Title: Accounting convergence and international investment levels

Authors: Jochen Zimmermann; Sebastian A. Tideman

Addresses: University of Bremen, Hochschulring 4, 28359 Bremen, Germany ' University of Oldenburg, Ammerlaender Heerstr. 114-118, 26129 Oldenburg, Germany

Abstract: International investment is constrained by regulation and opportunity costs. Differing accounting systems have remained a major driver for opportunity costs. Convergence of accounting systems should therefore lead to increased levels of international investments. We test this proposition for Germany and the USA with quarterly data from 1991 to 2014. Building on the gravity model previously applied in physics and international trade, we show that convergence in accounting disclosure and enforcement regulation has led to higher levels of investment in both countries and overall. We also corroborate that disclosure and enforcement do not operate in isolation, but have a mutual effect.

Keywords: accounting convergence; disclosure; enforcement; regulation distances; interactions between disclosure and enforcement; international investments; gravity model; de jure convergence; USA; Germany.

DOI: 10.1504/IJEA.2017.089388

International Journal of Economics and Accounting, 2017 Vol.8 No.2, pp.138 - 166

Received: 18 Feb 2017
Accepted: 16 May 2017

Published online: 11 Jan 2018 *

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