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How Does the Level of Rule of Law Affect Foreign Direct Investment in Renewable Energy Power Projects?

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  • Xu Tao
  • Biao Shi
  • Jun Zhou

Abstract

Using a manually curated database, we assess the installed capacity of 203 overseas renewable energy power projects invested in by Chinese companies from 2014 to 2023 to examine the relationship between the level of rule of law and foreign direct investment. Our results indicate that there is a negative correlation between the level of rule of law and the installed capacity of renewable energy power projects in FDI. The results of heterogeneity tests reveal that when investment decisions are primarily influenced by the legal framework rather than other factors, the negative correlation between the level of rule of law and FDI is more significant. Finally, we conduct three robustness tests, all of which robustly support our conclusions.

Suggested Citation

  • Xu Tao & Biao Shi & Jun Zhou, 2025. "How Does the Level of Rule of Law Affect Foreign Direct Investment in Renewable Energy Power Projects?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 61(5), pages 1376-1386, April.
    • Handle: RePEc:mes:emfitr:v:61:y:2025:i:5:p:1376-1386
    DOI: 10.1080/1540496X.2024.2415336
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