Abstract
The proponents of the International Financial Reporting Standards (IFRS) as a financial reporting framework suggest that companies’ financial statements become more comparable, transparent, credible, and reliable by adopting IFRS, which may promote foreign investment inflows. Consequently, some literature posits that when a country’s authorities adopt IFRS, it will help to increase foreign portfolio investment (FPI). Only a few studies investigated the effect of IFRS adoption in Africa on FPI. However, because of mixed findings in previous studies, the problem remains that it is still unknown and uncertain what effect IFRS adoption has on FPI in Africa.
This chapter aims to demonstrate how a quantitative method was applied to analyze empirical data to test whether IFRS adoption in African countries affects their FPI. Within a positivistic paradigm, secondary panel data were collected to perform mainly regression analyses to test the above association. The study found that countries that adopted IFRS experienced a statistically significant positive effect on their FPI inflows. However, a limitation was that the capital market in Africa is underdeveloped, with few listing securities. The value of this study to the accounting literature is that it can potentially contribute to policy formulation in Africa.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
AAA (American Accounting Association). (1966). Report of the committee on a statement of basic accounting theory (ASOBAT). In R. R. Sterling, 1967. A statement of basic accounting theory: A review article. Journal of Accounting Research (Spring), 95–112.
Amiram, D. (2012). Financial information globalization and foreign investment decisions. Journal of International Accounting Research, 11(2), 57–81.
Ball, R. (2016). IFRS—10 years later. Accounting and Business Research, 46(5), 545–571.
Beneish, M. D., Miller, B. P., & Yohn, T. L. (2015). Macroeconomic evidence on the impact of mandatory IFRS adoption on equity and debt markets. Journal of Accounting and Public Policy, 34(1), 1–27.
Ben-Othman, H., & Kossentini, A. (2015). IFRS adoption strategies and theories of economic development: Effects on the development of emerging stock markets. Journal of Accounting in Emerging Economies, 5(1), 70–121.
Bisman, J. (2010). Postpositivism and accounting research: A (personal) primer on critical realism. Australasian Accounting Business and Finance Journal, 4(4), 3–25.
Boolaky, P. K., Tawiah, V., & Soobaroyen, T. (2020). Why do African countries adopt IFRS? An institutional perspective. The International Journal of Accounting, 55(01), 2050005.
Brink, H., Van der Walt, C., & Van Rensburg, G. (2006). Fundamentals of research methodology for health care professionals. Juta.
Bryman, A., & Bell, E. (2015). Business research methods (5th ed.). Oxford University Press.
Chambers, R. J. (1955). Blueprint for a theory of accounting. Accounting Research, 6(1), 17–25.
Chen, C. J., Ding, Y., & Xu, B. (2014). Convergence of accounting standards and foreign direct investment. The International Journal of Accounting, 49(1), 53–86.
Choudhary, K., & Bajaj, S. (2013). Price discovery process in nifty spot and futures markets. Global Business Review, 14(1), 55–88.
Collis, J., & Hussey, R. (2014). Business research: A practical guide for undergraduate and postgraduate students (4th ed.). Palgrave Macmillan.
Coolican, H. (2014). Research methods and statistics in psychology (6th ed.). Psychology Press.
Cooper, D. R., Schindler, P. S., & Sun, J. (2014). Business research methods (12th ed.). McGraw-Hill Irwin.
Creswell, J. W. (2014). Educational research: Planning, conducting, and evaluating quantitative and qualitative research (4th ed.). Pearson.
Efobi, U. (2017). International financial reporting standard, trade and foreign direct investment in Sub-Sahara African countries. PhD thesis, Covenant University, Ota, Nigeria.
Elkhashen, E., & Ntim, C. G. (2018). Accounting and philosophy: The construction of social reality framework. Journal of Accounting and Taxation, 10(3), 29–36.
Gerber, T. C. (2015). The conceptual framework for financial reporting represented in a formal language. PhD dissertation, University of Pretoria.
Golafshani, N. (2003). Understanding reliability and validity in qualitative research. The Qualitative Report, 8(4), 597–606.
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.
Hamberg, M., Mavruk, T., & Sjögren, S. (2013). Investment allocation decisions, home bias and the mandatory IFRS adoption. Journal of International Money and Finance, 36, 107–130.
Hong, H. A., Hung, M., & Lobo, G. J. (2014). The impact of mandatory IFRS adoption on IPOs in global capital markets. The Accounting Review, 89(4), 1365–1397.
Ihuah, P. W., & Eaton, D. (2013). The pragmatic research approach: A framework for sustainable management of public housing estates in Nigeria. Journal of US-China Public Administration, 10(10), 933–944.
