Accounting convergence and international investment levels
by Jochen Zimmermann; Sebastian A. Tideman
International Journal of Economics and Accounting (IJEA), Vol. 8, No. 2, 2017

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.

Online publication date: Mon, 22-Jan-2018

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