Accounting serves as a critical mechanism for disclosing a company’s financial position and performance. Differences in national accounting standards create information asymmetries that influence investment decisions, particularly in cross-border contexts. Studies indicate that US investors face higher information costs when investing in foreign companies with low-credibility accounting practices. Compliance with stringent disclosure requirements, such as those mandated by the US SEC or adoption of International Financial Reporting Standards (IFRS), mitigates these barriers by enhancing transparency and standardizing financial information. Evidence shows that IFRS adoption improves accounting quality, reduces earnings management, ensures timely recognition of losses, and increases the relevance of accounting figures to market values. These improvements enhance investor confidence and facilitate more efficient resource allocation in foreign markets. This study employs panel data regression to examine the interaction between IFRS adoption and regulatory quality, highlighting the significant role of standardized reporting in reducing information asymmetries and promoting investment decisions in African educational and corporate contexts. Findings underscore the importance of IFRS adoption as a tool for improving transparency, enhancing financial credibility, and supporting informed decision-making in cross-border investments.
Elizabeth Chisom Nwosu (Mon,) studied this question.