Search results

1 – 10 of 53
Article
Publication date: 3 August 2015

Abdullah Noman, Mohammad Nakibur Rahman and Atsuyuki Naka

This paper aims to uncover potential contemporaneous relationship between foreign portfolio investment (FPI) and another popular type of cross-border investment outflow…

2578

Abstract

Purpose

This paper aims to uncover potential contemporaneous relationship between foreign portfolio investment (FPI) and another popular type of cross-border investment outflow, namely, foreign direct investment (FDI).

Design/methodology/approach

The relationship between FPI and FDI are modeled using simultaneous equations approach to take potential endogeneity in to account. In a panel of 45 countries over the period of 2001-2009, FPI and FDI are found to be strategically complimentary to each other.

Findings

The two-stage least square estimates suggest existence of both statistically and economically significant relationship between these two types of outflows. In particular, the FDI outflow has empirically significant predictive power in explaining the FPI outflow. Similarly, the FPI outflow also has significant explanatory power for the observed level of FDI outflow. Second, the FPI has greater explanatory power for FDI outflow than the FDI for the FPI outflow.

Originality/value

The authors believe that the paper would contribute to the relevant literature in terms of its originality and scope. The empirical findings of the paper have valuable policy implications.

Details

Journal of Financial Economic Policy, vol. 7 no. 3
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 8 April 2022

Chipo Simbi, Jacqueline A. Arendse and Sibanisezwe Alwyn Khumalo

The institutional framework of an African country may influence the effectiveness of the International Financial Reporting Standards (IFRS) on foreign investment inflows…

Abstract

Purpose

The institutional framework of an African country may influence the effectiveness of the International Financial Reporting Standards (IFRS) on foreign investment inflows. The purpose of this paper is to argue that the quality of a country's institutional framework impacts the effectiveness of IFRS to an adopting country and ultimately influences the levels of Foreign Portfolio Investment (FPI).

Design/methodology/approach

Employing country-level data. A sample of 15 countries from Africa is used. Data is collected over a period of 22 years (1994–2014). The authors employ the General Method of Moments (GMM) panel regression technique to examine whether the quality of a country's institutional framework has an impact on the relationship between IFRS and FPI and the Propensity Score Matching (PSM) technique to assess the level of impact.

Findings

The findings reveal that the quality of a country's institutional framework moderates the strength of the association between IFRS and FPI. Overall, the authors find that the quality of the institutional frameworks in African countries has a negative effect on the IFRS and FPI nexus.

Research limitations/implications

The study focuses exclusively on African countries; using an exclusively African sample limits the generalisation of results to other continents like Latin America with similar environments to Africa.

Practical implications

This study provide evidence that IFRS alone cannot ensure the intended capital market benefits but encourages the development of strong institutions in African countries to realise the most from IFRS adoption. The emphasis on institutional development is an essential contribution that this study makes.

Originality/value

This study is unique since it emphasises the importance of institutional framework quality when considering the impact of IFRS on foreign investment inflows in an African setting.

Details

Journal of Accounting in Emerging Economies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2042-1168

Keywords

Article
Publication date: 20 July 2015

Ritab Al-Khouri

This study aims to examine the factors affecting the foreign direct investment (FDI) and foreign portfolio investment (FPI) flows among the 16 economies comprising the…

1290

Abstract

Purpose

This study aims to examine the factors affecting the foreign direct investment (FDI) and foreign portfolio investment (FPI) flows among the 16 economies comprising the Middle East and North African (MENA) region.

Design/methodology/approach

Panel data for the period 1984-2012 are used, and the generalized method of moment (GMM) technique is implemented.

Findings

The results support the agglomeration effect, which indicates that countries which have already had FDI attract more FDI in the future. Economic risk affects FDI significantly and negatively, whereas trade openness has a significant and positive impact on FDI. Of the political risk factors considered, three of them, namely, law and order, ethnic tension and internal conflict, significantly affect FDI. The results on FPI show that the lag in FPI and the degree of openness play a significant role in attracting FPI into the MENA region. In addition, stock market capitalization, as well as the return on investment affects the FPI flow positively. The study also reveals a negative government structure impact on FPI, whereas, surprisingly, religious tension in the MENA region affects FPI positively.

