International Financial Reporting Standards Foreign Direct Investment in Asean Countries

Maryam Yousefi Nejad, Azlina Ahmad, Mohd Fairuz Md Salleh, Ruzita Abdul Rahim
(Submitted 21 January 2018)
(Published 30 December 2018)


The objective of this study is to investigate the relationship between International Financial Reporting Standard (IFRS) and Foreign Direct Investment (FDI) inflows. FDI has been identified as an economic consequence of IFRS. However, thus far, few studies have examined this issue in developing countries and there are no studies which have examined IFRS-FDI in ASEAN countries. In order to fulfill this objective, this study hypothesizes that IFRS is positively associated with FDI inflows. The hypothesis was empirically tested using a sample consisting of the ten ASEAN countries from 2001 to 2016, using a bias corrected Least Square Dummy Variable (LSDVC), and Ordinary Least Square (OLS). The results of the LSDVC and OLS analyses indicate that IFRS is positively associated with FDI inflows. Normally after the adoption of a new standard such as IFRS, regulators, practitioners and academicians would be interested in understanding the consequences. Therefore, this study contributes to the understanding of the economic consequences of IFRS. This study also provides evidence regarding the outcomes of IFRS, from the aspects of FDI inflows’ enhancement. Therefore, the outcomes of this study may be useful for adopter and non-adopter countries to understand the economic consequences of IFRS. The findings may also provide important inputs to policy makers of non-adopter countries who are contemplating the adoption of IFRS. The positive relationship between IFRS and FDI inflows provides evidence that IFRS is an important determinant of FDI inflows, and eventually economic growth.


IFRS adoption; Foreign Direct Investment (FDI); Economic consequence of IFRS; ASEAN countries

Full Text: PDF



Ahmed, Neel & Wang, D. (2013). Does mandatory adoption of IFRS improve accounting quality? Preliminary evidence. Contemporary Accounting Research, 30(4), 1344–1372.

Ahmed, K. H., Chalmers, K., & Khlif, H. (2013). A meta-analysis of IFRS adoption effects. The International Journal of Accounting, 48.

Akisik, O. (2014). Financial Reporting and Foreign Direct Investments in Latin America. Research in Accounting in Emerging Economies, 14, 135–149.

Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. The Review of Economic Studies, 58(2), 277.

Ball, R. (2006). Pros and cons for investors International Financial Reporting Standards ( IFRS ), (June 2013), 37–41.

Ball, R. (2016). IFRS – Ten Years Later, (October 2015).

Black, E. L., Maggina, A., Black, E. L., & Maggina, A. (2016). The impact of IFRS on financial statement data in Greece.

Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143.

Bogliacino, F., Piva, M., & Vivarelli, M. (2012). R&D and employment: An application of the LSDVC estimator using European microdata. Economics Letters, 116(1), 56–59.

Brown, P. (2013). Some observations on research on the benefits to nations of adopting IFRS. The Japanese Accounting Review.

Brüggemann, U., Hitz, J.-M., & Sellhorn, T. (2013). Intended and unintended consequences of mandatory IFRS adoption: a review of extant evidence and suggestions for future research. European Accounting Review, 22(1).

Bruno, G. S. F. (2005). Estimation and Inference in Dynamic Unbalanced Panel Data Models with a Small Number of Individuals. The Stata Journal, 5(4).

Castillo-merino, D., Menéndez-plans, C., & Orgaz, N. (2014). Mandatory IFRS adoption and the cost of equity capital : Evidence from Spanish firms, 10(3), 562–583.

Chen, L., Ng, J., Davis, A., Dopuch, N., King, R., Leuz (2015). The Effect of Mandatory IFRS Adoption on International Cross-Listings. The Accounting Review, 90(4), 1395–1435.

Conley, T. G. (1999). GMM Estimation with Cross-sectional Dependence. Journal of Econometrics, 92(1), 1–45.

Daske, H. (2006). Economic benefits of adopting IFRS or US‐GAAP: Have the expected cost of equity capital really decreased. Journal of Business Finance & Accounting, 33(3–4).

Daske, H., Hail, L., Leuz, C., & Verdi, R. (2008). Mandatory IFRS Reporting around the World : Early Evidence. Journal of Accounting Research, 46(5).

DeFond, M., Hu, X., Hung, M., & Li, S. (2011). The impact of mandatory IFRS adoption on foreign mutual fund ownership: The role of comparability. Journal of Accounting and Economics, 51(3), 240–258.

Dornean, A., Işan, V., & Oanea, D.-C. (2012). The Impact of the Recent Global Crisis on Foreign Direct Investment. Evidence from Central and Eastern European Countries. Procedia Economics and Finance, 3(12), 1012–1017.

Elbannan, M. (2011). Accounting and stock market effects of international accounting standards adoption in an developing economy. Review of Quantitative Finance and Accounting, 36.

Epstein, B. J. (2009). The economic effects of IFRS adoption. The CPA Journal, 79(3).

Feeny, S., Iamsiraroj, S., & McGillivray, M. (2014). Growth and Foreign Direct Investment in the Pacific Island countries. Economic Modelling, 37, 332–339.

García, M. del P. R., Alejandro, K. A. C., Sáenz, A. B. M., & Sánchez, H. H. G. (2017). Does an IFRS adoption increase value relevance and earnings timeliness in Latin America? Emerging Markets Review, 30.

