همگرایی استانداردهای حسابداری و سرمایه گذاری مستقیم خارجی

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.2 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.

The eclectic paradigm developed by Dunning, 1977, Dunning, 1988 and Dunning, 1993, known as the Ownership-Location-Internalization (OLI) paradigm, provides a framework for understanding foreign direct investment (FDI) activities. Many scholars have since investigated the different forms of location advantages that countries possess and their effects on FDI. These location advantages can include physical infrastructure such as highways and airports (Loree & Guisginer, 1995) or institutional infrastructure such as political stability and rule of law (Globerman & Shapiro, 2003). In his most recent works, Dunning, 2005 and Dunning, 2006 emphasizes that the institutional infrastructure should be central to any study of the determinants of international business activities. In this study, we consider accounting standards as a component of the institutional infrastructure and examine whether similarities in accounting standards between partner countries are conducive to bilateral FDI, and whether convergence to international accounting standards increases FDI traffic. Discrepancies between national accounting standards and practices have been recognized as important informational barriers to cross-border investment (Ahearne et al., 2004 and Pagano et al., 2002). Previous studies have found that foreign investors prefer markets with high-quality information that enables them to assess investment prospects at a lower cost (Portes & Rey, 2005). Thanks to its verifiability, accounting information has been widely employed as one of the key inputs to reduce information asymmetries in investment decisions. After the European Union's adoption of IFRS in 2005, the leaders of the G-20 in September 2009 called on “international accounting bodies to redouble their efforts to achieve a single set of high quality, global accounting standards within the context of their independent standard-setting process, and complete their convergence project by June 2011.” 3 As more countries adopt or converge to IFRS, researchers, regulators and users of financial statements have all become increasingly interested in understanding the consequences of using a set of uniform financial reporting standards across countries. The debate concerns even more American academics and professionals these days because the U.S. is the only remaining major economy in the world not yet adopting IFRS. 4 Though some have raised the question of the cost of IFRS adoption, 5 one of the most frequently cited benefits of switching from local reporting standards to IFRS is that reducing or eliminating differences in accounting standards can allay information processing costs and increase cross-border economic transactions. European Commissioner McCreevy, for example, claims that widespread adoption of IFRS “should lead to more efficient capital allocation and greater cross-border investment, thereby promoting growth and employment in Europe” ( McCreevy, 2005). A large number of recent studies have examined the effect of IFRS adoption mostly at firm level, but macro-level evidence has been scant. 6 We take advantage of a quasi-experimental opportunity provided by the mandatory adoption of IFRS by 19 European Union (EU)/Organization for Economic Co-operation and Development (OECD) countries and four non-EU/OECD countries in 2005, to examine 1) whether the degree of IFRS conformity in pre-adoption national GAAP (generally accepted accounting principles) is systematically associated with the level of FDI activities; 2) whether national institutional differences affect this association; and 3) whether the process of eliminating cross-border differences in accounting standards increases FDI activities. The rationale underlying our examination is that adoption of IFRS forces reporting entities in both countries in a bilateral FDI relationship to converge to a set of uniform financial reporting standards. To the extent that this convergence process reduces the discrepancy in accounting standards between the two countries, it can be expected to alleviate information asymmetry between home-country and foreign users of the financial statement information, reducing an important barrier to FDI as identified by prior studies (Young & Guenther, 2003). The usefulness of accounting information in cross-border investment decision-making is already recognized by the literature: for example, Rossi and Volpin (2004) find that the volume of cross-country mergers and acquisitions is significantly larger in countries with better accounting standards, while Black et al. (2007) reveal that international acquirers pay lower premiums for target firms based in countries where accounting data are less value-relevant. Other studies show that firms with good accounting attributes are often more likely to be held by foreign investors (Kang & Stulz, 1997). Though adopting IFRS is expected to facilitate growth in bilateral economic activities, the benefit may not be evenly distributed across all bilateral relations. The pre-adoption conformity of national GAAP to IFRS determines the significance, and therefore the benefit, of IFRS adoption. Institutional differences between partner countries can impact the effect of convergence to a set of uniform financial reporting standards, as they can affect the degree to which the new accounting standards are actually enforced and influence the interpretation of accounting information prepared under IFRS. This notion is in line with recent evidence (e.g., Ball et al., 2003 and Daske et al., 2008) showing that institutional factors such as legal origin and effectiveness of law enforcement affect the role of accounting standards in determining the quality and usefulness of accounting information. Therefore, we also examine the possible confounding effect of institutional differences on the relationship between adoption of IFRS and changes in FDI. Using a sample of bilateral FDI data from 30 OECD countries between 2000 and 2005 (when a large number of our sample countries adopted IFRS) and controlling for other FDI determinants identified by the literature, we obtain results generally consistent with our expectations. Specifically, our cross-section analysis for the pre-adoption period (2000–2002) shows that a higher level of IFRS conformity is associated with more FDI flows between partner countries. Furthermore, this relationship is found to be stronger between countries that belong to different accounting traditions as defined by Frank (1979). Our time-series analysis examines changes in FDI from 2001 to 2005. The results show that partner countries with lower pre-adoption IFRS conformity scores experienced faster growth in bilateral FDI during the period of transition from domestic accounting standards to IFRS, which supports the hypothesis that convergence to IFRS has a positive effect on the growth in cross-border economic activities. This study contributes to the literature in several important ways. First, as Globerman and Shapiro (1999, p. 514) rightly pointed out, “numerous theoretical arguments have been offered both in defense of barriers to FDI, as well as against such barriers; however, the statistical evidence on the impacts of barriers specifically directed at FDI, as well as their removal, is relatively limited given the voluminous literature on the determinants of FDI.” Our study provides fresh evidence not only on the barrier effect of international accounting differences on FDI but also on the magnitude of FDI changes once this barrier is removed. Second, this is one of the first studies to provide systematic country-level evidence on the effect of IFRS adoption. Most previous studies on the benefits of convergence to IFRS use firm-level data; country-level evidence is almost non-existent, though many proponents refer extensively to macroeconomic benefits in promoting the adoption of IFRS. In addition, our study also contributes to the literature on location advantages proposed by the eclectic theory of FDI by demonstrating that accounting standards are an important component of national institutional infrastructure that significantly impacts cross-border FDI transactions. Our use of bilateral FDI for measuring the benefits of convergence to IFRS offers several research design advantages. First, FDI is a better measure than other possible measures for cross-border capital flows, such as changes in the number of listed companies or market capitalization. These measures often fail to reliably separate flows between domestic and foreign investors, and rarely report the nationalities of investors or the directions of the capital flows. The FDI measure used in this study consists mainly of equity investments (see the definition in Section 3.1), which are more long-term oriented and less speculative. Second, our FDI data are obtained from the reports of 30 OECD countries. This is a group of the most highly developed nations in the world, which account for the lion's share of the global economy. More importantly, they provide relatively more reliable and compatible country-level statistics than other nations. Third, measuring the effect of convergence to IFRS with FDI data allows us to control for confounding effects, because a well-established strand of literature in international economics has identified major factors that affect FDI activities between partner countries. Finally, the use of bilateral FDI data offers a relatively large number of observations, which is often not possible for country-level studies. This desirable data property enables us to conduct additional tests to check the robustness of our results. Our approach of focusing on the relationship between differences in accounting standards and changes in FDI also avoids the research design limitations arising from reliance on accounting accruals or the correlation between accounting numbers and stock prices. Identification of differences in accounting standards does not require the assumption of a stable structure in business operations of the type needed for accrual-based financial reporting quality measures (Hribar & Collins, 2002), nor does it depend on the assumption of market efficiency, which is imperative for stock-price-based measures of accounting information quality. The remainder of this paper proceeds as follows. Section 2 reviews the literature on financial reporting and FDI and develops the main hypotheses for our study. Section 3 describes our measures of FDI and accounting standard conformity, the characteristics of our sample, and empirical models. Section 4 presents the results of our baseline empirical analyses and also the results of robustness checks. Section 5 discusses the implications of our results and concludes our paper.