Originality/value

This research examines, simultaneously, the factors that determine not only FDI but also FPI flow. It uses a powerful econometric technique which avoids common estimation problems such as endogeneity, heteroskedasticity and autocorrelation. Policymakers in the MENA region recognized the need for outside capital as a major catalyst of development, economic growth and modernization. Therefore, it is essential to know the factors that would lead to a surge in capital flow to these countries.

Details

The Multinational Business Review, vol. 23 no. 2
Type: Research Article
ISSN: 1525-383X

Keywords

Article
Publication date: 24 November 2020

Safi Ullah and Muhammad Tahir

The purpose of this study is to examine the effect of country- and firm-specific factors on foreign investment in Pakistan.

Abstract

Purpose

The purpose of this study is to examine the effect of country- and firm-specific factors on foreign investment in Pakistan.

Design/methodology/approach

This study uses time-series data for country-level determinants and uses panel data for 100 listed non-financial companies selected based on market capitalisation from 2005 to 2015.

Findings

Findings suggest that the stock market returns and liquidity of the country significantly positively influence the foreign portfolio investment (FPI) in Pakistan. Whereas, economic growth surprisingly is negatively related to foreign portfolio investment. In addition, findings reveal that firm size, financial leverage, dividend yield and global depositary receipts (GDR) have a positive impact on the total foreign investment at firm level. Further, foreign institutional investors prefer to invest in those firms that are large, pay high dividends and issue GDR. Furthermore, findings suggest that foreign direct investors tend to invest in firms that are financially leveraged and have low capital gain yield.

Practical implications

At the country level, this study recommends that stock market performance, economic growth and foreign reserves of the country should be maintained and improved to attract FPI. At the firm level, this study recommends issuance of global depositary receipts and high dividend payouts for those firms that are interested in institutional investment in Pakistan.

Originality/value

To the best of authors' knowledge, this study is the first that examines the effect of firm-level factors along with country-level factors on foreign investment in Pakistan.

Details

South Asian Journal of Business Studies, vol. 11 no. 1
Type: Research Article
ISSN: 2398-628X

Keywords

Article
Publication date: 29 November 2018

Liu Wang and Shaomin Li

Amid the rising concerns about the unbalanced globalization, there has been a renewed interest in examining the pattern of international trade and investment, especially…

Abstract

Purpose

Amid the rising concerns about the unbalanced globalization, there has been a renewed interest in examining the pattern of international trade and investment, especially between emerging and mature economies. In this study, the purpose of this paper is to examine the role of different institutional and market-related determinants in shaping the pattern and mode of foreign investments in emerging and developed markets.

Design/methodology/approach

The empirical investigation is based on a balanced panel sample of 45 countries (28 developed countries and 17 emerging economies) over an 11-year period from 2002 to 2012. A series of multivariable regressions are conducted to evaluate both the trend and the mode of foreign investment with rigorous robustness checks.

Findings

Overall, the authors find that market openness and capital market development are the main determinants of a country’s ability to attract foreign investment in developed countries, while the governance environment is the key consideration in emerging markets. Regarding the mode of foreign investment, the authors find that, in developed markets, foreign investors tend to choose direct investment in the countries with more open markets. In emerging markets, however, the choice between direct and indirect (portfolio) investments is mainly driven by arbitrage activities, where investors opt for portfolio investment when the stock market is undervalued.

Practical implications

First, the findings may aid foreign investors in their strategic choice between emerging vs mature markets based on the governance environment, market openness, capital market development and arbitrage opportunities. Second, the findings may be used to aid governments in prioritizing institutional improvement in market openness, stock market development and policies aimed at balancing different investment channels.

Social implications

The study may enhance the social understanding on the current debate on the winners and losers of globalization. A main complaint from mature economies is that the emerging economies took their jobs away and, therefore, they should adopt protectionism (which implies closing their own markets) in order to preserve jobs. The study shows that such a reaction may not be in the best interests of the mature economies since they will be able to attract more foreign investment (which implies creating or at least keeping more jobs) if they make their markets more open.

