IDEAS home Printed from https://ideas.repec.org/a/ris/buecrj/0236.html
   My bibliography  Save this article

The Effects of Corruption and Democracy on FDI in Developing Countries: An Empirical Investigation

Author

Listed:
  • Ay, Ahmet

    (Selçuk University)

  • Kızılkaya, Oktay

    (Ahi Evran University)

  • Akar, Tuba

    (Karamanoğlu Mehmetbey University)

Abstract

In this paper, the effects of corruption and democracy on foreign direct investments are examined empirically for 10 developing countries over the period 1995-2013. Panel unit root tests, panel cointegration test, panel FMOLS estimator, and panel vector error correction causality methods are employed in the paper. According to the findings, there is a cointegration relationship among corruption, democracy, and foreign direct investments. Decrease of corruption and increase of democracy level, affect foreign direct investments positively in 10 developing countries which constitute panel, in accordance with evaluating estimate results of cointegration coefficients. According to the findings obtained from the causality analysis, there is unidirectional causality from corruption to foreign direct investments in the short run while there is unidirectional causality from corruption and democracy to foreign direct investments in the long run. These findings support the hypothesis which argue that democracy and corruption have significant effects on foreign direct investments. Today, it can be seen that foreign investors test the trustworthiness of political regime in host country. Reviewing policies towards foreign investors appears as a substantial factor for host countries.

Suggested Citation

  • Ay, Ahmet & Kızılkaya, Oktay & Akar, Tuba, 2016. "The Effects of Corruption and Democracy on FDI in Developing Countries: An Empirical Investigation," Business and Economics Research Journal, Uludag University, Faculty of Economics and Administrative Sciences, vol. 7(3), pages 73-88, July.
    • Handle: RePEc:ris:buecrj:0236
    as

    Download full text from publisher

    File URL: http://www.berjournal.com/the-effects-of-corruption-and-democracy-on-fdi-in-developing-countries-an-empirical-investigation
    File Function: Full text
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sargis Karavardanyan, 2022. "Short-Term Harm, Long-Term Prosperity? Democracy, Corruption and Foreign Direct Investments in Sino-African Economic Relations," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 64(3), pages 417-486, September.

    More about this item

    Keywords

    Corruption; Democracy; Foreign Direct Investments; Developing Countries; Panel Data Analysis;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:buecrj:0236. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Adem Anbar (email available below). General contact details of provider: https://edirc.repec.org/data/iiulutr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.