Motivated by the lack of literature analyzing the country-level benefits of international accounting convergence, this study examines the relationship between convergence of accounting standards and FDI activities, and tests the effect of widespread adoption of IFRS on changes in FDI flows between countries. Our results show three important findings. First, FDI flows are positively associated with conformity to IFRS, suggesting that adopting a set of common financial reporting standards may promote cross-border investments as it reduces the information barrier to FDI. Second, the positive relationship between FDI and IFRS conformity is stronger for country pairs with greater institutional differences, which magnify the need for accounting information in decisions for cross-border transactions. Third, FDI growth is positively associated with the degree of convergence from domestic accounting standards to IFRS during the period 2001 to 2005. As these results are obtained after controlling for other determinants of FDI, in particular the rule of law, it is arguable that accounting standards represent a specific component of institutional infrastructure that is important for FDI. Methodologically, our results are obtained with data from a convergence process mainly instigated by EU legislation, which was largely an external shock to these countries' choices of accounting standards and thus reduces the endogeneity concerns regarding the IFRS conformity measures in our analysis. Use of panel-data regression methods also mitigates the concern related to omitted variables. These advantages in research design enable us to provide more convincing results about the effect of IFRS adoption on FDI. This study also presents some useful implications for practitioners. By showing the macroeconomic benefits of IFRS adoption, it launches a call for policymakers in non-adopting countries to join the family of IFRS adopters. It also demonstrates the transitory nature of this benefit, which calls for policymakers to constantly improve their country location advantage by identifying and relieving other FDI bottlenecks after resolving the accounting barrier problem. Multinationals can also learn from this study. Our results show that accounting information is relevant to FDI decisions and the adoption of IFRS is not just a change of label, but a more profound mutation that fosters lower transaction costs and better transparency. Some caution is needed in interpreting our results. First, like other studies of this nature, our study faces the empirical difficulty of completely isolating one factor from other factors (Globerman & Shapiro, 1999). Although we employed various types of statistical controls, including fixed effects, we cannot be completely certain that the estimated effects of IFRS conformity are not effects of some omitted variables that are correlated with the accounting conformity measures. Second, due to data limitation, our study only examined the pre-adoption cross-section variations and the time differences in IFRS conformity between 2001 and 2005; it did not explore the potency of the convergence process in individual countries between 2002 and 2005. Third, we employed several innovative empirical measures (e.g., mutual IFRS conformity, rate of IFRS convergence) that have yet to be proven effective in capturing the effect of the underlying constructs. Its limitations notwithstanding, this study makes a useful contribution to the literature by exploring the effects of institutional changes on FDI, and it is also among the first to provide direct evidence on the macroeconomic benefits of convergence to IFRS, which are often claimed by policymakers advocating the convergence to IFRS. Finally, due to the data availability and reliability, we have concentrated our study on the 30 OECD countries, which certainly limits the generalizability of our results. In fact, several countries very active in FDI activities, like China or Russia, are not included in the present study. These limitations indicate potential future research directions.