Assessing the Relationship between IFRS Convergence and Foreign Direct Investment Inflows

This research examines the accumulated experience gained from efforts to align national accounting standards with international ones and its impact on economic growth, as reflected in the inflow of foreign direct investment. The authors show that governments in many countries have implemented a series of reforms aimed at aligning their national accounting standards with IFRS to foster the inflow of foreign investment and stimulate economic growth. The research assesses the relationship between the convergence of accounting standards with IFRS and foreign direct investment. This evaluation was based on research models presented in the economic literature. The analysis of the link between the convergence of national standards with international ones and the inflow of foreign direct investment, drawn from existing research models, yielded contradictory results. Several studies have supported the hypothesis that, in the years following convergence, foreign investment quickly began to increase steadily, emerging as one of the primary drivers of economic growth. In several other studies, the relationship between the adoption of IFRS and the inflow of foreign direct investment was also examined. Given the limited number of studies conducted, the impact of converging national standards with international ones merits further investigation. Although the application of IFRS in developing countries warrants further refinement, standard-setters should consider the potential economic consequences of their decisions.