Crisis to Crisis: FDI Redux

33 Pages Posted: 27 May 2010

See all articles by Bonnie Buchanan

Bonnie Buchanan

Surrey Business School, University of Surrey

Quan V. Le

Seattle University - Albers School of Business and Economics

Meenakshi Rishi

Seattle University

Date Written: May 26, 2010

Abstract

In this paper, we examine the impact of institutional quality on foreign direct investment (FDI) and on the volatility of FDI. By utilizing data in a post Asian financial crisis context, we can examine whether the crisis has an immediate impact on retarding FDI. Based on our analysis of panel data of 164 countries from 1996-2006, our results lead us to believe that good institutional quality matters to FDI. We provide evidence that institutional quality has a positive and significant effect on FDI, but a negative and significant effect on FDI volatility. More specifically, we find that a one standard deviation change in institutional quality improves FDI by a factor of 1.69.

Keywords: FDI, institutional quality, governance, financial crisis

JEL Classification: F30, F21, G15

Suggested Citation

Buchanan, Bonnie and Le, Quan V. and Rishi, Meenakshi, Crisis to Crisis: FDI Redux (May 26, 2010). Available at SSRN: https://ssrn.com/abstract=1616004 or http://dx.doi.org/10.2139/ssrn.1616004

Bonnie Buchanan (Contact Author)

Surrey Business School, University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

Quan V. Le

Seattle University - Albers School of Business and Economics ( email )

901 12th Avenue
Seattle, WA 98122
United States

Meenakshi Rishi

Seattle University ( email )

901 12th Ave
Broadway
Seattle, WA 98122
United States
206-296-2078 (Phone)

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