Open Access Article Economics

Sustainable Practice of Ifrs And Economic Growth: Evidence From A Case Study on A Developing Country

Sarfaraz Javed (1), Sajjad Nazir (2), Ghulam Mustafa Malik (3), Azeem Ahmad Khan (4), Syed Jalil (5)
(1) Department of accounting and finance, Sohar University, Oman, Oman,
(2) Department of Management, Faculty of Business, Sohar University, Oman,
(3) Department of Business Management, Nizwa university, Oman,
(4) Department of Accounting, Faculty of Business Administration, Al-Baha University , Saudi Arabia,
(5) Department of Management, Faculty of Business, Sohar University, Oman
https://doi.org/10.36923/iefrontiers.v27i2.242

Article Sidebar

Issue
Vol. 27 No. 2 (2024): Continuous
Submitted
February 5, 2024
Published
June 30, 2024
Keywords:
    Foreign Direct Investment, International Financial Reporting Standards, Economics growth, Comparability, Quality, Transparency, Opportunity and risk
Download PDF

Abstract

This research aims to investigate whether there is a link between the adoption of International Financial Reporting Standards (IFRS) and the benefits of Foreign Direct Investment (FDI), both of which were significant contributors to Afghanistan's economic growth between 2003 and 2020. This study uses panel integration and causality assessment. It looks into the underlying causes of the problem in terms of short- and long-term partnerships, as well as diversity. The findings of this study support the existence of a positive and significant relationship between the adoption of IFRS and the flow of FDI, as well as the correlation between them. Furthermore, the examination of causes shows that IFRS-related FDI is both a short-term source of EG and a long-term cause of diversification. The analysis of causes demonstrates this. This study investigates Afghanistan and expands on the relationship between IFRS acquisition and FDI income. This research could help developing countries that use IFRS and those that do not use IFRS identify the financial implications of IFRS practices and boost economic growth.

Full text article

Generated from XML file

References

Adetula, D. T., Nwobu, O., & Owolabi, F. (2014). International financial reporting standards and foreign direct investment in Nigeria. International Journal of Commerce, Business and Management, 3(3), 446-449.

Akisik, O. (2014). Financial reporting and foreign direct investments in Latin America. In Accounting in Latin America. Emerald Group Publishing Limited. https://doi.org/10.1108/S1479-356320140000014000

Akisik, O., Gal, G., & Mangaliso, M. P. (2020). IFRS, FDI, economic growth and human development: The experience of Anglophone and Francophone African countries. Emerging Markets Review, 45, 100725. https://doi.org/10.1016/j.ememar.2020.100725

Anuchitworawong, C., & Thampanishvong, K. (2015). Determinants of foreign direct investment in Thailand: Does natural disaster matter? International Journal of Disaster Risk Reduction, 14, 312-321. https://doi.org/10.1016/j.ijdrr.2014.09.001

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. https://doi.org/10.1016/j.jaccpubpol.2014.10.002

Brüggemann, U., Daske, H., Homburg, C., & Pope, P. F. (2010, August). How do individual investors react to global IFRS adoption? AAA. https://doi.org/10.2139/ssrn.1458944

Chen, H., Tang, Q., Jiang, Y., & Lin, Z. (2014). The role of international financial reporting standards in accounting quality: Evidence from the European Union. Journal of International Financial Management & Accounting, 25(2), 93-117.

De Moura, A. A. F., Altuwaijri, A., & Gupta, J. (2020). Did mandatory IFRS adoption affect the cost of capital in Latin American countries? Journal of International Accounting, Auditing and Taxation, 38, 100301. https://doi.org/10.1016/j.intaccaudtax.2020.100301

Elhamma, A. (2023). Impact of mandatory IFRS adoption on foreign direct investment: the moderating role of conflict of interest regulation. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-04-2022-0145

Epstein, B. J. (2009). The economic effects of IFRS adoption. The CPA Journal, 79(3), 26-31.

