Foreign Investment Inflows Research Articles

Gelişmekte Olan Ülkelerde Kredi Temerrüt Takası (CDS) Primlerinin Belirleyicileri: Türkiye'den Kanıtlar

Turkey faces increasing CDS (Credit Default Swap) spreads. The level of CDS spreads shows the riskiness of a country in terms of credit default and countries can’t attract high foreign investment inflows when CDS spreads are high. In this context, countries need to identify the influential factors in order to decrease CDS spreads. In this study, ten independent variables classified in global, macro, and market factors are analyzed using monthly data between January 2004 and December 2019 with autoregressive distributed lag (ARDL), fully modified least square (FMOLS), dynamic ordinary least square (DOLS), and Markov Switching Regression (MSR) after applying principal component analysis (PCA). The results show that (i) market component has a greater effect than other components for all models, which indicates that it is the most important variable for Turkey’s CDS spreads; (ii) global and market components are positive and statistically significant for the ARDL, FMOLS, and DOLS models; (iii) macro component is negative for all models.

Determinants of foreign direct investments in Central Asian countries

The main purpose of this study is to examine the factors that determine FDI inflows to five countries in Central Asia (Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan). An empirical analysis covering the period of 1995–2021 was made in the study. Dynamic panel data analysis methods were used in the empirical analysis. The model was created by using five different variables (FDI in the previous period, economic growth, real effective exchange rate, macroeconomic stability and infrastructure) that are thought to affect FDI in Central Asian countries that are close to each other in economic terms. The created model was analyzed with the Generalized Moments Method (GMM) proposed by Arellano and Bond [1]. According to the results of the GMM estimation method, it is seen that the lagged value of FDI, economic growth, real effective exchange rate, macroeconomic stability variables are statistically significant and explain the dependent variable to a large extent. On the other hand, the infrastructure variable does not affect foreign direct investments. This study explores developing Central Asian countries, including Kazakhstan. The results of this study are important in knowing the factors that determine foreign direct investments in Central Asian countries. As a result, it can be thought that the success of the investments in the past period will encourage more foreign investment inflows in the following years. Economic growth of Central Asian countries is an important factor in influencing FDI. Fast-growing economies attract more FDI. Therefore, Central Asian countries need to take steps to create a suitable investment climate by eliminating macroeconomic problems such as inflation, insufficient infrastructure, and exchange rate instability in order to increase the amount of FDI.

Measurement of Cost of Capital for Foreign Direct Investment in Pakistan: A Neoclassical Approach

Capital can move inside and outside the boundaries of a country in search of the highest financial return and greatest security for its operation in the host regions. High return from investment is linked with the incentive mechanism offered by the host country in attracting FDI to fill the investment gap and diffusion of other skills. To attract the foreign investors, the successive governments in Pakistan, offered various investment incentives in the form of tax concessions (tax expenditure) and direct expenditure on infrastructural provisions. The taxation policy of Pakistan has great relevance for Transnational Corporation’s (TNC) involvement in production activities. It is perceived to be a significantly influential factor in determining the inflow of foreign investment through the cost of capital and the resulting after tax return. Stimulating foreign investment, mainly through the large TNCs, requires cost minimising devices, which are reflected in fixed cost of a long-term investment project. The cost of fixed assets in such projects depends upon the rate of return, the price of capital goods and, most importantly, the tax treatment of generated income. Foreign investors are generally pursuing two sets of objectives that are related to their decision to invest. First, they prefer for locational advantages like market size, access to raw material and the availability of skilled labour. Secondly, they have their concern with the incentives offered by the host countries through their fiscal policies. These policies attract the investment considerations of the foreign investors. TNCs search the second set of objectives only if the first set is fulfilled.