Jaccard, J., & Becker, M. A. (2010). Statistics for the behavioral sciences (5th ed.). Cengage Learning.
Jaggi, B., & Low, P. Y. (2000). Impact of culture, market forces, and legal system on financial disclosures. The International Journal of Accounting, 35(4), 495–519.
Jankowicz, A. D. (2005). Business research projects (4th ed.). Thomson Learning.
Kimeli, E. K. (2017). IFRS adoption and capital markets. Journal of Finance and Accounting, 5(1), 19–30.
Kivunja, C., & Kuyini, A. B. (2017). Understanding and applying research paradigms in educational contexts. International Journal of Higher Education, 6(5), 26–41.
Kolsi, M., & Zehri, F. (2013). The determinants of IAS/IFRS adoption by emergent countries. https://cbe.uaeu.ac.ae/en/csafc/pdf/ad_38.pdf Date of access: 21 October 2017.
Kribat, M. M. (2009). Financial disclosure practices in developing countries: Evidence from the Libyan banking sector. PhD dissertation, University of Dundee.
Mafuwane, B. M. (2012). The contribution of instructional leadership to learner performance. PhD thesis, University of Pretoria.
Manyara, S. M. (2013). Access to capital: Examining the effect of adopting international financial reporting standards. PhD dissertation, Northcentral University, San Diego, CA.
Mardini, G. H., Crawford, L., & Power, D. M. (2012). The impact of IFRS 8 on disclosure practices of Jordanian listed companies. Journal of Accounting in Emerging Economies, 2(1), 67–90.
Mattessich, R. (2003). Accounting representation and the onion model of reality: A comparison with Baudrillard’s orders of simulacra and his hyperreality. Accounting, Organizations and Society, 28(5), 443–470.
McKernan, J. F. (2001). Truth, objectivity and subjectivity in accounting. PhD dissertation, University of Glasgow.
Neuman, W. L. (2014). Social research methods: Qualitative and quantitative approaches. Pearson.
Ng, C. (2015). Assessing the association between International Financial Reporting Standards (IFRS) and foreign direct investment (FDI): A replication and extension study utilizing econometric analysis. PhD dissertation, Wilmington University.
Nnadi, M., & Soobaroyen, T. (2015). International financial reporting standards and foreign direct investment: The case of Africa. Advances in Accounting, 31(2), 228–238.
Ortega, X. (2017). A review of IFRS and US GAAP convergence history and relevant studies. International Business Research, 10(9), 31–38.
Pricope, C. F. (2016). The role of institutional pressures in developing countries: Implications for IFRS. Theoretical and Applied Economics, 23(2), 27–40.
Riahi-Belkaoui, A. (2012). Accounting theory (5th ed.). Cengage Learning.
Sarantakos, S. (2013). Social research (4th ed.). Red Globe Press.
Saunders, M. N., Lewis, P., & Thornhill, A. (2012). Research methods for business students (6th ed.). Pearson.
Sherman, T., & De Klerk, M. (2015). International financial reporting standards and foreign ownership in South African companies. Southern African Business Review, 19(1), 72–88.
Simon, M. & Goes, J. (2013). Ex-post-facto research: Using existing data for your dissertation research. http://www.dissertationrecipes.com/ex-post-facto-research-existing-data-dissertation-research Date of access: 12 June 2018.
Smith, M. (2003). Research methods in accounting. Sage.
United Nations Conference on Trade and Development Report. (2016). Investors nationality: Policy challenges. https://unctad.org/en/PublicationsLibrary/wir2016_en.pdf Date of access: 25 Augustus 2018.
Van Greuning, H., Scott, D., & Terblanche, S. (2011). International financial reporting standards: A practical guide (6th ed.). World Bank’.
Disclosure Statement
This paper is derived from the following Ph.D. thesis: Omotoso, M. O. (2020). The Effect of the Adoption of International Financial Reporting Standards on Foreign Portfolio Investments in Africa (Ph.D. thesis, North-West University).
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2023 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Omotoso, M., Oberholzer, M., Schutte, D. (2023). The Effect of the Adoption of International Financial Reporting Standards on Foreign Portfolio Investment in Africa. In: Buys, P.W., Oberholzer, M. (eds) Business Research . Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-19-9479-1_3
Download citation
DOI: https://doi.org/10.1007/978-981-19-9479-1_3
Published:
Publisher Name: Palgrave Macmillan, Singapore
Print ISBN: 978-981-19-9478-4
Online ISBN: 978-981-19-9479-1
eBook Packages: Business and ManagementBusiness and Management (R0)