The relationship between foreign portfolio investment (FPI) and various macroeconomic\nvariables of China has been discussed in the existing literature. However, the link between\nChina�s accounting reforms and FPI is yet to be explored. This study intends to discover the\nimpact of changes in China�s accounting system and convergence of its domestic accounting\nstandards (henceforth referred to as accounting reforms) on FPI. We have used Binary Choice\nModel in Eviews for two decades� data. In our analyses, FPI has been taken as dependent\nvariable, whereas accounting reforms, annual increase in listed companies, GDP growth of\nChina and financial crises are taken as explanatory variables. The results of our model reveal\na significant relationship between accounting reforms and FPI; moreover, Granger causality\ntest shows a significant causal relationship between yearly increase in listed companies and\nFPI. Our findings are theoretically rational and can be useful for both investors and the\npolicymakers.
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