Crash of COVID -19 on the Indian Foreign Investments

Corona viruses are Zoometric that means which are transmitted between animals and humans. Corona virus (COV) is a large family of viruses and COVID -19 is one of them that cause respiratory diseases arraign from the general cold to more stern diseases. COVID -19 that crippled the world economy in the terms of trade and commerce, employment, education and health. The only mechanism that drags out any sick economy from any crisis is its foreign investments. Foreign investments play an important role for the emerging and developing economies in booming their economies through the sources of international finance and portfolio investments. But this time FDI which is already seeing downcast with lower rate of returns will not act as a lubricant for the suffering economies. Uncertainties about the upcoming course and consequence of COVID-19 has made the financial market additional unpredictable, leading to huge collide and wealth wearing away which consecutively impacting consumption level. According to the Department for Promotion of Industry and Internal Trade, on 18th April 2020 the government of India had made certain changes in the foreign Investment policies to encourage opportunistic takeovers and acquisitions.
 This paper is entirely committed to bring out whether there is a significant impact of the COVID-19 on the Indian foreign investments. For such analyses, the monthly data have been taken for Net Foreign Direct Investments, Foreign Direct Investments by India, Net Portfolio Investments, FII, Portfolio Investments by India and Foreign Investment Inflows. The analysis is then extended in examining the impact of COVID -19 on Market Capitalization (BSE and NSE) and Market Turnover (BSE and NSE). For such analysis T- test and Mann-Whitney Test has been applied.

The Activities of Foreign Entrepreneurs in the Amur Region as Reflected in the Regional Press of the 1860s

The article studies how the economic life of the Amur region in the first half of the 1860s is reflected in contributions to the newspapers Amur and Vostochnoe Pomorie, with a focus on the newspaper coverage of foreign entrepreneurs' activities in the region. The authors analyze how the journalists tried to attract foreign capital to Russia, and how they interpreted the legal and cultural conditions that foreign traders encountered in the Amur region. Equally taken into consideration are the features and prospects of intercultural communication in the region, the respective publications attitudes towards the Russian annexation of the Amur region, and their perceptions of the factors that stood in the way of the comprehensive development of the region and of the attraction of foreign entrepreneurs. The article analyzes the image that the newspaper authors drew of life in the Russian Far Eastern peripheries; in particular, a number of articles were very critical in their discussion of how to remove obstacles to attracting foreigners to the region. At the same time this contribution argues that by their description of the nature and living conditions in the Amur region, the regional newspapers also contributed to the inflow of domestic and foreign investments into the Far Eastern region. It seems that this experience can be useful for the economic development of remote Russian territories also today, after a necessary adjustment.

Foreign direct investment and shadow economy: One-way effect or multiple-way causality?

The article examines the relationship between the size of the shadow economy and indicators of the investment market development. Net inflow of foreign direct investments, volume of net investments in non-financial assets, volumes of portfolio investments, and net outflow of foreign direct investment were used as parameters characterizing the development of the investment market. The dependence between the indicators was analyzed using the regression equation, Shapiro-Wilk test. Research results demonstrate that the increase in the inflow and outflow of foreign direct investments leads to an increase in the size of the shadow economy without a time lag in Ukraine, Poland, Slovenia, Romania, Croatia, Lithuania, Latvia, Estonia, and with a time lag of 1 year in Slovakia and Hungary. The largest impact on the size of the shadow economy is made by the volume of inflow and outflow of direct foreign investments, while the volume of portfolio investments has a less significant effect. Consequently, it was concluded that the processes of inflow and outflow of direct foreign investments require enhanced control by specialized state executive bodies given the scale of their potential destabilizing impact on the macroeconomic stability of the country.

Effects of institutional quality on foreign direct investment inflow in lower-middle income countries

The intention of this study is to look into the effect of institutional quality on Foreign Direct Investment (FDI) inflow in lower-middle income countries. To accomplish this goal, we use a panel data set of 28 lower-middle income countries in six different regions that span the period from 2002 to 2018. This analysis is conducted by using dynamic panel estimation (two-step system GMM). Later, we use threshold analysis to capture how the reaction of institutional quality varies in terms of GDP per capita. The empirical outcomes suggest that control of corruption and regulatory quality enhance FDI inflow while high rule of law and voice and accountability mitigate it in lower-middle income countries. On the contrary, government effectiveness, and political stability do not have any significant impact on FDI. Regulatory quality has the greatest impact on foreign investment inflows of all the metrics. Similarly, threshold analysis reveals that regulatory quality has a positive impact on FDI when per capita GDP of FDI recipient nations exceeds the threshold value of 7.197, while voice and accountability have a positive impact on FDI when per capita GDP exceeds the threshold value of 7.776. In terms of the size of the impact of institutional factors in attracting FDI, lower middle incoutries were quite different from that high and low income countries, though the outcome is largely similar in the three subgroups. According to the regional findings, each of the institutional quality measures is only effective in the East Asia and Pacific region. In addition, threshold analysis reveals how institutions respond to the impact of per capita GDP.

