Abstract
International Financial Reporting Standards (IFRS) adoption research supports the arguments of an increase in the credibility of corporate financial information. We investigate the association between IFRS adoption and foreign direct investments (FDI) inflows. The aim is to analyse several characteristics of the adoption process specific to European emerging countries. Our results indicate that the countries adopting IFRS are more likely to benefit from a higher increase in FDI inflows than the non-adopters. Additional tests reveal that the impact is driven by the adoption level related both to listed and unlisted companies. IFRS adoption by unlisted companies has a lower impact on FDI inflows, as compared to IFRS adoption by listed companies. Furthermore, difference-in-difference analysis illustrates a higher increase of FDI inflows after adopting IFRS in the case of non-European Union (EU) countries as compared to EU countries.
Acknowledgements
The authors appreciate the helpful comments and the constructive suggestions on previous drafts of this study presented at 11th edition of the International Conference Accounting and Management Information Systems (AMIS 2016), Bucharest, Romania and at the 3rd International Conference on IFRS: GLOBAL RULES & LOCAL USE (2015), Prague, Czech Republic. Special thanks are addressed to anonymous reviewers of this journal, for insightful recommendations.
Disclosure statement
No potential conflict of interest was reported by the authors.
ORCID
Camelia Iuliana Lungu http://orcid.org/0000-0003-3627-7493
Chirata Caraiani http://orcid.org/0000-0002-6323-7844
Cornelia Dascălu http://orcid.org/0000-0002-8624-2312
Notes
1 To address the existing differences among the countries taken into study, we also considered FDI inflows values, scaled by GDP. However, the descriptive statistics showed a higher variability and a significant number of outliers for the values of FDI inflows scaled by GDP. Therefore, we dropped this alternative of measuring the dependent variable and decided that the natural logarithm of FDI inflows better fits our research.