The impact of Malta’s IFRS adoption on attracting foreign direct investment

Abstract

Purpose: The main aim of this study is to establish whether Malta’s adoption of International Financial Reporting Standards (IFRS) had a positive impact on Foreign Direct Investment (FDI) in the local manufacturing sector. Additionally, the study also aims to uncover the main drivers of FDI in this sector and to identify the challenges that are impeding Malta from attracting further FDI. Design: To achieve the objectives of this study, a qualitative research methodology was employed. In fact, primary data was collected through a series of nine semi-structured interviews that were carried out with foreign direct investors. Findings: The findings establish that investors base their decision to invest in Malta on the complete package that the country is offering. However, Malta’s IFRS adoption is not considered as a main determinant of FDI as it does not lead to any significant cost savings, and since there are no major discrepancies between IFRS and other standards, amongst other reasons. Nevertheless, the interviewees agreed that IFRS adoption aids in increasing comparability and making consolidation easier. Finally, it was established that labour shortages, utility bills, logistics, and increased competition are the main challenges being faced by the local manufacturing sector. Conclusions: This study concluded that although Malta has been successful in attracting FDI, more can still be done. The local manufacturing sector is facing certain challenges that are not experienced by other sectors. Hence, if these challenges are addressed, then this sector can be further strengthened and made more attractive to foreign investors. Value: This dissertation has shed light on an issue which has not yet been tackled in the local scenario. Additionally, this study shows the factors that are attracting and discouraging companies from investing in Malta, and hence it is useful to the relevant authorities to be able to attract further FDI.