Convergence of Accounting Standards and Foreign Direct Investment

By C. Chen, Yuan Ding, Bin Xu. 2014

115 citations recorded by the source corpus.

Since the development of the eclectic paradigm by Dunning (1977, 1988, 1993), many studies have investigated different forms of location advantages that attract foreign direct investment (FDI). In this study, we consider accounting standards as a component of the institutional infrastructure of a location and hypothesize that the convergence of domestic and International Financial Reporting Standards (IFRS) promotes FDI as it reduces information processing costs for foreign investors.22For simplicity, we refer to both International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as IFRS throughout. We also hypothesize that the effect of reduced information costs is stronger for partner countries whose accounting systems showed greater pre-convergence differences because they magnify the facilitating role of accounting standard convergence for FDI. Using bilateral FDI data from 30 OECD countries between 2000 and 2005, we find evidence generally consistent with these hypotheses.

Subfields: Accounting

View Paper: https://www.semanticscholar.org/paper/bb347e8fe5c3966500d5702fbf6ab37b00a78f05

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

1. Thorsten Sellhorn
2. Ulf BrÜGgemann
3. Joerg-Markus Hitz
4. Christian Leuz
5. Peter D. Wysocki

Citations in the corpus

• Intended and Unintended Consequences of Mandatory IFRS Adoption: A Review of Extant Evidence and Suggestions for Future Research (2013, background): “Chen et al. (2011) and Márquez-Ramos (2011) show that foreign direct investment increases following mandatory IFRS adoption and that the size of this effect depends on country institutions such as pre-adoption IFRS conformity.”