Institutional Structure, IFRS Adoption and Foreign Portofolio Investment in Africa

This paper examines institutional structures, IFRS adoption and Foreign Portfolio Investment (FPI) among some selected African countries. Assessment of the moderating effect of institutional structures of the countries on the impacts of IFRS adoption on FPI is the focus of the study. Apart from the FPI, which is the dependent variable, corruption, regulatory authority effect and index of institutions as it affects accounting environment are used as proxies for institutional structure. Inflation rate, exchange rate, market capitalization, tax and trade openness are other macroeconomic variables included in the study. Dummy variables are used to code adoption of IFRS among the countries. Panel data analysis is applied to estimate the formulated model and analyze the data. The results show that adoption of IFRS have significant impact on FPI and that Institutional variables plays important roles on the extent to which IFRS affects FPI. Findings further reveal that institution variables are more significant in the countries that fully adopted IFRS thus aiding its effect on FPI. It is recommended that countries should look beyond adoption of IFRS to attract FPI but to also focus on their institutional structures as it serves as catalysis for efficient implementation of IFRS