Abstract

PurposeThe purpose of this paper is to examine the relationships between International Financial Reporting Standards (IFRS), types of foreign direct investment (FDI) – greenfield investments (GFIs) and mergers and acquisitions (M&As) – and economic growth in 49 African countries between 2003 and 2017.Design/methodology/approachIn the study, panel data fixed effects and generalized method of moments estimation techniques are used in order to test the hypotheses.FindingsUsing country-level data obtained from the World Development Indicators, The United Nations Conference on Trade and Development and World Governance Indicators websites, the authors find that IFRS and the types of FDI are significantly related to economic growth. Moreover, our results provide evidence that the effect of GFIs and M&As on growth is influenced by IFRS positively.Research limitations/implicationsWith a handful of exceptions, most African countries do not have active stock markets. Therefore, the authors were unable to determine the effect of capital markets on growth.Practical implicationsFDI has the potential to contribute to economic growth and quality of life. Our findings suggest that policymakers should create incentives for attracting FDI and effective enforcement of IFRS in order to unleash the benefits of FDI on their economies.Originality/valueThe study provides important insights into the effects of types of FDI on the economic growth of African countries and into the role that IFRS play on this relationship.

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