Originality/value

Existing studies on foreign investment have primarily focused on direct investment. The study examines both the direct and indirect investments and the way in which they affect the foreign investment markets in emerging and mature economies. From the institutional perspective, the authors show how the governance environment and market factors affect foreign investors’ strategic choice between direct and indirect investment, contingent upon the stage of a country’s economic and institutional development.

Details

International Journal of Emerging Markets, vol. 13 no. 5
Type: Research Article
ISSN: 1746-8809

Keywords

Article
Publication date: 11 February 2020

Abdelkader Derbali and Ali Lamouchi

The purpose of this paper is to understand and compare the extent and nature of the impact of foreign portfolio investment (FPI) on the stock market volatility…

Abstract

Purpose

The purpose of this paper is to understand and compare the extent and nature of the impact of foreign portfolio investment (FPI) on the stock market volatility, particularly in the Southeast Asian emerging markets, and compare that against the corresponding experience of Indian economy, in the context of a global financial crisis of the recent past.

Design/methodology/approach

The Asian emerging markets are now being perceived as becoming financially more and more vulnerable to international events because of their growing exposure to unstable foreign investment flows. The daily net FPI inflow and the daily leading stock market composite index of four countries, namely, Thailand, the Philippines, Indonesia and India, have been analyzed using autoregressive conditional heteroscedasticity (ARCH)-generalized ARCH group of models dividing the study period from 2000 to 2014 among pre-crisis, crisis and post-crisis period separately.

Findings

The study reveals that the net inflow of FPI has been a significant determinant of stock market returns in all countries. The impact of volatility spillover from the FPI market to the stock market in the sample countries has been found to be different under different market conditions. The past information and volatility clustering have been significantly influencing the stock market return volatilities of all these Southeast Asian countries on average.

Originality/value

However, there are significant country-wise differences in the relative importance and direction of the relationship of each of these effects with the volatility of the FPI and the stock markets. These effects have been different in these four different markets and they have significantly altered in strength and significance during the global financial crisis and in the post-financial crisis period.

Details

Pacific Accounting Review, vol. 32 no. 2
Type: Research Article
ISSN: 0114-0582

Keywords

Article
Publication date: 21 November 2008

Rosylin Mohd. Yusof and M. Shabri Abd. Majid

In line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic…

5384

Abstract

Purpose

In line with the government's policy to promote Malaysia as an international hub for Islamic banking and finance, the purpose of this paper is to evaluate the dynamic effects of both Islamic and conventional stock markets on foreign portfolio investments.

Design/methodology/approach

First, the paper explores the short and long‐run relationships between (FPI) and three markets, i.e. the goods, money, and securities market. Second, the paper attempts to examine the relative importance of the three markets in accounting for variations in FPI. Consistent with earlier studies, the goods market variable considered is real income (Y). The money market variables tested are the broad money supply (M2), treasury bill rate (TBR) and the US Federal Fund rate (FFR), while the security market is represented by both Kuala Lumpur Shari'ah Index (KLSI) and Kuala Lumpur Composite Index (KLCI).

Findings

The findings of the study indicate that among the three markets studied, the securities market in Malaysia (both conventional and Islamic) is the most significant market in attracting FPI into the economy. This implies that to a certain extent, the government's effort in promoting Malaysia as the international hub for the Islamic capital market has been successful.

Originality/value

The paper suggests that further efforts need to be enhanced in promoting Malaysia as the International hub for the Islamic banking and finance. The paper's findings shed some light on the policy ramifications pertaining to attracting foreign investors into the ICM in Malaysia and in moving towards a more globally competitive capital market.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. 1 no. 4
Type: Research Article
ISSN: 1753-8394

Keywords

Open Access
Article
Publication date: 24 September 2020

Boubekeur Baba and Güven Sevil

The purpose of this paper is to investigate the impact of foreign capital shifts on economic activities and asset prices in South Korea.

Abstract

Purpose

The purpose of this paper is to investigate the impact of foreign capital shifts on economic activities and asset prices in South Korea.

