Maximising international returns: Impact of IFRS on foreign direct investments

Olga Golubeva

Journal of Contemporary Accounting and Economics, 2020, vol. 16, issue 2

Abstract: This study investigates whether the adoption of International Financial Reporting Standards (IFRS) by a country increases Foreign Direct Investments (FDIs) and impacts the profitability of investments conducted by Multi-National Enterprises (MNEs). The proposed regression models are tested on a data set containing 493 observations of Swedish companies’ FDIs in 73 countries made during 2007–2014. Empirical evidence is provided for a significant impact of IFRS adoption on FDIs and earnings generated by foreign investments, depending upon the extent of IFRS implementation and the level of convergence. This study also suggests that IFRS adoption is significant both for FDIs and reported profits obtained through FDIs for developed countries, contrasting with emerging markets. Finally, this is one of the first papers to empirically test and confirm that several significant underlying variables (including IFRS), which can explain both FDIs and profits reported by MNEs, are identical.

Keywords: Foreign Direct Investments (FDIs); International Financial Reporting Standards (IFRS); Return on invested capital; Sweden (search for similar items in EconPapers)
JEL-codes: F21 G15 M41 M48 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:16:y:2020:i:2:s1815566918301401

DOI: 10.1016/j.jcae.2020.100200

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