Impact of the COVID-19 on foreign direct investment inflows in emerging economies: evidence from panel quantile regression

The study explores the role of the COVID-19 pandemic on foreign direct investment in 12 emerging countries for the period between 2014 and 2021. The world pandemic uncertainty index is used, and panel quantile regression approach is employed to analyze the effect of the pandemic on foreign investment inflows. Unlike the conditional mean regression analysis, panel quantile regression gauges the independent variables at the different locations of the dependent variable. For this reason, it provides a more comprehensive illustration of the impact of the independent variables on dependent variables. The results show that the pandemic has an inverse effect on foreign direct investment in low- and middle-foreign investment receiving countries, while the effect is insignificant in high-foreign investment receiving countries. Apparently, the health crisis has been further harmful to the countries that have weaker economic structures.

The Dynamics of Foreign Portfolio Investment and Exchange Rates: An Interconnection Approach in ASEAN

This paper examines the spatial dependence of foreign portfolio investment (FPI) inflows among ASEAN countries in 2002Q1-2018Q4 utilizing the spatial econometric approach. This paper adds clarity to the identification of the true nature of portfolio investment performances. I show a competitive relationship among ASEAN countries, indicating crowding out of FPI in the host country is most likely to occur when the neighboring country is experiencing a crowding out. I also show that exchange rate volatility and changes, both in the host country and neighboring country, do not significantly affect FPI in the host country. Furthermore, I find that, aside from macroeconomic factors of the host country, foreign investors also consider the macroeconomic conditions in the neighboring country, suggesting the existence of spatial dependency. Robustness checks are conducted to confirm the main findings of this study.

INTERNATIONAL SCIENTIFIC AND TECHNICAL COOPERATION IN THE REPUBLIC OF BELARUS: MAIN FEATURES

The decisive factor in the social and economic development of countries and the world was the contribution of science, innovation, and new technologies. With their help, the production volume of products, goods, and services and their diversity are constantly increasing. At the same time, the key to successful and stable development is not in the availability of the latest achievements but the possibilities for the country’s benefit. The more efficient the market mechanism for the transmission and attraction of the latest achievements, the more efficient the distribution of this factor of production in society and the greater the benefit to scientific organizations and the state will be. The role of international cooperation is to support and complement national efforts. Nowadays, an analysis of international trends shows that the effective development of science and the creation of competitive innovation products is impossible without the deep integration of national scientific and industrial spheres into global research and innovation networks. That is the only way to ensure the inflow of foreign investment, highly effective personnel, and new technologies.

테러가 외국인직접투자의 유입에 미치는 영향

Foreign direct investment has been a driving force for economic growth in many countries around the world due to its many additional effects. Therefore, many countries around the world actively seek to attract foreign direct investment. Since the early 1990s, many studies have suggested that terrorism can have a negative impact on foreign direct investment (Kang and Lee, 2007; Shahzad et al., 2016; Shah and Faiz, 2015; Li and Vashchilko, 2010; Suliman and Mollick, 2009 et al.). However, although many studies have been conducted, the data on terrorism are from the early 2000s, and the number of research subjects is limited. This study empirically analyzed the effect of terrorism on foreign direct investment. Analysis shows that terrorism has a negative impact on foreign direct investment. In other words, as the number of victims of terrorism and the number of deaths from terrorism per number of terrorist attacks increased, the inflow of foreign investment was found to decrease. This suggests the need for a country to develop a policy to prevent terrorism and a means or policy to resolve disputes in order to attract foreign direct investment, which can become a driving force for economic growth.

The influence of foreign direct investment on the Egyptian audit market: what do Big 4 partners’ perceptions tell us?

PurposeThis study aims to examine the effects of the entry of foreign direct investments (FDIs) on the audit markets in developing countries (i.e. Egypt). There is a long-standing debate on the impact of FDIs on developing markets, but little is still known about the effect of FDI on national suppliers, such as audit firms.Design/methodology/approachThis paper reports the results of a study that used qualitative research methods. It involves interviews with senior management teams of the Big 4 audit firms, to find out how these firms deal simultaneously with conflicting global and local influences. The interviews were complemented by the publicly available data on the firms’ websites as well as published reports related to the Egyptian economy and current investment regulations.FindingsDrawing on the institutional theory, the findings suggest that an increased litigious environment, compliance with developed markets’ regulations, auditor regulatory sanctions and improved local accounting and auditing standards are highly significant consequences of foreign investment inflows. The findings indicate that more emphasis has been given to the quality of audit and auditors’ independence when auditing FDIs. Both audit regulators and audit firms in the domestic market pay higher attention to improving the quality of financial reports when FDIs have entered the market. More inspections and reviews for audit firms have been conducted, and local auditing and accounting standards have been revised to be in compliance with international standards.Research limitations/implicationsOur results have important implications for investors, regulatory authorities and governments in relation to the development, implementation and enforcement of international financial reporting and auditing standards.Originality/valuePolicymakers and regulators in Egypt have responded to international pressure by revitalizing their local accounting and auditing standards and adopting international financial reporting and auditing standards. The authors identify strategies that have been adopted by audit firms to face the FDIs’ challenges.

