both adopting and non-adopting countries, this study sampled only Africa countries that have adopted IFRS to determine whether the adoption has improved FDI inflows. To achieve this objective, 20 African countries that have adopted IFRS were sampled covering a period 1980 to 2015. Data was sourced from The World Bank financial and Economic Data. Control variables such as GDP growth, openness of the economy, government debt and population growth were included in the model. The correlation and regression analysis showed that IFRS adoption has a positive and significant influence on FDI inflows in Africa. On the other hand, open economy, government debt and population growth had a positive and significant association with FDI. Overall, the results show that African countries that want to improve FDI inflows must improve the quality of their reporting environment by adopting IFRS.

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Author Biographies

Eunice Adjei, Academic City College

Lecturer: School of Business 

Ibrahim Anyass Ahmed, University of Education, Winneba

Lecturer: School of Business

Published
2020-10-31
How to Cite
Musah, A., Adjei, E., & Ahmed, I. (2020). The Effect of IFRS Adoption on Foreign Direct Investment in Africa. Journal of Applied Accounting and Taxation, 5(2), 117-126. https://doi.org/10.30871/jaat.v5i2.1481

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