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

Orhan Akisik and Mzamo P. Mangaliso

Journal of Applied Accounting Research, 2019, vol. 21, issue 1, 60-76

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.

Keywords: IFRS; Economic growth; Mergers and acquisitions; Greenfield investments (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaarpp:jaar-02-2018-0025

DOI: 10.1108/JAAR-02-2018-0025

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