Feeny, S., Iamsiraroj, S., & McGillivray, M. (2014). Growth and foreign direct investment in the Pacific Island countries. Economic Modelling, 37, 332-339. https://doi.org/10.1016/j.econmod.2013.11.018

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. https://doi.org/10.1016/j.jaccpubpol.2012.06.001

Houcine, A., Zitouni, M., & Srairi, S. (2022). The impact of corporate governance and IFRS on the relationship between financial reporting quality and investment efficiency in a continental accounting system. EuroMed Journal of Business, 17(2), 246-269. https://doi.org/10.1108/EMJB-06-2020-0063

Houqe, M. N., Monem, R. M., & van Zijl, T. (2016). The economic consequences of IFRS adoption: Evidence from New Zealand. Journal of International Accounting, Auditing and Taxation, 27, 40-48. https://doi.org/10.1016/j.intaccaudtax.2016.10.001

Leykun Fisseha, F. (2023). IFRS adoption and foreign direct investment in Sub-Saharan African countries: Does the levels of adoption matter? Cogent Business & Management, 10(1), 2175441. https://doi.org/10.1080/23311975.2023.2175441

Lungu, C., Caraiani, C., & Dascălu, C. (2017). The impact of IFRS adoption on foreign direct investments: Insights for emerging countries. Accounting In Europe, 14(3), 331-357. https://doi.org/10.1080/17449480.2017.1374546

Ma, C., Awan, R. U., Ren, D., Alharthi, M., Haider, J., & Kouser, R. (2022). The IFRS adoption, accounting quality, and banking performance: An evaluation of susceptibilities and financial stability in developing economies. PloS one, 17(7), e0265688. https://doi.org/10.1371/journal.pone.0265688

Madawaki, A. (2012). Adoption of international financial reporting standards in developing countries: The case of Nigeria. International Journal of Business and Management, 7(3), 152-161. https://doi.org/10.5539/ijbm.v7n3p152

Nejad, M. Y., Ahmad, A., Mdsalleh, F. A. I. R. U. Z., & Rahim, R. A. (2018). IFRS adoption and foreign direct investment: An application of the LSDVC estimator. In Proceeding of the 5th International Conference on Management and Muamalah.

Nobes, C. (2006). The survival of international differences under IFRS: towards a research agenda. Accounting and Business Research, 36(3), 233-245. https://doi.org/10.1080/00014788.2006.9730023

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

Ojewumi, S. J., & Akinlo, A. E. (2017). Foreign direct investment, EG and environmental quality in sub-Saharan Africa: a dynamic model analysis. African Journal of Economic Review, 5(1), 48-68.

Okpala, K. (2012). Adoption of IFRS and financial statements effects: The perceived implications on FDI and Nigeria economy. https://doi.org/10.52283/NSWRCA.AJBMR.20120205A10

Omri, A., & Kahouli, B. (2014). The Nexus among foreign investment, domestic capital, and economic growth: Empirical evidence from the MENA region. Research in Economics, 68(3), 257-263. https://doi.org/10.1016/j.rie.2013.11.001

Osinubi, T. S., & Amaghionyeodiwe, L. A. (2009). Foreign direct investment and exchange rate volatility in Nigeria. International Journal of Applied Econometrics and Quantitative Studies, 6(2), 83-116.

Owusu, G. M., Saat, N. A. M., Suppiah, S. D. K., & Siong, H. L. (2017). IFRS adoption, institutional quality and foreign direct investment inflows: A dynamic panel analysis. Asian Journal of Business and Accounting, 10(2), 43-75.

Poria, S. V. (2009). IFRS implementation and challenges in India. India; Maharashtra Economic Development Council (MEDC).

Saidu, S., & Dauda, U. (2014). An assessment of compliance with IFRS framework at first-time adoption by the quoted banks in Nigeria. Journal of Finance and Accounting, 2(3), 64-73.

Samaha, K., & Khlif, H. (2016). Adoption of and compliance with IFRS in developing countries: A synthesis of theories and directions for future research. Journal of Accounting in Emerging Economies. https://doi.org/10.1108/JAEE-02-2013-0011

Simbi, C., Arendse, J. A., & Khumalo, S. A. (2023). IFRS and FPI nexus: does the quality of the institutional framework matter for African countries? Journal of Accounting in Emerging Economies, 13(1), 195-215. https://doi.org/10.1108/JAEE-10-2021-0319

Singh, P. (2023). International financial reporting standards (IFRS), corporate social responsibility, and sustainable development. Journal of Accounting, Finance, Economics, and Social Sciences, 8(1), 27-35. https://doi.org/10.62458/jafess.160224.8(1)27-35

UNCTAD. (2007). Global foreign direct investment to exceed $1 trillion, UNCTAD predicts.

Uzma, S. H., & Nurunnabi, M. (2021). Antecedents of IFRS adoption in BRICS nations: A meta-synthesis. In International Financial Reporting Standards Implementation: A Global Experience (pp. 391-414). Emerald Publishing Limited. https://doi.org/10.1108/978-1-80117-440-420211007

Yousefinejad, M., Ahmad, A., Salleh, F., Rahim, R. A., & Azam, H. (2018). The mediating effect of information asymmetry on IFRS and foreign direct investment. International Journal of Economics & Management, 12(2), 641-656.

