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Significance of Good Governance for FDI Inflows in SAARC Countries

Author

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  • Mumtaz Hussain Shah

    (Institute of Management Studies, UoP, Peshawar)

  • Anum Gul Afridi

    (Institute of Management Studies, UoP, Peshawar)

Abstract

This paper studies the importance of good governance for FDI inflows in SAARC member countries for the time period of nine years, i.e. from 2006 to 2014. The worldwide governance indicators of Kaufmann, Kraay, and Zoido-Lobatón (1999) are used to investigate the impact of good governance on FDI inflows. Through random effects panel estimation technique, the results show that political stability and regulatory quality significantly and positively affect inward FDI. On the contrary, prevalence of corruption discourages multinationals to invest in SAARC countries. Moreover, conventional FDI location determinants like market size and development level continue to exert their positive influence. However, openness of the host economy and human capital, though equally important, are insignificant in terms of their possible sway on FDI inflows. The key finding is that good governance has significant impact on inward FDI in the SAARC region

Suggested Citation

  • Mumtaz Hussain Shah & Anum Gul Afridi, 2015. "Significance of Good Governance for FDI Inflows in SAARC Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(2), pages 31-52, October.
    • Handle: RePEc:bec:imsber:v:7:y:2015:i:2:p:31-52
    DOI: dx.doi.org/10.22547/BER/7.2.2
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    Citations

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    Cited by:

    1. Shah, Mumtaz Hussain & Khan, Faisal, 2019. "Telecommunication Infrastructure Development and FDI into Asian Developing Nations," MPRA Paper 107255, University Library of Munich, Germany.
    2. Shah, Mumtaz Hussain & Khan, Atta Ullah, 2017. "Factors determining capital structure of Pakistani non-financial firms," MPRA Paper 82015, University Library of Munich, Germany.
    3. Shah, Mumtaz Hussain & Lala, Gule, 2017. "Autocracy, Democracy and FDI inflows in Asian Developing Countries," MPRA Paper 107248, University Library of Munich, Germany.
    4. Shah, Mumtaz Hussain, 2018. "Corruption & Foreign Direct Investment: The Case of South Asia," MPRA Paper 107253, University Library of Munich, Germany.
    5. Shah, Mumtaz Hussain, 2016. "Financial development and foreign direct investment: The case of Middle East and North African (MENA) developing nations," MPRA Paper 82013, University Library of Munich, Germany.
    6. Mumtaz Hussain Shah & Yahya Khan, 2016. "Trade Liberalisation and FDI Inflows in Emerging Economies," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 8(1), pages 35-52, April.
    7. Shah, Mumtaz Hussain & Jamil, Iqra, 2016. "Trade Agreements and Transnational Corporations Presence in the Developing Asia," MPRA Paper 107250, University Library of Munich, Germany.
    8. Alexandrov Nevski Sachs Semanou, 2022. "Economic growth in West African countries: a comparative analysis," SN Business & Economics, Springer, vol. 2(7), pages 1-22, July.
    9. Joseph Kwadwo Tuffour & Thelma Mensah, 2018. "The Effects of Governance Type and Economic Crises on Foreign Direct Investment Inflows in Ghana," Foreign Trade Review, , vol. 53(2), pages 63-80, May.
    10. Hayelom Abrha Meressa, 2022. "Determinants of foreign direct investment inflows to COMESA member countries: an integration of institutional and socio-economic factors," Journal of Innovation and Entrepreneurship, Springer, vol. 11(1), pages 1-16, December.
    11. Shah, Mumtaz Hussain & Khan, Sajjad, 2017. "Factors Effecting Commercial Banks Profitability in Pakistan," MPRA Paper 82016, University Library of Munich, Germany.
    12. Shah, Mumtaz Hussain & Khan, Fiaz, 2018. "Profitability and Working Capital Management Nexus: Evidence from Food & Personal Care Products Sector Firms Listed on Pakistan Stock Exchange," MPRA Paper 107254, University Library of Munich, Germany.
    13. Shah, Mumtaz Hussain, 2016. "The Effect of Macroeconomic Stability on Inward FDI in African Developing Countries," MPRA Paper 82014, University Library of Munich, Germany.
    14. Shah, Mumtaz Hussain & Zeb, Aisha, 2017. "Prudent Macro Management of the Economy and Inward FDI in ASEAN Member States," MPRA Paper 107249, University Library of Munich, Germany.
    15. Imran Ali, Imran & Foday, Foday & Zahid Usman, Muhammad, 2024. "Determinants of Foreign Direct Investment in India: A VECM Analysis of Economic Indicators," MPRA Paper 122185, University Library of Munich, Germany, revised 03 Sep 2024.
    16. Shah, Mumtaz Hussain & Azam, Ayesha, 2018. "Financial Development and Investors Location Choice in The Arab World," MPRA Paper 107245, University Library of Munich, Germany.

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    More about this item

    Keywords

    Good governance; SAARC developing countries; FDI; panel data;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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