TY - JOUR
T1 - Donor aid allocation and accounting standards of recipients
AU - Nagae, Akira
AU - Katayama, Hajime
AU - Takase, Koichi
N1 - Funding Information:
To capture the donor's interest, we include the donor-recipient log-transformed export figures, as donors may be inclined to assist trading partners (Alesina and Dollar, 2000; Younas, 2008). This export volume data was collected from the Direction of Trade Statistics offered by the International Monetary Fund (IMF). Donor interests may also include former colonial and historical ties as well as geopolitical interests. These time-invariant factors are controlled for as recipient-donor pair fixed effects, which are explained in Section 5.Part of this research investigation was financially supported by JSPS KAKENHI Grant No. 24243037. We are grateful for its financial support.
Funding Information:
Part of this research investigation was financially supported by JSPS KAKENHI Grant No. 24243037 . We are grateful for its financial support.
Publisher Copyright:
© 2021 Elsevier B.V.
PY - 2022/1
Y1 - 2022/1
N2 - How do donor countries determine foreign aid allocation? The literature seems to agree that institutional quality could be a possible determinant. However, no study has found any decisive variable to represent this factor. Recently, an increasing number of countries, developed as well as developing, have been adopting International Financial Reporting Standards (IFRS) as a single set of high-quality global accounting standards. IFRS aims to generate accurate financial information and to remove information asymmetry, thereby potentially improving corporate governance and performance in firms. We hypothesize that donors allocate more aid to mandatory IFRS-adopting recipients than nonadopting ones, expecting higher aid effectiveness in the recipients. Our bilateral panel data analysis on commitment flows between 28 Development Assistance Committee (DAC) donors and more than 90 recipients shows that, upon mandatory IFRS adoption by a recipient, donors increase the amount of aid by approximately 20%.
AB - How do donor countries determine foreign aid allocation? The literature seems to agree that institutional quality could be a possible determinant. However, no study has found any decisive variable to represent this factor. Recently, an increasing number of countries, developed as well as developing, have been adopting International Financial Reporting Standards (IFRS) as a single set of high-quality global accounting standards. IFRS aims to generate accurate financial information and to remove information asymmetry, thereby potentially improving corporate governance and performance in firms. We hypothesize that donors allocate more aid to mandatory IFRS-adopting recipients than nonadopting ones, expecting higher aid effectiveness in the recipients. Our bilateral panel data analysis on commitment flows between 28 Development Assistance Committee (DAC) donors and more than 90 recipients shows that, upon mandatory IFRS adoption by a recipient, donors increase the amount of aid by approximately 20%.
KW - Aid allocation
KW - Foreign aid
KW - International financial reporting standards
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U2 - 10.1016/j.econmod.2021.105702
DO - 10.1016/j.econmod.2021.105702
M3 - Article
AN - SCOPUS:85119294713
SN - 0264-9993
VL - 106
JO - Economic Modelling
JF - Economic Modelling
M1 - 105702
ER -