Design/methodology/approach

The authors in this paper apply the Bayesian threshold vector autoregressive (TVAR) model to estimate the regimes of large and low inflows of foreign capital. Then, structural impulse-response analysis is used to check whether the responses of the variables differ across the estimated regimes. The model is estimated using quarterly data of foreign capital inflows, gross domestic product (GDP), consumer price index, credit to the private non-financial sector, real effective exchange rate (REER), stock returns and house prices.

Findings

The main findings suggest that large inflows of gross foreign capital, foreign direct investments (FDI) and foreign portfolio investments (FPI) are ineffective to boost economic growth, but large inflows of other foreign investments (OFIs) significantly contribute to GDP. The decreases in the foreign capital inflows are associated with larger depreciation of REER. The large inflows of gross foreign capital, FDI and OFIs are associated with further expansion of credit supply to private non-financial sectors.

Research limitations/implications

The policy implications of foreign capital inflows are of particular importance to all the emerging markets alike. However, the empirical analysis is limited to the case of South Korea due to various reasons. The experience with international capital inflows among emerging markets is heterogeneous. Therefore, it would be better to take each case of emerging market individually. In addition, TVAR analysis requires a long data sample, which unfortunately is not available for most of the emerging markets.

Originality/value

The foreign capital inflows are shown to be procyclical and notoriously volatile in many studies. Nevertheless, this topic has commonly been studied using linear VAR models, which do not properly deal with the cyclical characteristics of foreign capital inflows. This study attempts to resolve these methodological limitations by examining a non-linear VAR model that is capable of capturing the structural breaks associated with the cyclical behaviors of foreign capital inflows.

Details

Asian Journal of Economics and Banking, vol. 4 no. 3
Type: Research Article
ISSN: 2615-9821

Keywords

Article
Publication date: 7 March 2016

Mohamed Salem and Andrew Baum

The purpose of this paper is to identify the main determinants of foreign direct real estate investments (foreign direct investment (FDI)) in selected Middle Eastern and…

2079

Abstract

Purpose

The purpose of this paper is to identify the main determinants of foreign direct real estate investments (foreign direct investment (FDI)) in selected Middle Eastern and North African (MENA) countries.

Design/methodology/approach

The empirical work of this study is an econometric analysis of FDI in the commercial real estate sector for eight MENA markets, namely Algeria, Egypt, Morocco, Qatar, Saudi Arabia, Turkey, Tunisia and the UAE during the period 2003-2009. The econometric analysis is carried out using the pooled Tobit model technique for panel data.

Findings

The paper finds that both country-specific factors and real estate sector-specific variables consistently support hypotheses explaining commercial real estate-related FDI, and find evidence that political stability explains why some selected MENA countries attract more real estate investments than other MENA countries.

Practical implications

The findings should be seriously considered in any policy making effort on the part of governments in the region.

Originality/value

The authors contribute to the existing literature in many ways. First, the study aims to develop econometric models, using both conventional and unique variables, to be generalised and applied to any developed or emerging market. The study applies relevant techniques in estimating the models, including the pooled Tobit model. Second, the research studies eight selected MENA real estate markets from 2003 to 2009, a timeframe and geography not examined in previous published empirical work on commercial real estate investments. Lastly, and for the first time in real estate literature, the study applies the location dimension of Dunning’s OLI paradigm as a theoretical explanation for the behaviour of foreign investors in commercial real estate towards the selected MENA markets.

Details

Journal of Property Investment & Finance, vol. 34 no. 2
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 March 2003

M. Kabir Hassan

Summarizes the net capital flows from industrial to developing/transitional countries 1970‐1996 and recent changes in their equity and bond markets; and identifies the…

1344

Abstract

Summarizes the net capital flows from industrial to developing/transitional countries 1970‐1996 and recent changes in their equity and bond markets; and identifies the factors affecting these portfolio flows and risk/return behaviour in OIC stock markets. Uses monthly stock return data from ten OIC countries to demonstrate that despite their volatility they might offer opportunities for portfolio diversification; and uses cointegration methods to investigate the dynamic relationships between them. Discusses the causes of the Asian currency crisis and its impact on these stock marekts; and considers what trade and development policies OIC countries should adopt to improve their economies.

Details

Managerial Finance, vol. 29 no. 2/3
Type: Research Article
ISSN: 0307-4358

Keywords

1 – 10 of 53