The Determinants of Mergers and Acquisitions in Ghana

Background: In this context of uncertainties and the unknown based on economic, financial, and health crises, one of the ways to save companies is the operations of mergers or acquisitions. But not all mergers bring the expected results. An Avalanche of literature has indicated several factors that promote the decision of mergers and acquisitions.
 Purpose: This paper aimed to investigate the determinants of mergers and acquisitions of listed firms on the Ghana Stock Exchange. Specifically, the study sought to identify and examine the relationship that exists between GDP, Inflation, FDI, Stock Returns, and interest rate on the mergers and acquisitions of listed firms, well as evaluate the failures of mergers and acquisitions in the country.
 Methodology: The study used an explanatory research design. The population for the study was all mergers and acquisitions between 2010-2018 totaling twenty-five (25). The study used secondary data from Ghana Stock Exchange. Using sample data spanning between 2010 and 2018, the study adopted the GMM estimation technique in its analyses.
 Findings: The findings from the study revealed that indeed GDP, FDI, and interest rate exhibit a positive and significant effect on mergers and acquisitions of listed firms, whilst stock returns was found to negatively impact merges and acquisitions. Inflation rate was found not significant in the analyses of the study. The study also showed that factors such as limited or no involvement from the owners, theoretical valuation vs. the practical proposition of future benefits, lack of clarity and execution of the integration process, cultural integration issues, actual cost of a difficult integration, and high cost of recovery and negotiations errors are the major causes of the failures of mergers and acquisitions in Ghana.
 Recommendation: The study recommends that the Ministry of Finance and Ministry of trade must put stringent policies to curb systematic risk, as well as create a conducive environment to promote the inflow of foreign investment into the country.

The Impact of Population Aging on FDI Inflow in China—An Empirical Analysis Based on Provincial Panel Data

With the increasingly serious situation of population aging in China, the impact of population aging cannot be ignored. This study analyzes the effect of population aging on the attraction of FDI inflows in China through the construction of an empirical model. The results show that there is a significant “inverted-U” relationship between population aging and FDI inflows, and aging negatively affects foreign investment inflows after crossing the aging inflection point. Based on the findings, this study proposes policy recommendations based on the quantity and quality of the labor force, such as improving the policy of gradual delayed retirement, improving the level of human capital, and promoting the regional mobility of the labor force, to provide feasible research ideas to enhance the attractiveness of FDI in regions with different levels of aging.

IFRS and FPI nexus: does the quality of the institutional framework matter for African countries?

PurposeThe 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/approachEmploying 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.FindingsThe 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/implicationsThe 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 implicationsThis 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/valueThis 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.

Social Environment as a Factor of Capital Investment in Serbia

ABSTRACT The main purpose of this paper is to investigate the impact of the social environment on foreign investment inflows in Serbia. It surveyed the largest 300 foreign investors over the period 2001–2019 and achieved a response rate of 29.3%. The obtained results show that the crime rate, skilled labor, and attitude toward foreigners are the most important for foreign investors in Serbia. The main contribution of this paper is that it represents a rare attempt to provide an empirical research on the attitudes of foreign investors, in the context of the transition economy in the region of Southeast Europe.

Foreign Direct Investment

Asia is in a sweet spot, thanks to the massive investments that international investors are making in Asian countries. As the surge in investments other Asian countries like Malaysia, India, Thailand and Korea too have gained from the inflow of huge dollars into their economics. This has given a boost to these economies and their capital markets. Indian stock markets have been the recipients if massive foreign investment inflows, since the middle of last year, while FII’s have been steady investors in India. Amongst the developing and transition economics of both Europe and Asia, the fastest growing ones are the biggest recipients of Foreign Direct Investment (FDI). The latter is now accepted as panacea for all types of scarcities, financial capital, technological, know-how, efficient managerial techniques, organizational skill and access to market abroad. As against portfolio investment, FDI is a source of creation of tangible and intangible assets, employment and wealth in the host economy. It may provide rents, potential spillovers and externalities that are highly beneficial to the host country’s economic growth. The globalization of activities by Multinational Enterprises together with the effort made by all kids of governments has enhanced the important of FDI, not only as a development factors by itself, but also for its close linkage with trades technology and transfer and financial frows.

