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Article
Publication date: 23 May 2019

Otuo Serebour Agyemang, Christopher Gbettey, John Gartchie Gatsi and Innocent Senyo Kwasi Acquah

The purpose of this study is to examine the link between country-level corporate governance and foreign direct investment in African economies for the period 2009-2015.

Abstract

Purpose

The purpose of this study is to examine the link between country-level corporate governance and foreign direct investment in African economies for the period 2009-2015.

Design/methodology/approach

The authors use annual panel data of 40 African economies over the period of the study and use the system generalized method of moments (GMM) to establish the relationship between country-level corporate governance and foreign direct investment.

Findings

The authors find that African economies characterized by firms with high ethical values tend to attract a great deal of foreign direct investment. In addition, they highlight that when an economy is associated with effective corporate boards, it tends to attract much foreign direct investment. Further, this study reveals that the level of minority shareholders’ interests’ protection in an economy has a significant positive relationship with foreign direct investment. Finally, they document a negative relationship between effectiveness of regulation of securities and exchanges and foreign direct investment.

Practical implications

It is advised that sound and implementable corporate governance structures devoid of political interferences should be put in place in African economies, if the aim of using foreign direct investment to mitigate poverty by 2015 as part of the Millennium Development Goals is to be attained.

Originality/value

Empiricists have devoted considerable effort to estimate the factors that influence the level of foreign direct investment into African economies without taking into consideration the corporate governance structures in these economies. However, this paper seeks to examine the relationship between country-level corporate governance structures and foreign direct investment in African economies.

Details

Corporate Governance: The International Journal of Business in Society, vol. 19 no. 5
Type: Research Article
ISSN: 1472-0701

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Article
Publication date: 26 August 2014

Justice Gameli Djokoto, Francis Yao Srofenyoh and Kobla Gidiglo

– The purpose of this paper is to investigate the effects of foreign direct investment (FDI) into agriculture on domestic investment in agriculture.

Abstract

Purpose

The purpose of this paper is to investigate the effects of foreign direct investment (FDI) into agriculture on domestic investment in agriculture.

Design/methodology/approach

Time series data from 1976 to 2007 was fitted to a derived model.

Findings

Foreign direct investment into agriculture crowd-in domestic investment into agriculture.

Research limitations/implications

A targeted approach that will attract foreign direct investment into agriculture is required as to complement existing efforts at boosting domestic agricultural investment.

Originality/value

Numerous papers investigated the relationship between foreign direct investment and domestic investment at the aggregate national and regional levels. However, the evidence for this relationship has been conflicting. That for agriculture is rare. For Ghana, a developing agrarian economy that has promoted foreign direct investment for some decades now, it is imperative to establish the relationship between foreign direct investments and domestic investment. Also, the estimation was based on a theoretically derived model.

Details

Agricultural Finance Review, vol. 74 no. 3
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 1 April 2003

Georgios I. Zekos

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination…

Abstract

Aim of the present monograph is the economic analysis of the role of MNEs regarding globalisation and digital economy and in parallel there is a reference and examination of some legal aspects concerning MNEs, cyberspace and e‐commerce as the means of expression of the digital economy. The whole effort of the author is focused on the examination of various aspects of MNEs and their impact upon globalisation and vice versa and how and if we are moving towards a global digital economy.

Details

Managerial Law, vol. 45 no. 1/2
Type: Research Article
ISSN: 0309-0558

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Book part
Publication date: 19 April 2017

Laura Alfaro

Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and falling of…

Abstract

Among the prominent economic trends in recent decades is the exponential increase in flows of goods and capital driven by technological progress and falling of restrictions. A key driver of this phenomenon has been the cross-border production, foreign investment, and trade both final and intermediate goods by multinational corporations. Research has sought to understand how foreign direct investment (FDI) affects host economies. This paper reviews the main theories and empirical evidence of two streams of literature: the mechanisms by which multinational activity might create positive effects and externalities to countries and the role of complementary local conditions, also known as “absorptive capacities,” that allow a country to reap the benefits of FDI paying particular attention to the role of factor markets, reallocation effects, and the linkages generated between foreign and domestic firms. The survey focuses mainly on work related to developing countries.

