Impact of mandatory IFRS adoption on foreign direct investment: the moderating role of conflict of interest regulation

Abstract

Purpose

This paper aims to examine the moderating effect of conflict of interest regulation (CIR) on the relationship between mandatory of International Financial Reporting Standards (IFRS) adoption and foreign direct investment (FDI) in the Middle East and North Africa (MENA) region.

Design/methodology/approach

The study was conducted based on panel data from 15 MENA countries during the period 2008–2020. Collected data were analyzed by using the generalized method of moments estimation technique.

Findings

This study results show that both mandatory of IFRS adoption and CIR do not have a significant effect on FDI inflows in MENA region; however, their interaction has a positive and significant effect on FDI inflows. This implies that more development of CIR enhances the impact that mandatory of IFRS adoption has on FDI inflows.

Practical implications

This study results are very useful to policymakers and regulators in the MENA region. The mandatory of IFRS adoption on its own does not improve significantly FDI inflows. The MENA countries should look inwards into more developed CIR that would support IFRS adoption to attract more FDI.

Originality/value

To the best of the author’s knowledge, this is the first research study to investigate the moderating effect of CIR on the relationship between mandatory of IFRS adoption and FDI inflows. In addition, the empirical researches on the effect of mandatory of IFRS adoption as issued by the International Accounting Standards Board (IASB) on FDI inflows for MENA countries are almost absent.

Citation

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, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-04-2022-0145