top of page
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute
Asian Institute of Research, Journal Publication, Journal Academics, Education Journal, Asian Institute

Economics and Business

Quarterly Reviews

ISSN 2775-9237 (Online)

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, managemet journal
crossref
doi
open access

Published: 24 July 2023

Impact of Governance and Financial Development on Foreign Direct Investment in BRICS Nations

Anurag Piyamrao Wasnik, Ishan Kumar Sarraf

Indian Institute of Management, Pandit Deendayal Energy University

asian institute research, jeb, journal of economics and business, economics journal, accunting journal, business journal, management journal

Download Full-Text Pdf

doi

10.31014/aior.1992.06.03.519

Pages: 46-65

Keywords: BRICS, FDI Inflow, Governance, Financial Development

Abstract

The study tries to understand the impact of Governance and Financial Development on the FDI inflow in the BRICS nations. The study uses the panel regression method to analyze the degree of impact of these indicators on the FDI inflow. The study found that the unit change in Government Effectiveness, Political Stability, and Regulatory Quality will have a positive impact on the FDI inflow in BRICS nations by 1.353, 0.945, and 0.148536 times respectively, while any unit change in the Control of Corruption will have a negative impact on the FDI inflow by 2.820 times. Likewise, for Financial Development, any unit change in the Financial Market Depth and Financial Market Efficiency will positively impact the FDI inflow by 1.634 and 1.624 times, respectively. The study implies that the BRICS nations should focus on strengthening their Government Effectiveness, maintaining Political Stability, improve Regulatory Quality while combating corruption to attract FDI. Similarly, enhancing the Depth and Efficiency of their Financial Markets will significantly strengthen their FDI inflow. The researchers and scholars may pursue the policy implications provided within the study for gauging measures to improve the FDI Inflows in the BRICS nations through Governance and Financial Developments.

References

  1. Adhikary, B. (2011). Does good governance matter for foreign direct investment? Journal of Business Research, 64(8), 826-834.

  2. Adhikary, B. K. (2011). FDI, trade openness, capital formation, and economic growth in Bangladesh: a linkage analysis. International Journal of Business and Management, 6(1), 16.

  3. Berden, K., Bergstrand, J.H. and van Etten, E. (2014), “Governance and Globalisation”, The World Economy, Vol. 37 No. 3, pp. 353–386.

  4. BRICS INDIA (2021). (2021). Evolution of BRICS. Ministry of Foreign Affairs, Government of India.

  5. Čihák, M., Demirgüç-Kunt, A., Feyen, E., & Levine, R. (2012). Benchmarking financial systems around the world (No. 6175). World Bank.

  6. Gelb, S., & Black, A. (2004). Foreign direct investment in South Africa. Investment strategies in emerging markets, 177-212.

  7. Globerman, S., & Shapiro, D. (2002). Global foreign direct investment flows The role of governance infrastructure. World Development, 30(11), 1899-1919.

  8. Guo, Y., & Xu, Q. (2019). The impact of financial development on economic growth in BRICS: Based on panel data analysis. Journal of Business Research, 102, 290-299.

  9. Guru, B.K. and Yadav, I.S. (2019), "Financial development and economic growth: panel evidence from BRICS," Journal of Economics, Finance and Administrative Science, Emerald Publishing Limited.

  10. Hassen, S., & Anis, O. (2012). Foreign direct investment (FDI) and economic growth: an approach in terms of cointegration for the case of Tunisia. Journal of Applied Finance and Banking, 2(4), 193.

  11. Hermes, N., & Lensink, R. (2003). Foreign direct investment, financial development, and economic growth. The journal of development studies, 40(1), 142-163.

  12. Heydt, G. T., Liu, C. C., Phadke, A. G., & Vittal, V. (2001). Solution for the crisis in electric power supply. IEEE Computer Applications in Power, 14(3), 22-30.

  13. Kaufmann, & Kraay. (2021). Worldwide Governance Indicators. The World Bank.

  14. Kaufmann, D., Kraay, A., & Mastruzzi, M. (2009). Governance matters VIII: aggregate and individual governance indicators, 1996-2008—World Bank policy research working paper, (4978).

