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
Date Written: May 2015
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
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