Good Governance and Tourism in South Asian Emerging Economies: The Mediating Role of Foreign Direct Investment

Abstract

This study examined the role of good governance in promoting tourism in emerging South Asian countries and also tested the mediating role of foreign direct investments (FDI). The study used panel data collected from seven South Asian countries from 1996 to 2018. Panel data regression models were estimated to test the research hypotheses. The results showed that the country’s good governance has a positive and significant influence on tourism receipts and arrivals. Moreover, the mediation analysis results supported that foreign direct investments mediated the relationship between good governance indicators like government effectiveness, political stability, voice and accountability, and control over corruption and tourism. Based on the results, the study proposed the governance-led FDI and FDI-led tourism hypotheses, the study’s main contribution. The study has implications for the government regulatory agencies relating to governance, tourism departments, foreign prospect investors, and policymakers.