IFRS Adoption and the Environment: Is Africa Closing Her Eyes to Something?

Abstract

Abstract Purpose This study aims at establishing a linkage between IFRS adoption and environmental pollution in Africa. More so, the role of institution was emphasized as a possible ameliorator of environmental pollution in the face of IFRS adoption. Methodology/approach The empirical model builds on the traditional EKC hypothesis, by including IFRS adoption variable and an interaction term (which captures the multiplicative between IFRS adoption and institutions). Data was gathered for 47 African countries for the period 2001–2013. The SGMM technique was used in the estimation process. Findings The robust estimation reveals that a positive and significant linkage exist between IFRS adoption and environmental pollution. The interactive variable also shows that the effect of IFRS on the environment will reduce when institutions quality (in the form of bureaucratic corruption) is addressed. Originality The linkage between IFRS and the environment has not received empirical attention. This is partly due to the fact that accounting phenomenon is rarely linked to macroeconomic outcomes. However, there is a rising interest in the role of accounting institutions on economic outcomes and this study contributes sufficiently to this budding body of knowledge.