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Corruption and FDI Inflows: Evidence from a Small Developing Economy

Author

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  • Hamad A Kasasbeh
  • Metri F Mdanat
  • Raed Khasawneh

Abstract

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.

Suggested Citation

  • Hamad A Kasasbeh & Metri F Mdanat & Raed Khasawneh, 2018. "Corruption and FDI Inflows: Evidence from a Small Developing Economy," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(8), pages 1075-1085.
    • Handle: RePEc:asi:aeafrj:v:8:y:2018:i:8:p:1075-1085:id:1729
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    Citations

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    Cited by:

    1. Nik Azmiah Binti Nik Azin & Norhayati bt Alias, 2019. "Value Relevance of Intangible Assets Before and After FRS 138 Adoptions: Evidence From Malaysia," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 267-279, May.
    2. Shi Wang & Hua Wang & Qian Sun, 2020. "The Impact of Foreign Direct Investment on Environmental Pollution in China: Corruption Matters," IJERPH, MDPI, vol. 17(18), pages 1-20, September.
    3. Oliver E. Ogbonna & Jonathan E. Ogbuabor & Charles O. Manasseh & Davidmac O. Ekeocha, 2022. "Global uncertainty, economic governance institutions and foreign direct investment inflow in Africa," Economic Change and Restructuring, Springer, vol. 55(4), pages 2111-2136, November.
    4. Zalina Zainudin & Zarina Mohd Zaki & Abdul Razak Abdul Hadi & Hafezali Iqbal Hussain & Mazhar Hallak Kantakji, 2019. "Investor Sentiment and Firm Financial Performance of Malaysian IPO Firms: Pre and Post Financial Crisis," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 450-458, August.
    5. Kazi Sirajul Islam & Saravanan Muthaiyah & David Yong Gun Fie, 2020. "Isomorphic Drivers of Institutional Pressure and Importance of Environmental Management System Implementation Towards The Adoption Propensity of Green ICT," International Journal of Energy Economics and Policy, Econjournals, vol. 10(6), pages 624-634.

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