The Presence of Foreign Capital and the Internationalization of Portuguese Industrial SMEs

The objective of this paper is to empirically examine the relationship between the firms’ ownership and control structure, in particular the presence of foreign capital, and their internationalization levels, measured in terms of intensity and diversification. The international performance of Portuguese SMEs, which is crucial for the domestic economy’s growth, depends on a multitude of factors, with the existence of foreign investment inflows directed to industrial SMEs being a usually forgotten factor. This paper fills that gap using a balanced panel data of 5722 firms for the period from 2010 to 2017, researching if the presence of foreign capital influences the level and scope of internationalization, and controlling the effects of other variables such as profitability, age, size, indebtedness and sector of activity. The origin of foreign capital is also considered, being researched if issues of institutional or development differences exert any influence over firms’ internationalization. The results evidence that the presence of foreign shareholders in SMEs positively influences internationalization and that the distance variable positively correlates with the internationalization measures. Moreover, there seems to exist a non-linear relationship between the development level of the country of origin of the share capital and internationalization, with the results indicating that firms with share capital originating from more advanced countries attain a higher degree of internationalization. As SMEs in Portugal face increasing competition, joining hands with resource-rich investors such as foreign corporations and institutional investors would be a fruitful strategy to enhance the international competitiveness of Portuguese firms.

The Potential Impact of the 2020 UAE FDI Decree and Side Agreements

Abstract The United Arab Emirates (UAE) has assumed a leading role in attracting foreign investments in the region through the implementation of the Foreign Direct Investment Law of 2018 (FDI Law). The goal of the FDI Law is to create a pathway and framework that would enable 100 percent foreign ownership of UAE limited liability companies beyond the allowed 49 percent cap in mainland UAE. The efforts have been bolstered by the latest FDI Decree that offers full foreign ownership to businesses in the UAE, except ‘strategic impact’ activities. Therefore, the purpose of this article is to explore the potential impact of the FDI Decree on inflows of foreign investments into the UAE. The article also examines the persisting question about the legal validity and enforceability of side agreements. Preliminary findings have shown that the FDI Decree is a significant step towards the liberation and modernization of the UAE foreign investment landscape. The new regime will certainly spur inbound flows of foreign investments into the UAE. However, it is still too early to ascertain the extent of the Decree in encouraging greater foreign investment and ultimately diversifying the UAE economy. Additionally, concerns over the legal validity and enforceability of side agreements will persist under the new regime pending the release of the Strategic Impact List. A major issue is the uncertainty surrounding the proactive implementation of the Anti-Fronting Law, which prohibits side agreements with UAE nationals. The future of the Anti-Fronting Law is critical, considering that limiting or prohibiting side agreements will undermine the UAE’s quest for liberalization and modernization. Foreign investors must now develop future-proofing actions to take advantage of the new law. Ultimately, foreign investors will have the final word after the full implementation of the FDI Decree.

ANALYSIS OF NIGERIAN NATURAL GAS CONSUMPTION (1990 – 2020). A VECTOR ERROR CORRECTION MODEL APPROACH

This paper investigates the relationship between natural gas consumption, natural gas price, crude oil price, Foreign direct Investment and per capita GDP in Nigeria to ascertain their causal effects and dependencies by using time series data from 1990 to 2020 in an econometric platform using Vector Error Correction model (VECM). The result of VECM estimate, Granger causality test and Variance decomposition test all suggest the presence of a strong positive correlation between natural gas consumption and economic growth (represented by per capita GDP) in Nigeria, even though the price of natural gas is not consumption determined. This implies that economic policies that encourage production of goods and services in Nigeria will tend to boost natural gas consumption in Nigeria. Finally, foreign direct investment showed negligible impact on natural gas consumption but was more impacted by crude oil price. This suggests that the rate of influx of foreign investment into Nigeria is more influenced by international crude oil price not necessarily by the Nigerian natural gas consumption, all things being equal.