Effect of quality of institutions on outward foreign direct investment

Article

Mishra, Anil and Daly, Kevin. 2007. "Effect of quality of institutions on outward foreign direct investment." The Journal of International Trade and Economic Development: an international and comparative review. 16 (2), pp. 231-244. https://doi.org/10.1080/09638190701325573
Article Title

Effect of quality of institutions on outward foreign direct investment

ERA Journal ID18433
Article CategoryArticle
AuthorsMishra, Anil (Author) and Daly, Kevin (Author)
Journal TitleThe Journal of International Trade and Economic Development: an international and comparative review
Journal Citation16 (2), pp. 231-244
Number of Pages14
Year2007
Place of PublicationLondon, United Kingdom
ISSN0963-8199
1469-9559
Digital Object Identifier (DOI)https://doi.org/10.1080/09638190701325573
Web Address (URL)https://www.tandfonline.com/doi/abs/10.1080/09638190701325573
Abstract

In this paper we study the effect of quality of institutions in the OECD and Asian host countries on outward foreign direct investment (FDI) stocks of source OECD countries using International Country Risk Guide governance indicators, for the period 1991 to 2001. We find that better institutions in the host countries have an overall positive and significant effect on source countries outward FDI stocks. The strength and impartiality of the legal system, popular observance of law, strength and quality of bureaucracy and government stability in host countries’ have direct effect on source countries outward FDI stocks. Interestingly, trade changes sign and losses significance in two stage least squares regressions compared to theoretical expectation. Furthermore skill proxied by labour abundance in source countries relative to host countries appears to be insignificant in determining source countries’ outward FDI stock.

Keywordsforeign direct investment; governance indicators; financial institutions
ANZSRC Field of Research 2020350208. Investment and risk management
380110. International economics
350102. Auditing and accountability
Public Notes

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Byline AffiliationsSchool of Accounting, Economics and Finance
University of Western Sydney
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