THE MODERATING ROLE OF IFRS ADOPTION SPEED IN THE RELATIONSHIP BETWEEN CAPITAL INFLOWS AND INCLUSIVE GROWTH IN SUB-SAHARAN AFRICA

Abstract

Purpose: This study investigates how the speed of International Financial Reporting Standards (IFRS) adoption condition the capital inflows and inclusive growth nexus in Sub-Saharan Africa. While existing literature primarily examined IFRS impacts at the firm level, this study filles a significant gap by focusing on the macroeconomic effects of IFRS adoption speed, particularly its role in enhancing the benefits of capital inflows such as Foreign Direct Investment (FDI), Foreign Portfolio Investment (FPI), and Foreign Aid.   Methods: This study employs a dynamic panel data analysis using the Generalized Method of Moments (GMM) to examine how the speed of IFRS adoption impacts capital inflows and fosters inclusive growth across Sub-Saharan African countries. The study leveraged a dataset spanning from 2005 to 2019, covering 48 countries in the region. By analysing the relationship between IFRS adoption speed, capital inflows, and inclusive growth, the study offers new insights into the macroeconomic benefits of adopting IFRS.   Findings: Findings suggest that speedy IFRS adoption significantly enhances the positive impact of capital inflows on inclusive growth, underlining the importance of swift and effective implementation of IFRS for equitable economic development.   Implications: This study contributes to the existing literature by providing a macroeconomic perspective on IFRS adoption and highlighting the importance of financial reporting standards in achieving inclusive growth in Sub-Saharan Africa.   Originality: This study introduces a novel approach by examining how the speed of International Financial Reporting Standards (IFRS) adoption moderates the impact of capital inflows on inclusive growth in Sub-Saharan Africa. Bridging the gap in existing literature, it shifts the focus from firm-level effects of IFRS and direct impacts of capital inflows on economic growth to a nuanced exploration of how financial reporting standards' adoption speed can enhance a country's ability to utilize foreign investments for inclusive economic development. Unique in its regional focus, this research provides critical insights into the macroeconomic benefits of IFRS in Sub-Saharan Africa, offering valuable implications for policymakers and contributing significantly to the discourse on financial innovation, regulatory frameworks, and sustainable economic growth in emerging markets.