Gordon, L. A., Loeb, M. P., & Zhu, W. (2012). The impact of IFRS adoption on foreign direct investment. Journal of Accounting and Public Policy, 31(4), 374–398.

Gujarati, D. (2003). Basic econometrics. 4th Edition. McGraw-Hili Companies. The USA.

Houqe, M. N., Monem, R. M., & Zijl, T. van. (2016). The economic consequences of IFRS adoption: Evidence from New Zealand. Journal of International Accounting, Auditing and Taxation, 27, 40–48.

Iamsiraroj, S. (2016). The foreign direct investment-economic growth nexus. International Review of Economics and Finance, 42, 116–133.

Ismail, W. A., & Kamarudin, K. . (2013). Earnings quality and the adoption of IFRS based accounting standards: evidence from an emerging market. Asian Review of Accounting, 21.

Joshi, M., Yapa, P., & Kraal, D. (2016). IFRS adoption in ASEAN countries Perceptions of professional accountants.

Kao, H.-S., & Wei, T.-H. (2014). The effect of IFRS, information asymmetry and corporate governance on the quality of accounting information. Asian Economic and Financial Review, 4(2), 226–256.

Leuz, C. (2010). Different Approaches to Corporate Reporting Regulation : How Jurisdictions Differ and Why. ECGI Working Paper Series in Law European Corporate Governance Institute, (53).

Li, S., Sougiannis, T., & Wang, I.-L. (2017). Mandatory IFRS Adoption and the Usefulness of Accounting Information in Predicting Future Earnings and Cash Flows, (April 2017).

Lourenço, I. M. E. C., & Branco, M. E. M. de A. D. (2015). Main Consequences of IFRS Adoption: Analysis of Existing Literature and Suggestions for Further Research. Revista Contabilidade & Finanças, 26(68), 126–139.

Lungu, C. I., Caraiani, C., & Dascălu, C. (2017). The Impact of IFRS Adoption on Foreign Direct Investments : Insights for Emerging Countries. Accounting in Europe, 9480(September).

Naranjo, P., Saavedra, D., & Verdi, R. S. (2013). Financial Reporting Regulation , Information Asymmetry and Financing Decisions around the World, (617).

Nickell, S. (1981). Biases in Dynamic Models with Fixed Effects. Econometrica, 49(6), 1417–1426.

Nor, N. H. H. M., Wah, L. S., & Nor, A. H. S. M. (2015). Foreign direct investment, economic growth and quality of stock market development ’ panel analysis. Jurnal Ekonomi Malaysia, 49(1).

Ojewumi, S. J., & Akinlo1, A. E. (2017). Foreign Direct Investment, Economic Growth and Environmental Quality in Sub- Saharan Africa: A Dynamic Model Analysis. Journal, African Review, Economic, V(I), 48–68.

Özcan, A. (2016). Assessing the Effects of IFRS Adoption on Economic Growth : A Cross Country Study. ACU International Journal of Social Sciences, (2), 70–86.

Palea, V. (2014). Fair value accounting and its usefulness to financial statement users. Journal of Financial Reporting and Accounting, 12(2), 102–116.

Saleem, F., Zahid, A., Shoaib, B., Mohamood, M., & Nayab, S. (2013). Impact of inflation and economic growth on foreign direct investment: evidence from Pakistan. Interdisciplinary Journal of Contemporary Research in Business, 4(9).

Samaha, K., & Khlif, H. (2016). Adoption of and compliance with IFRS in developing countries. Journal of Accounting in Emerging Economies, 6(1), 33–49.

Sekaran, U., & R., B. (2010). Research Methods for Business. 5th ed. Unithed Kingdom.

Thampanishvong, C., & Kannika, A. (2015). Determinants of foreign direct investment in Thailand: Does natural disaster matter? International Journal of Disaster Risk Reduction, 14, 312–321.

Tu, S. (2013). The effect of IFRS-convergence on cost of equity capital : Evidence from Chinese listed firms.

Utama, S., Farahmita, A., & Anggraita, V. (2016). Economic Consequences of IFRS Adoption in Indonesia, 6(1), 79–85.

Uwalomwa, U., Emeni, F. K., Uwuigbe, O. R., & Oyeleke, O. I. (2016). EuroEconomica Mandatory International Financial Reporting Standards Adoption and Cost of Equity Capital in Nigeria Finance , Banking and Accounting EuroEconomica F, 1(1).

Zaidi, S., & Huerta, E. (2014). IFRS Adoption and Enforcement As Antecedents of Economic Growth, 4(1), 95.

Zaidi, S., & Paz, V. (2015). the Impact of IFRS Adoption : a Literature Review. Journal of Theoretical Accounting Research, 10(2), 116–141.

Zeghal, D., & Mhedhbi, K. (2006). An analysis of the factors affecting the adoption of international accounting standards by developing countries. The International Journal of Accounting, 41.

Zehri, C., & Abdelbaki, A. (2013). Does adoption of international accounting standards promote economic growth in developing countries? International Open Journal of Economics, 1(1).

Zhai, J., & Wang, Y. (2016). Accounting information quality, governance efficiency and capital investment choice. China Journal of Accounting Research, 9(4), 251–266.


  • There are currently no refbacks.

Copyright (c) 2019 Gadjah Mada International Journal of Business

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.