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Foreign Direct Investment Inflows and Governance Nexus: Evidence from the United States, China, and Singapore

Author

Listed:
  • Farrukh Nawaz Kayani

    (Hamad Bin Khalifa University, Doha, State of Qatar)

  • Christopher Gan

    (Faculty of Agribusiness and Commerce, Lincoln University, New Zealand)

Abstract

This study investigates the relationship between inward foreign direct investment inflows and governance of the United States, China, and Singapore. The study employs governance indicators including control of corruption, government effectiveness, regulatory quality, political stability and the absence of violence, rule of law, voice, and accountability to examine the relationship between inward foreign direct investment flows and governance for the period 2002–2019. The baseline regression results are based on bivariate and multivariate regressions with fixed effects. The results confirm a direct and significant relationship between governance and foreign direct investment. The results are robust while applying other regression techniques such as Prais–Winsten regression, Driscoll–Kraay regression, and a two-step system generalized method of moments’ estimation. More specifically, all six governance indicators including control of corruption, government effectiveness, regulatory quality, political stability and the absence of violence, rule of law, voice, and accountability exhibit the same i.e., direct and significant relationship. The paper also suggests various recommendations for investors at the individual and country levels.

Suggested Citation

  • Farrukh Nawaz Kayani & Christopher Gan, 2022. "Foreign Direct Investment Inflows and Governance Nexus: Evidence from the United States, China, and Singapore," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 25(04), pages 1-18, December.
    • Handle: RePEc:wsi:rpbfmp:v:25:y:2022:i:04:n:s0219091522500308
    DOI: 10.1142/S0219091522500308
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    More about this item

    Keywords

    Foreign direct investment; governance indicators; control of corruption; system generalized method of moments;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other

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