IDEAS home Printed from
   My bibliography  Save this article

Country Risk Importance on Investment Decision Making


  • Elena Mihaela ILIESCU

    () (Nicolae Titulescu University, Romania)

  • Felicia Alina DINU

    () (The Bucharest Academy of Economic Studies, Romania)


Given the controversies, especially from the last period, in terms of credibility of the major international rating agencies, this article aims to assess the correlation between country risk ratings and the evolution of FDI flows in the receiving economies. In this regard, we chose to analyze the degree of these influences manifestation in Romania. The study, based on statistical information on the rating granted to Romania and the value of foreign direct investments during the period between 2000 and 2010, confirms the indirect natural connection of the two indicators. Thus, the results show that, when the rating falls in an immediate lower class, foreign direct investments are reduced by 1173.76 billion Euros, which represents 27.2% of the investments average mean made within the 11 analyzed years. Conversely, we can observe an influence of 0.05% of FDI on Romania's rating. The data obtained demonstrates the interdependence between the two indicators, however, a low correlation can be observed. The qualitative analysis performed, showed arguments that support the decrease in importance of rating, such as: reducing the credibility of rating agencies as a result of exposing the weak points from the methodologies applied, granting of incorrect ratings, the inability to foresee the financial crisis or increasing the transparency of governments which makes more and more information available to investors. This doesn’t mean that the role of country rating is denied. It remains an important decision making criterion in guiding the flows within the global economy space, but it is not sufficient and it is not indispensable.

Suggested Citation

  • Elena Mihaela ILIESCU & Felicia Alina DINU, 2011. "Country Risk Importance on Investment Decision Making," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 14(2), pages 371-379, December.
  • Handle: RePEc:rom:econmn:v:14:y:2011:i:2:p:371-379

    Download full text from publisher

    File URL:
    Download Restriction: no


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

    Cited by:

    1. Imola DRIGÃ & Codruþa DURA, 2013. "Restoring the Economic Power of Russia through OFDI Expansion," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 16(2), pages 227-241, December.
    2. Ali, Muhammad Ali & Asfand, Asfand Yar Khattak & Bakhtiyar, Bakhtiyar Khan & Hammad, Raja Hammad Amhed, 2014. "Financial Risk and Foreign Direct Investment: Evidence from Pakistan Economy," MPRA Paper 60779, University Library of Munich, Germany, revised 12 Dec 2014.

    More about this item


    country risk; foreign direct investments; interdependence.;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


    Access and download statistics


    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:rom:econmn:v:14:y:2011:i:2:p:371-379. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ciocoiu Nadia Carmen). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.