Details

Geography, Location, and Strategy
Type: Book
ISBN: 978-1-78714-276-3

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Article
Publication date: 20 February 2009

Orhan Akisik and Ray Pfeiffer

This paper aims to examine the relation between the proportion of direct investment to US total – direct and portfolio – investment abroad and their country‐specific…

Abstract

Purpose

This paper aims to examine the relation between the proportion of direct investment to US total – direct and portfolio – investment abroad and their country‐specific determinants in developed and developing countries between 1997 and 2005, emphasizing the role of high‐quality accounting standards and corporate governance.

Design/methodology/approach

The study covers 46 developed and emerging market countries that are classified into four groups: Advanced, Asian, Central and Eastern European and Latin American. In order to eliminate the adverse effects of possible outliers in some observations on regression results, fixed effect robust regression (RR) techniques were conducted, in addition to fixed effect ordinary least squares (OLS) estimation using panel data.

Findings

It was found that the proportion of direct investment to US total investment abroad is strongly and negatively related to both high‐quality accounting standards and effective corporate governance, even after controlling for a number of variables found in previous research to be important: inflation, stock market capitalization, per capita gross domestic product, openness of destination countries’ economies and tax rates.

Research limitations/implications

One major problem in international accounting research is the difficulty in obtaining of data. This problem was encountered in this study, too. Therefore, some emerging market countries are necessarily excluded from the sample.

Originality/value

The main focus is the contributions of accounting standards and corporate governance to explaining tradeoffs between US direct and portfolio investment in developed and developing countries. In this sense, this is – to the authors’ knowledge – the first study in this area.

Details

Review of Accounting and Finance, vol. 8 no. 1
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 1 January 1987

George Tesar

Research suggests that the small‐ and medium‐sized Western European firms interested in direct investment in the United States are reluctant to co‐operate with state…

Abstract

Research suggests that the small‐ and medium‐sized Western European firms interested in direct investment in the United States are reluctant to co‐operate with state governments in formulating investment decisions. Research findings in the Upper Mid‐west indicate that the primary motivation of these firms to invest in the Upper Mid‐west is to shelter capital. The amount of importance the individual state governments place on reverse direct investment politicises the entire process of solicitation of potential direct investors. As a result, the small‐ and medium‐sized Western European firms tend to seek direct investment assistance from professional private sources.

Details

International Marketing Review, vol. 4 no. 1
Type: Research Article
ISSN: 0265-1335

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Article
Publication date: 19 August 2009

Jayaraman Vijayakumar, Abdul A. Rasheed and Rasoul H. Tondkar

This paper investigates the extent to which country risk ratings influence the inflow of foreign direct investment (FDI). Using International Monetary Fund (IMF) data from…

Abstract

This paper investigates the extent to which country risk ratings influence the inflow of foreign direct investment (FDI). Using International Monetary Fund (IMF) data from over 100 countries and Euromoney’s country risk ratings over a ten‐year period, this study finds that country risk ratings have a significant influence on FDI. This effect is stronger for US FDI. We also analyze the relative importance of the individual components of the country risk index.

Details

Multinational Business Review, vol. 17 no. 3
Type: Research Article
ISSN: 1525-383X

Keywords

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Book part
Publication date: 3 September 2014

Orhan Akisik

This paper explores the relationship between foreign direct investments and financial reporting changes via financial development in 12 Latin American countries during the…

Abstract

Purpose

This paper explores the relationship between foreign direct investments and financial reporting changes via financial development in 12 Latin American countries during the period from 1997 to 2010.

Methodology/Approach

In order to control the possible endogeneity problem, the Generalized Method of Moments (GMM) estimation technique has been conducted using country-level panel data obtained from the World Development Indicators website.

Findings

The empirical analyses provide evidence that international accounting standards have a significant effect on foreign direct investments. However, financial development associated with such standards reduces this positive effect. This is an important finding, suggesting that investors are likely to prefer portfolio to direct investments in Latin American financial markets that require or permit the use of international accounting standards.