Zaidi, S., & Paz, V. (2015). The impact of IFRS adoption: A literature review. Journal of Theoretical Accounting Research, 10(2), 116-141.

Authors

Sarfaraz Javed
Department of accounting and finance, Sohar University, Oman
https://orcid.org/0000-0002-1992-3484
sarfaraz7216@gmail.com (Primary Contact)
Sajjad Nazir
Department of Management, Faculty of Business, Sohar University
https://orcid.org/0000-0002-6602-0886
Ghulam Mustafa Malik
Department of Business Management, Nizwa university
https://orcid.org/0000-0002-0450-6629
Azeem Ahmad Khan
Department of Accounting, Faculty of Business Administration, Al-Baha University
https://orcid.org/0000-0001-8745-7975
Syed Jalil
Department of Management, Faculty of Business, Sohar University
https://orcid.org/0000-0002-0701-0354
Author Biographies

Sarfaraz Javed, Department of accounting and finance, Sohar University, Oman

Dr. Sarfaraz Javed is an assistant professor of accounting and finance at Sohar University. He earned his Ph.D. in commerce from Aligarh Muslim University, India. He previously taught at Mazoon University College, Oman, where he received substantial research grants. Dr. Javed specializes in sustainable environmental accounting, management accounting, and corporate accounting, with numerous publications in WOS, SCOPUS, ABS, and ABDC journals. Additionally, he coordinates timetables for the faculty of business and reviews papers for prestigious journals and conferences.

Sajjad Nazir, Department of Management, Faculty of Business, Sohar University

Dr Sajjad Nazir is working as an Associate professor in the Faculty of Business at Sohar University, Oman. He has received his Ph.D. degree from Nanjing, China. He has done his bachelor’s degree in business studies from Bolton University, UK and master’s degree from the University of Central Lancashire, UK. Dr Sajjad has more than 10 years of work experience in teaching at HEIs in Pakistan, China, and Oman. 

Ghulam Mustafa Malik, Department of Business Management, Nizwa university

Dr Mustafa received his PhD degree in Commerce (Tourism Management) from Aligarh Muslim University (India) in 2004 and his Master’s degree in Tourism Administration (MTA) from Aligarh Muslim University in 2001. He also Qualified for the UGC-NET examination in Tourism Management in 2004. He is twice the recipient of the University Medal from Aligarh Muslim University (AMU) for securing 1st position in B.SC (Hon’s) 1999 and in MTA 2001.

Azeem Ahmad Khan, Department of Accounting, Faculty of Business Administration, Al-Baha University

Dr Azeem Ahmed Khan is a full-time assistant professor working at Al Baha University, Saudi. He has vast experience in research and teaching in India and Saudi Arabia. His area of research laid various domains of accounting and finance. He has published several Scopus and WOS papers and attended several national international conferences and seminars.

Syed Jalil, Department of Management, Faculty of Business, Sohar University

Dr Syed Aqib is working at Sohar University, Oman in the capacity of Assistant professor. Dr Jalil earned his PhD in Operations Research from Aligarh Muslim University, India, in 2020. He has more than two years of experience in teaching and research. His current research interests include the application of multi-objective programming and other optimisation approaches to logistics, supply chain management, and other related fields.

Javed, S., Nazir, S., Malik, G. M., Khan, A. A., & Jalil, S. (2024). Sustainable Practice of Ifrs And Economic Growth: Evidence From A Case Study on A Developing Country. Innovation Economics Frontiers, 27(2), 57–70. https://doi.org/10.36923/iefrontiers.v27i2.242
Download Citation
Endnote/Zotero/Mendeley (RIS) BibTeX

Copyright (c) 2024 Sarfaraz Javed, Sajjad Nazir, Ghulam Mustafa Malik, Azeem Ahmad Khan, Syed Jalil

Creative Commons License

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

Copyright / Open Access Policy: This journal provides immediate free open access and is distributed under the terms and conditions of the Creative Commons Attribution License (CC BY). This is an open-access journal, which means readers can access it freely. Readers may read, download, copy, distribute, print, search, or link to the full texts of the articles for any lawful purpose without seeking prior permission from the publisher or author. This is consistent with the Budapest Open Access Initiative's (BOAI) definition of open access.

Article Details

Crossref
Scopus
Google Scholar
Europe PMC