Transparency vs. Comparability: The Impact of Accounting Standards on Foreign Direct Investment

33 Pages Posted: 16 May 2019

See all articles by Gregory Sabin

Gregory Sabin

Boston University - Questrom School of Business

Date Written: February 2019

Abstract

This paper examines the roles comparability and transparency play in the relation between IFRS adoption and foreign direct investment (FDI). In this study, I disentangle the impact of transparency and comparability through the use of a natural experiment resulting from Mexico’s adoption of IFRS in 2012. Greater comparability (adoption of IFRS by both domestic and foreign parties), controlling for transparency (adoption of IFRS by Mexico), increases FDI inflows as reported in column 5 in Table 4. Individually, greater transparency and comparability have been associated with increases in investment activity. However, it is unclear from the existing literature how transparency and comparability interact in the FDI setting. Consistent with prior findings, I find the adoption of IFRS is associated with increases in inbound foreign direct investment. This paper contributes to the literature on IFRS and FDI, specifically with respect to the role of common financial standards in increasing foreign investment activity.

Suggested Citation

Sabin, Gregory, Transparency vs. Comparability: The Impact of Accounting Standards on Foreign Direct Investment (February 2019). Boston University Questrom School of Business Research Paper No. 3373339. Available at SSRN: https://ssrn.com/abstract=3373339 or http://dx.doi.org/10.2139/ssrn.3373339

Gregory Sabin (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

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