Does Corruption Matter for Sources of Foreign Direct Investment?

Belgibayeva, Adiya; Plekhanov, Alexander

doi:10.2139/ssrn.3119692

Cited by 12 publications

(4 citation statements)

References 34 publications

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“…Resolving the collinearity problem in their study resulted in a positive impact of institutions on FDI flows. Belgibayeva and Plekhanov (2015) find a negative linkage between corruption and FDI in a sample of developing and developed countries. Li and Resnick (2003) investigate the impact of democracy on FDI for a sample of 53 countries.…”

Section: Literature Reviewmentioning

confidence: 79%

“…However, the available literature scarcely discusses the importance of institutions in attracting FDI in South America. It is recognized in the literature that better institutions enhance the flow of FDI (Globerman and Shapiro, 2002), while the absence of quality institutions adversely affect the flow of investment (Belgibayeva and Plekhanov, 2015; Li and Resnick, 2003). Institutional quality matters to foreign investors because they lower the cost of doing business in host economies.…”

Section: Introductionmentioning

confidence: 99%

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Foreign direct investment and institutional quality: empirical evidence from South America

Owusu-Nantwi

2019

JEAS

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Purpose The purpose of this paper is to investigate the effect of institutional quality on foreign direct investment (FDI) flows in South America. Design/methodology/approach The study uses two-stage least squares (2SLS) and fixed effect ordinary least squares regression analyses to examine the relationship between institutional quality and FDI in South America. Findings The study finds a significant positive relationship between institutional quality index and FDI. This implies that improvements in the institutional quality relate to increases in the flow of FDI to South America. Domestic capital, GDP per capita growth, and trade positively relate to FDI. However, the coefficient of trade is not significant. This implies that increases in these variables relate to increases in FDI flows to South America. Practical implications The study recommends that quality of institutions matter to the flow of FDI and therefore, efficient institutional reforms should be a priority for policymakers as this creates a conducive investment environment to attract FDI in South America. Further, policies that are focused on promoting competition, open market, and effective non-corrupt public institution as well as open and transparent legal and regulatory regimes, and effective delivery of government services should be the priority of policymakers in South America (Mishra and Daly, 2007). Originality/value The study uses a single measure of institutional quality based on a broad set of institutional indicators. This broad measure of institutional quality differs from the available studies that mainly focused on single aspects of institutional quality, that is, either corruption, governance, or political risk.

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Section: Literature Reviewmentioning

confidence: 79%

Section: Introductionmentioning

confidence: 99%

Foreign direct investment and institutional quality: empirical evidence from South America

Owusu-Nantwi

2019

JEAS

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“…Developing countries with insignificant or low returns on foreign investment can benefit significantly from reducing corruption. Belgibayeva and Plekhanov (2015) concluded that improving corruption control in the destination country increases the flow of investment from countries with a lower incidence of corruption compared to countries with a higher incidence of corruption. The change in potential investor profile can further strengthen economic and political institutions that control corruption.…”

Section: Overview Of Previous Researchmentioning

confidence: 99%

Corruption Environment and Foreign Direct Investments in Croatia

Peronja

Piplica

Ružić

2022

ZREFIS

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With this research, the authors would like to contribute to the understanding and identification of corruption, which is an important factor that can affect FDI in Croatia. The scientific and pragmatic purpose of this research is to identify an appropriate anti-corruption policy to influence the increase of FDI in Croatia. The research sample includes data for all countries that have FDI in Croatia as well as countries where Croatia has FDI. The authors added indicators on the level of FDI for the level of corruption in Croatia which were statistically processed. The statistical analysis is performed based on a total of 614 different values where the FDI of individual countries is put in relation to Croatia on a yearly basis, and the CPI was measured in those countries in the same year as in Croatia. The main hypothesis is that corruption "as sand" significantly negatively affects foreign direct investment in Croatia. An alternative hypothesis has also been formulated that corruption "as sand" significantly affects Croatia's foreign direct investment in foreign countries. The results showed that in the period from 1999 to 2019 there was no connection between corruption and FDI in Croatia. However, when the connection between corruption and Croatian FDI is observed, such a connection is becoming stronger as the FDI increases. Such a relationship between corruption and Croatia’s FDI can be characterized as "as grease." However, when only seven countries in which Croatia has the most direct investments were considered, a significant positive correlation was found between such investments and measured corruption in those countries, therefore the alternative hypothesis was accepted. The obtained results of the conducted research can provide important knowledge to the creators of Croatian economic policy that the impact of corruption on Croatian FDI abroad "as grease" in the future may be a very limiting factor to an increase in investments when the level of corruption in these countries decreases, which already applies to countries where corruption is shown to be at a low level.

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“…Corruption in Latin America may have a diminishing effect on trade however exchange relationships involving corruption are not this straightforward (de Jong & Bogmans, 2011;Thede & Gustafson, 2012). Level of corruption does have an effect on which partners may be willing to trade (Belgibayeva & Plekhanov, 2019). Literature suggests that successful trading partners are those that are more familiar with and able to navigate a corrupt environment.…”

Section: Corruptionmentioning

confidence: 99%

Colombia’s Progress: Internal Peace and Foreign Trade

2021

JABE

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The nation of Colombia has made great progress in securing internal peace through an agreement with the Revolutionary Armed Forces of Colombia (FARC) and policing of drug cartels. These important steps have contributed to increased international commerce based on strong trade agreements and a more global outlook than many other Latin American nations have embraced. Colombia stands poised for additional growth; however, the challenges of internal development and wide-spread corruption remain.

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Does Corruption Matter for Sources of Foreign Direct Investment?

Cited by 12 publications

References 34 publications

Foreign direct investment and institutional quality: empirical evidence from South America

Foreign direct investment and institutional quality: empirical evidence from South America

Corruption Environment and Foreign Direct Investments in Croatia

Colombia’s Progress: Internal Peace and Foreign Trade

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