Abstract:

Countries adoption of the International Financial Reporting Standards-IFRS is a landmark event in the global financial landscape; leading to significant improvement in the quality of financial reporting and hence investment decisions around the world. Despite this development, two major questions that arise are: 1) how will IFRS adoption affect the volume of foreign direct investment-FDI inflow to African countries? 2) Does accounting infrastructure affect the relationship between IFRS adoption and FDI flow to African countries? The answer to these questions is pertinent because African countries currently lag behind in attracting FDI inflow. This is where this study markedly makes its contributions. We utilized a sample of 23 African countries for the period 2005-2011. The baseline model comprise of FDI as our dependent variable and IFRS adoption and other covariates as our explanatory variables. The System Generalized Method of Moment-SGMM estimation technique was used for the data analysis. Our results includes that IFRS is not able to significantly improve the FDI flow to African countries. However, accounting infrastructure matter a great deal as it significantly informs FDI inflow to African countries.