  15. Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The worldwide governance indicators: Methodology and analytical issues. Hague Journal on the Rule of Law, 3(2), 220-246.

  16. Kaur, S., & Singh, A. (2021). Financial sector development and foreign direct investment: Evidence from India. Economic Analysis and Policy, 70, 469-481.

  17. Krueger, A.O. (1985). "The experience and lessons of Asia's super exporters," Export-Oriented Development Strategies: The Success of Five Newly Industrializing Countries, Boulder, Colorado, Westview Press, pp. 187–212.

  18. Krueger, A.O. and Berg, M.A. (2003). Trade, Growth, and Poverty: A Selective Survey, International Monetary Fund.

  19. Liu, W., Wang, L., & Lu, C. (2020). The impact of foreign direct investment on economic growth in BRICS: Evidence from panel data analysis. Journal of International Trade and Economic Development, 29(5), 579-593.

  20. Loungani, P., & Assaf, R. (2001). How beneficial is a foreign direct investment for developing countries? Finance & Development, 38(002).

  21. Mengistu, A. A., & Adhikary, B. K. (2011). Does good governance matter for FDI inflows? Evidence from Asian economies. Asia Pacific business review, 17(3), 281-299.

  22. Mody, A., & Srinivasan, K. (1998). Japanese and US firms as foreign investors: do they march to the same tune? Canadian Journal of Economics, 778-799.

  23. Ngepah, N. and Udeagha, M.C. (2018). "African regional trade agreements and intra-African trade," Journal of Economic Integration, JSTOR, Vol. 33 No. 1, pp. 1176–1199.

  24. Ngepah, N. and Udeagha, M.C. (2019). "Supplementary trade benefits of multi-memberships in African regional trade agreements," Journal of African Business, Taylor & Francis, Vol. 20 No. 4, pp. 505–524.

  25. Ngepah, N.N. (2014). "International trade and agricultural production: Evidence from the Southern African Development Community sub-region," Development Southern Africa, Taylor & Francis, Vol. 31 No. 3, pp. 494–514.

  26. Ogunmuyiwa, M., Akanbi, O., & Ogunmuyiwa, O. (2019). Governance indicators and economic growth in the BRICS countries: An empirical analysis using panel data regression. Heliyon, 5(10), e02652.

  27. Rammal, H. G., & Zurbruegg, R. (2006). The impact of regulatory quality on intra-foreign direct investment flows in the ASEAN markets. International Business Review, 15(4), 401-414.

  28. Rugman, A. M., & Verbeke, A. (1998). Corporate strategies and environmental regulations: An organizing framework. Strategic management journal, 19(4), 363-375.

  29. Sahay, M. R., Cihak, M., N'Diaye, M. P. M., Barajas, M. A., Pena, M. D. B. A., Bi, R., ... & Yousefi, M. R. (2015). Rethinking financial deepening: Stability and growth in emerging markets. International Monetary Fund.

  30. Saidi, Y., Ochi, A. & Ghadri, H. (2013). "Governance and FDI attractiveness: Some evidence from developing and developed countries," Global Journal of Management and Business Research.

  31. Samimi, A. J., & Ariani, F. (2010). Governance and FDI in MENA region. Australian Journal of Basic and Applied Sciences, 4(10), 4880-4882.

  32. Singh, H., & Jun, K. W. (1995). Some new evidence on determinants of foreign direct investment in developing countries (No. 1531). World Bank Publications.

  33. Svirydzenka. (2016). Introducing a New Broad-based Index of Financial Development. International Monetary Fund.

  34. UNCTAD. (2009). UNCTAD REPORT ANNUAL 2009. The United Nations Conference on Trade and Development.

  35. Wang, Z. Q., & Swain, N. (1997). Determinants of inflow of foreign direct investment in Hungary and China: time‐series approach. Journal of International Development: The Journal of the Development Studies Association, 9(5), 695-726.

  36. World Bank. (2021). Foreign direct investment, net (BoP, current US$) | Data. Foreign Direct Investment, Net (BoP, Current US$) | Data.

  37. Xinhua. (2022). Xi Focus: Xi pumps more BRICS power into global economic governance. BRICS 2022.

bottom of page