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Financial development and foreign direct investment nexus: A systematic review of literature

Author

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  • Mollah Aminul Islam

    (Department of Accounting & Information Systems, Jatiya Kabi Kazi Nazrul Islam University, Bangladesh&School of Economics, Huazhong University of Science and Technology, Luoyu Road 1037, Wuhan-430074,Hubei, China)

  • Md Nahin Hossain

    (Army Institute of Business Administration, Bangladesh University of Professionals, Savar, Dhaka)

  • Muhammad Asif Khan

    (University of Kotli, AJK)

  • Mohammad Raihanul Hasan

    (School of Management, Huazhong University of Science and Technology, Luoyu Road 1037, Wuhan, Hubei-430074, China)

  • Md Riad Hassan

    (Department of Accounting & Information Systems, Jatiya Kabi Kazi Nazrul Islam University, Bangladesh)

Abstract

In this study, we review the literature to find how the financial development of a country attracts foreign direct investments for a sustainable real sector development of the country. The area is least focused on literature. Thus we don’t limit our search and review to any time or database or journal category. We find the theoretical logic and empirical evidence so far available in the literature. Our review finds that the development of the financial sector of a country is one of the most important attractors of FDIs. Theoretically, financial sector development works as a symbol of trust and goodness to the new potential investors and a good resource allocation channel for the existing investors. However, very few researchers find that FDIs are more prone to countries with a low developed financial system which may happen due to the presence of risk-taker foreign investors and risk-averse domestic entrepreneurs. Key Words:Financial Development, FDI, Financial Market, Financial Institutions

Suggested Citation

  • Mollah Aminul Islam & Md Nahin Hossain & Muhammad Asif Khan & Mohammad Raihanul Hasan & Md Riad Hassan, 2021. "Financial development and foreign direct investment nexus: A systematic review of literature," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(4), pages 226-238, June.
    • Handle: RePEc:rbs:ijbrss:v:10:y:2021:i:4:p:226-238
    DOI: 10.20525/ijrbs.v10i4.1213
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    References listed on IDEAS

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