Research Implications

The conclusions that have been drawn from this study are important for investors, creditors, and regulators. Although international accounting standards appear to affect foreign investments, there could be a lack of adaptation of these standards to specific economic environments due to cultural, educational, and economic factors. Therefore, firms, regulators, professional organizations, and accounting firms should make necessary arrangements so that the benefits of using these standards increase their costs.

Originality/Value

The study contributes to the international accounting literature by examining the effects of international accounting standards and financial development on foreign direct investments in Latin America.

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Article
Publication date: 26 July 2011

Palamalai Srinivasan, M. Kalaivani and P. Ibrahim

This paper aims to investigate the causal nexus between foreign direct investment (FDI) and economic growth in SAARC countries.

Abstract

Purpose

This paper aims to investigate the causal nexus between foreign direct investment (FDI) and economic growth in SAARC countries.

Design/methodology/approach

Johansen's cointegration test was employed to examine the long‐run relationship between foreign direct investment and economic growth in SAARC countries. Besides, the vector error correction model (VECM) was employed to examine the causal nexus between foreign direct investment and economic growth in SAARC countries for the years 1970‐2007. Finally, the impulse response function (IRF) has been employed to investigate the time paths of log of foreign direct investment (LFDI) in response to one‐unit shock to the log of gross domestic product (LGDP) and vice versa.

Findings

The Johansen cointegration result establishes a long‐run relationship between foreign direct investment and gross domestic product (GDP) for the sample of SAARC nations, namely, Bangladesh, India, Maldives, Nepal, Pakistan and Sri Lanka. The empirical results of the vector error correction model exhibit a long‐run bidirectional causal link between GDP and FDI for the selected SAARC nations except India. The test results show that there is a one‐way long‐run causal link from GDP to FDI for India.

Research limitations/implications

This paper employed annual data to examine the causal nexus between FDI and economic growth. Therefore, researchers are encouraged to test the FDI‐growth relationship further by using quarterly data.

Practical implications

The SAARC nations should adopt effective policy measures that would substantially enlarge and diversify their economic base, improve local skills and build up a stock of human capital recourses capabilities, enhance economic stability and liberalise their market in order to attract as well as benefit from long‐term FDI inflows.

Originality/value

This paper would be immensely helpful to the policy makers of SAARC countries to plan their FDI policies in a way that would enhance growth and development of their respective economies.

Details

Journal of Asia Business Studies, vol. 5 no. 2
Type: Research Article
ISSN: 1558-7894

Keywords

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Article
Publication date: 1 January 1994

Hamid Hosseini

The end of World War II brought about many economic changes, among them the tremendous increase of US manufacturing activities in Western Europe. This astronomical…

Abstract

The end of World War II brought about many economic changes, among them the tremendous increase of US manufacturing activities in Western Europe. This astronomical increase of foreign direct investment (FDI) required a new theory ‐ an economic theory of foreign direct investment. International economic theory, which traditionally had ignored the FDI decision, was not able to explain the FDI decision, nor could it explain the phenomena of multinational corporation (MNC). In a world of perfect competition, foreign direct investment would be absent. And when all markets operate efficiently, when there are no external economies of production and marketing, when information is costless and there are no barriers to trade or competition, international trade is the only possible form of international involvement. Logically, it follows that it is the departures from the models of perfect competition that must provide the rationale for foreign direct investment. Since, according to the Heckscher‐ Ohlin‐Samuelson (neoclassical) model, trade of goods will equalize factor prices in a world of factor immobility. In fact, the FDI decision is even ignored by new international economics which, since the late 1970's, has utilized new developments in the field of industrial organization. Proponents of these new theories have developed models that emphasize increasing returns and imperfect competition and see the possibility that government involvements in trade (trade restrictions, export subsidies, etc.) may under some circumstances be useful. All of this is done while foreign direct investment is ignored.

Details

Humanomics, vol. 10 no. 1
Type: Research Article
ISSN: 0828-8666

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