Institutional quality and foreign direct investment inflows: evidence from Asian countries

Ullah, Irfan; Khan, Muhammad Arshad

doi:10.1108/jes-10-2016-0215

Cited by 51 publications

(36 citation statements)

References 65 publications

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“…Harms and Ursprung (2002) find that foreign investors invest in countries with strong democratic structures, while autocratic societies often experience policy reversal and attract less FDI. Some studies find that institutional quality positively and significantly impacts FDI inflow in Asia and Latin America (Gani 2007), SAARC, Central Asian countries and the ASEAN region (Ullah and Khan 2017). Lucke and Eichler (2016) estimate the impact of institutional and cultural determinants of FDI in developing countries and find a positive association between institutions and FDI in developing countries and that foreign investors prefer to invest in countries that are politically unstable and have less diverse societies.…”

Section: Introductionmentioning

confidence: 99%

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Institutions and FDI: evidence from developed and developing countries

2019

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This study investigates the impact of institutional quality on Foreign Direct Investment (FDI) inflows using panel data for low, lower-middle, upper-middle and high-income countries for the sample period of 1996-2016 using the system Generalized Method of Moments (GMM). The empirical results confirm that institutional quality has a positive impact on FDI in all group of countries. The magnitude of the coefficients of control of corruption, government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability for FDI inflows are greater in developed countries than in developing countries. We conclude that institutional quality is a more important determinant of FDI in developed countries than in developed countries. However, GDP per capita, agriculture value-added as a percentage of GDP, and inflation influence FDI inflows negatively in developed countries, while GDP per capita, trade openness, agriculture value-added as a percentage of GDP, and infrastructure have positive and statistically significant impacts on FDI inflows in developing countries. Trade openness as a percentage of GDP and infrastructure positively affect FDI in developed countries. From our analysis, we infer that institutional quality is a more important determinant of FDI in developed countries than in developing countries.

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Section: Introductionmentioning

confidence: 99%

“…Institutional quality indicators are highly correlated (Globerman and Shapiro 2002;Daude and Stein 2007;Buchanan et al 2012), and it is not possible to include all indicators in a single equation (Ullah and Khan 2017). Therefore, we construct an institutional quality index using principal component analysis (PCA).…”

Section: Introductionmentioning

confidence: 99%

Institutions and FDI: evidence from developed and developing countries

2019

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“…FDI and its determinants have received attention of researchers across the world (e.g., Alam et al, 2013; Busse & Hefeker, 2007; Conyon et al, 2002; Kishore & Singh, 2015; Kurecic & Kokotovic, 2017; Li & Liu, 2005; Majumder & Nag, 2015; Owusu-Nantwi & Erickson, 2019; Sabir et al, 2019; Saini & Singhania, 2018; Sichei & Kinyondo, 2012; Ullah & Khan, 2017). But, given the role of FDI in the development of any country by augmenting the level of capital and technology, it still attracts attention of researchers and policymakers to understand its determinants, particularly in the case of developing countries, and design appropriate policies to increase the FDI inflow in the country/region.…”

Section: Literature Reviewmentioning

confidence: 99%

Causal Nexus Between FDI Inflows and Its Determinants in SAARC Countries

Kumar

Sharma

2020

South Asia Economic Journal

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This article aims to understand the drivers of foreign direct investment (FDI) inflows and its nexus with its determinants such as economic growth, inflation rate, labour productivity, infrastructure development, market size, openness of the economy, political stability and corporate tax for South Asian Association for Regional Corporation (SAARC) countries. The article is based on secondary data from the World Bank and International Labour Organization (ILO) for 19 years from 2001 to 2018 for 6 SAARC countries, viz. Bangladesh, Bhutan, India, Nepal, Pakistan and Sri Lanka. The findings indicate that there exists long-run, short-run and joint causal relationship among infrastructure development, market size, openness of the economy, political stability and corporate tax and FDI inflows. Among these variables, the corporate tax is the most important one because it shows bidirectional causality with FDI inflows in the long run as well as short run along with joint strong causality. However, only the coefficients of infrastructure development and corporate tax were found to be positively and negatively significant, respectively. Therefore, better infrastructure development and decrease in corporate tax may enhance FDI inflows in SAARC countries. This infers that with the decrease in corporate tax, more FDI inflows may take place, and higher FDI inflows may decrease in corporate tax further. Therefore, this article suggests that SAARC countries should accelerate the process of integration of their economy with the rest of the world along with political stability, enhance the infrastructure facility and reduce the corporate tax to get the higher FDI inflows. JEL: F21, F02, C22

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“…Investors are unwilling to invest in countries where institutions encourage corruption and inefficiency of public service because these factors increase the cost of doing business (Mengistu & Adhikary, 2011). Gani (2007) carried out a study in Asia, Latin America and Central Asian countries, and Ullah and Khan (2017) in the ASEAN region with the institution having a positive interaction with foreign investment Lucke and Eichler (2016). find a positive association between institutions and FDI in developing countries and that foreign investors prefer to invest in countries that are politically unstable and have less diverse societies.…”

Section: Review Of Literaturementioning

confidence: 99%

Does Quality of Host Regulation Matter in Multinational Investment Attraction? Evidence from Sub-Sahara Africa

Ayodeji¹,

Enyi²,

Akintoye³

et al. 2020

theijhss

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1. Introduction With the increase in globalization, there has been an enhanced discussion on cross-border flows of capital between nations around the world. Multinational firms' serves as the channel through which these funds find their way around the globe-these multinationals sources for an efficient economy with working institution and system to invest and operate. System is crucial in every human organization regardless of its objectives, structure, size, and endowment or complexity. This provides the platform for the exceptional discharge of duties, professional competencies and efficiency to perform, flourish and prosper. Economies with an efficient system, though not necessarily endowed with abundant natural resources are creative and innovative because of their efficient use and management of most intangible resources-human and quality institution supporting the human endeavour. Modern theories of globalization from the perspective of economics postulate that institutional conditions can facilitate or hinder the chance of an economy to function well and drive investors. (Acs et al., 2008, 2009, 2013). Consequently, variations in the nature and structure of host institution can be detrimental or provide an opportunity for prosperity in attracting foreign capital (Acs et al., 2008; Stenholm et al., 2013). Despite a large number of studies investigating the relationship between institutions and foreign investments, large dispersion still exists among empirical findings, especially in developing economies (Herrera-Echeverri et al., 2014). Although the literature on foreign investment pointed out a range of potential benefits to economies, these benefits include its role in facilitating technology transfer and skill (human capital) upgrading, its spillover effect on domestic investment, and improvements in institutions. However, the successful reaping of these benefits depends on the prevailing conditions of the host economy regulatory quality. These conditions include the rule of law, control of corruption and quality of policies to translate to economic prosperity. SSA is faced with enormous challenges, and these challenges make foreign capital very crucial to Africa as a continent due to the need for revenue to meet with the challenges as governments are saddled with the responsibility of

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Institutional quality and foreign direct investment inflows: evidence from Asian countries

Cited by 51 publications

References 65 publications

Institutions and FDI: evidence from developed and developing countries

Institutions and FDI: evidence from developed and developing countries

Causal Nexus Between FDI Inflows and Its Determinants in SAARC Countries

Does Quality of Host Regulation Matter in Multinational Investment Attraction? Evidence from Sub-Sahara Africa

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