Is corruption good or bad for FDI? Empirical evidence from Asia, Africa and Latin America

Jalil, Abdul; Qureshi, Amina; Feridun, Mete

doi:10.2298/pan1603259j

Cited by 21 publications

(21 citation statements)

References 24 publications

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“…Other factors such as population and rule of law also have significant positive relationships with FDI inflows. These results are consistent with the findings of many studies (Ohlsson, 2007;Al-Sadig, 2009;Hossain, 2016;Jalil et al, 2016;Epaphra and Massawe, 2017). Interestingly, inflation, trade openness, per capita income and financial development indicators were found to be statistically insignificant in explaining FDI inflows to the Jordanian economy.…”

Section: Results and Hypothesis Testingsupporting

confidence: 93%

Corruption and FDI Inflows: Evidence from a Small Developing Economy

Kasasbeh

Mdanat

Khasawneh

2018

Asian Economic and Financial Review

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This study proposes an analytical framework for examining factors affecting foreign direct investment (FDI) inflows into developing economies, taking Jordan as an example. It uses multivariate VAR analysis to address the relationships of FDI with institutional factors, economic factors, population and financial factors. It thus demonstrates the existence of a significant negative effect of corruption on FDI inflows. However, this effect is substantially alleviated by improving the quality of institutions and good governance in the country. Based on the analysis, the study proposes a number of policies that could assist in attracting FDI. Supportive policies that tend to limit corruption are more likely to enforce the rule of law and good governance, which can contribute positively to attracting FDI. Contribution/ Originality:The study contributes to existing literature and assists policymakers in understanding the effect of corruption on FDI inflows. This is seemingly the first application of an analytical framework to analyse FDI determinants in a small developing economy like Jordan.

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Section: Results and Hypothesis Testingsupporting

confidence: 93%

Corruption and FDI Inflows: Evidence from a Small Developing Economy

Kasasbeh

Mdanat

Khasawneh

2018

Asian Economic and Financial Review

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“…Accordingly, several studies have examined the consequence of corruption on FDI inflow with most of the outcomes supporting the gabbing hand view, while some works have validated the helping hand view and few others found insignificant relationship. For instance, studies such as Fung and Gracia-Herrero (2012), Dauti (2015), De Beule and Duanmu (2012), Amarandei (2013), Aziz and Mishra (2015), Júlio, Pinheiro-Alves and Tavares (2013), Al-Khouri and Khalik (2013), Kasasbeh, Mdanat and Khasawneh (2018), Osabutey and Okoro (2015), Ferreira and Ferreira (2016), Abala (2014), Ajide and Raheem (2016), Nnadi and Soobaroyen (2015), Epaphra and Massawe (2017), Jeong (2014), Quazi (2014), Azam and Ahmad (2013), Mathur and Singh (2013), Hossain and Rahman (2017), Castro and Nunes (2013), Morrissey and Udomkerdmongkol (2012), Kurul andYalta (2017), Hayakawa, Kimuri andLee (2013), Alemu (2012), Kimura and Lee (2013), Erdogan and Unver (2015), Hossain (2016), Udenze (2014) and Jalil, Qureshi and Feridun (2016) have reported that corruption is a grabbing hand which discourage FDI inflow. However, the works of Khan and Akbar (2013), Bellos and Subasat (2012), Quazi, Vemuri and Soliman (2014), Kolstad and Wiig (2013), Yang et al (2018), Różański and Sekuła (2016), Bellos (2013), Fung andGracia-Herrero (2012) and Helmy (2013) have submitted that corruption is ...…”

Section: Corruption and Foreign Direct Investmentmentioning

confidence: 99%

Corruption and Foreign Direct Investment: A Conceptual Review

Zangina

Hassan

Harun

2020

IPJAF

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This paper carefully reviews the empirical literature on the relationship of corruption and FDI inflow from 2000 to 2019 with a focus on more recent studies. Though corruption is not a new phenomenon, its pervasiveness in the contemporary era, as well as its role in modern economy, has continued to attract the interest of scholars and development institutions in recent times. Theoretically, there are two conflicting views on corruption. The “grabbing hand” hypothesis maintains that corruption raises the cost of transactions, risks and uncertainties which inhibits FDI inflow, while the “helping hand” hypothesis believes that corruption eases bureaucratic as well as regulatory hurdles and greases the wheels of commerce, thereby facilitating the inflow of FDI. Although the methodologies employed and the context of the various empirical investigations reviewed differ considerably, the paper has largely shown that there is no consensus on the nature of corruption-FDI nexus. While the outcomes of the studies are dominated by the validation of the “grabbing hand” hypothesis, some have supported the grease the view of the wheel, whereas few concluded on insignificant relationships between corruption and FDI inflow. These contradictory outcomes from various studies have prompted some scholars to examine the connection between some specific aspects of FDI with corruption in a more dynamic framework. Accordingly, the areas of concern from the review have been pointed out in the discussion of the findings. The paper has also documented the need for further studies in this area with relevant suggestions.

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“…Wang, 2000;Seyoum, 2011;Holmes et al, 2013); corruption typically discourages inward FDI, but can also favour it, especially in certain host countries (e.g. Helmy, 2013;Jalil et al, 2016); trust and social networks typically encourage inward FDI (e.g. Seyoum, 2011;Zhao & Kim, 2011).…”

Section: Heterogeneous Countriesmentioning

confidence: 99%

How do informal institutions influence inward FDI? A systematic review

Mondolo

2018

Econ Polit

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In the last fifteen years, the literature on international economics and international business has been paying increasing attention to informal institutions and to how they affect a variety of economic variables, inward FDI in particular. The main aims of this work are: to shed more light on a puzzling, elusive concept-informal institutions-also by drawing comparisons with related constructs; to overview the main types of informal institution and their effects on FDI inflows; to conduct a metaanalysis to explore the heterogeneity across empirical studies focusing on the effects of informal institutions on FDI inflows. The main findings of the present work are as follows: according to most of the existing literature, informal institutions, such as trust, social networks and corruption, matter for the purpose of attracting FDI. The sign is significantly determined by the type of informal institution considered. In particular, social networks and factors typically facilitating or in favour of FDI-such as trust and a positive attitude to liberalism-have a significant and positive impact on inward FDI, and this especially holds when the host country is a developing economy.

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Is corruption good or bad for FDI? Empirical evidence from Asia, Africa and Latin America

Cited by 21 publications

References 24 publications

Corruption and FDI Inflows: Evidence from a Small Developing Economy

Corruption and FDI Inflows: Evidence from a Small Developing Economy

Corruption and Foreign Direct Investment: A Conceptual Review

How do informal institutions influence inward FDI? A systematic review

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