How Does Foreign Aid Affect the Relationship between IFRS Adoption and Foreign Direct Investment?

African Governance and Development Institute Working Paper Series WP/15/014

36 Pages Posted: 4 Jun 2015

See all articles by Uchenna Efobi

Uchenna Efobi

Covenant University

Matthias Nnadi

Cranfield University - School of Management

Date Written: May 2015

Abstract

This paper constructs a theoretical model to explain the relationship between IFRS adoption, FDI and foreign aid. Using the SGMM estimation technique to check the issue of endogeneity and reverse causality, this relationship was examined on 92 countries for the period 2003-2012. Overall, IFRS adoption attracts more aid when conditioned on foreign aid; however, when disaggregating foreign aid, the effect of foreign aid on the nexus was contradictory, while multilateral aid flow was positive. This result remained consistent despite the battery of checks.

Keywords: Accounting Standards; Foreign Aid; Foreign Direct Investment; Globalisation; IFRS Adoption

Suggested Citation

Efobi, Uchenna and Nnadi, Matthias, How Does Foreign Aid Affect the Relationship between IFRS Adoption and Foreign Direct Investment? (May 2015). African Governance and Development Institute Working Paper Series WP/15/014, Available at SSRN: https://ssrn.com/abstract=2613810 or http://dx.doi.org/10.2139/ssrn.2613810

Uchenna Efobi (Contact Author)

Covenant University ( email )

P.M.B. 1023
Km 10 Idiroko road
Ota, Ogun State 234
Nigeria

Matthias Nnadi

Cranfield University - School of Management ( email )

Bedfordshire, MK43 0AL
United Kingdom

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