Table 3.

Correlations of variables.

DCPS, LL and PCDM is 76, 72 and 75%, respectively indicating the small differences between all proxies. The kurtosis of FDI is the highest at 6.389 indicating the fluctuation of FDI as compared to other variables. The correlation matrix presented in Table 3 reveals that the variables are positive correlated among other with more than 0.5. The highest correlation between DCPS and PCDM is at 0.981 since both variables are the proxies of same variable of financial development.

Table 4 presents the mean of all variables of each country in the ASEAN-5 economies. As shown in this table, there is a considerable variation in RGDPPC across these countries, ranging from as low as US\$2332.82 for Indonesia to as high as US\$32,385.13 for Singapore. The mean of financial development demonstrates that Malaysia is consistently the highest for DCPS and LL, but Singapore is the highest in PCDM.

Each country in ASEAN-5 region has different starting date on complying IFRS in accordance with IFRS Foundation's Jurisdictional Profiles as shown in Table 5. Philippines is the earliest country adopting IFRS since 2005, while Malaysia is most recent among others. In addition, Table 6 shows the different scores for each


country. The score was constructed based on IFRS Foundation's Jurisdictional Profiles. Malaysia and the Philippines achieved full scores based on the characteristics that has been constructed. Although Indonesia has not adopted IFRS, however, this country has a score of 2 because it has made a public commitment in support of moving towards a set of high-quality global accounting. Hence, ASEAN-5 countries have financial information quality following IFRS on presenting the financial position for each country. The quality of financial reporting and financial development

Total 7 2 3 6 7

Nonlinear Effect of Financial Development and Foreign Direct Investment in Integration…

Malaysia Indonesia Thailand Singapore Philippines

1111 1

1111 1

100 1 1

100 1 1

101 1 1

1000 1

100 1 1

The flow of methodology started with the panel unit root test with crosssectional dependency to ensure the variables are integrated at first difference before proceed with cointegration test of panel cointegration second-generation. Since the existence of cross-sectional dependency among ASEAN-5 countries, hence, this study considers the using Westerlund's cointegration test as the second-generation

of panel cointegration. In addition, the fully modifies ordinary least square

soundness would lead better decision among foreign investors.

4. Methodology

47

Score Characteristics of IFRS

1 Has the jurisdiction made a

2 Has the jurisdiction made a

3 For domestic companies are IFRS Standards required or permitted?

4 Are IFRS Standards also required or permitted for more than the consolidated financial statements of companies whose securities trade in a public market?

5 Are all or some foreign

6 Are IFRS Standards incorporated into law or regulations?

7 Has the jurisdiction adopted the IFRS for SMEs Standard for at least some SMEs?

Source: Yousefinejad et al. [16].

Table 6.

IFRS adoption scores.

companies whose securities trade in a public market either required or permitted to use IFRS Standards in their consolidated financial statements?

adoption

DOI: http://dx.doi.org/10.5772/intechopen.86104

public commitment in support of moving towards a single set of high-quality global accounting standards?

public commitment towards IFRS Standards as that single set of high-quality global accounting standards?

Table 4.

Mean of variables over 1980–2017 for each country.


#### Table 5.

The IFRS adoption date of ASEAN countries.


Nonlinear Effect of Financial Development and Foreign Direct Investment in Integration… DOI: http://dx.doi.org/10.5772/intechopen.86104

#### Table 6.

DCPS, LL and PCDM is 76, 72 and 75%, respectively indicating the small differences between all proxies. The kurtosis of FDI is the highest at 6.389 indicating the fluctuation of FDI as compared to other variables. The correlation matrix presented in Table 3 reveals that the variables are positive correlated among other with more than 0.5. The highest correlation between DCPS and PCDM is at 0.981 since both

CPI 0.489\*\*\* 0.568\*\*\* 0.764\*\*\* 0.613\*\*\* 0.551\*\*\* 1.00

Variables FDI DCPS LL PCDM RGDPPC CPI

Accounting and Finance - New Perspectives on Banking, Financial Statements and Reporting

FDI 1.000

\*\*\*Significant at 1% level.

Correlations of variables.

Table 3.

Table 4.

Table 5.

46

ASEAN-5 countries

Source: Yousefinejad et al. [16].

The IFRS adoption date of ASEAN countries.

Mean of variables over 1980–2017 for each country.

Malaysia 2012

Thailand 2011 Singapore 2010 Philippines 2005

DCPS 0.622\*\*\* 1.000

LL 0.620\*\*\* 0.889\*\*\* 1.000

PCDM 0.651\*\*\* 0.981\*\*\* 0.901\*\*\* 1.00

RGDPPC 0.839\*\*\* 0.665\*\*\* 0.687\*\*\* 0.700\*\*\* 1.00

Table 4 presents the mean of all variables of each country in the ASEAN-5 economies. As shown in this table, there is a considerable variation in RGDPPC across these countries, ranging from as low as US\$2332.82 for Indonesia to as high as US\$32,385.13 for Singapore. The mean of financial development demonstrates that Malaysia is consistently the highest for DCPS and LL, but Singapore is the highest in PCDM.

Each country in ASEAN-5 region has different starting date on complying IFRS in accordance with IFRS Foundation's Jurisdictional Profiles as shown in Table 5. Philippines is the earliest country adopting IFRS since 2005, while Malaysia is most recent among others. In addition, Table 6 shows the different scores for each

Country FDI DCPS LL PCDM RGDPPC CPI Malaysia 4.08 106.60 107.67 95.93 6757.70 77.30 Indonesia 0.86 32.42 31.07 25.53 2332.82 51.41 Thailand 2.18 102.20 83.29 97.29 3566.14 72.54 Singapore 14.20 95.26 95.80 99.92 32,385.13 84.84 Philippines 1.34 31.72 44.63 31.88 1801.00 59.97

Indonesia Has not adopted (public commitment in support of moving towards IFRS from

Year of IFRS adoption

2012)

variables are the proxies of same variable of financial development.

IFRS adoption scores.

country. The score was constructed based on IFRS Foundation's Jurisdictional Profiles. Malaysia and the Philippines achieved full scores based on the characteristics that has been constructed. Although Indonesia has not adopted IFRS, however, this country has a score of 2 because it has made a public commitment in support of moving towards a set of high-quality global accounting. Hence, ASEAN-5 countries have financial information quality following IFRS on presenting the financial position for each country. The quality of financial reporting and financial development soundness would lead better decision among foreign investors.
