scholarly journals Financial development and foreign direct investment nexus: A systematic review of literature

2021 ◽  
Vol 10 (4) ◽  
pp. 226-238
Author(s):  
Mollah Aminul Islam ◽  
Md Nahin Hossain ◽  
Muhammad Asif Khan ◽  
Mohammad Raihanul Hasan ◽  
Md Riad Hassan
Keyword(s):  
Financial Development ◽  
Direct Investment ◽  
Financial Sector ◽  
Foreign Direct Investments ◽  
Risk Averse ◽  
Real Sector ◽  
Review Of Literature ◽  
Foreign Investors ◽  
Good Resource ◽  
Risk Taker

In this study, we review the literature to find how the financial development of a country attracts foreign direct investments for a sustainable real sector development of the country. The area is least focused on literature. Thus we don’t limit our search and review to any time or database or journal category. We find the theoretical logic and empirical evidence so far available in the literature. Our review finds that the development of the financial sector of a country is one of the most important attractors of FDIs. Theoretically, financial sector development works as a symbol of trust and goodness to the new potential investors and a good resource allocation channel for the existing investors. However, very few researchers find that FDIs are more prone to countries with a low developed financial system which may happen due to the presence of risk-taker foreign investors and risk-averse domestic entrepreneurs.

scholarly journals Effects of Foreign Direct Investments on Serbian Exporters′ Profitability

2017 ◽  
Vol 55 (1) ◽  
pp. 1-23
Author(s):  
Violeta Domanović ◽  
Sandra Stojadinović Jovanović
Keyword(s):  
Direct Investment ◽  
Foreign Capital ◽  
Transition Process ◽  
Foreign Direct Investments ◽  
Return On Assets ◽  
Foreign Investors ◽  
Return On Equity ◽  
The Subject ◽  
Ownership Transformation ◽  
Domestic Companies

Abstract For Serbia the efforts to attract investments from abroad came to the fore with the beginning of transition process. The process of ownership transformation in Serbia most often implied foreign direct investment inflows, because it included participation of foreign investors in purchase of domestic companies that had been the subject of privatisation. The subject of research in the paper is Serbian experience in attracting foreign capital into local export companies with special emphasis on their profitability. Aim of the paper is to estimate the profitability of leading Serbian exporters financed by foreign direct investments, i.e. to determine whether and to what extent foreign direct investments contributed to the increase of return on assets (ROA) and return on equity (ROE), as basic profitability measures. The results show that, in the case of Serbian exporters, the profitability varies, both per companies and per individual years. There is no general conclusion that foreign direct investments contributed to the ROA increase. On the contrary, ROA values significantly varied during this period. Either enormous increase or enormous decrease could be observed. The same goes for ROE values.

scholarly journals The impact of the sanctions regime on foreign direct investments in Russia

2018 ◽  
Vol 26 (4) ◽  
pp. 760-772
Author(s):  
Yury K Zaytsev
Keyword(s):  
Foreign Direct Investment ◽  
Central Bank ◽  
Direct Investment ◽  
Foreign Direct Investments ◽  
Investment Strategies ◽  
Investment Activity ◽  
Foreign Investors ◽  
Qualitative Level ◽  
European Economies ◽  
The Impact

The economic and political sanctions had a significant impact on the behavior of foreign investors in the real sector of the Russian economy in the period 2014-2017. Despite a significant outflow of foreign direct investment (FDI) in 2015, in 2016-2017, there was an increase in investment activity associated with a steady inflow of FDI, which could be explained by the change in investment strategies of foreign business in Russia. The purpose of the study. The article assesses the impact of Western sanctions and Russian countersanctions on the influx of foreign direct investment into Russia. Methods. The work is based on methods of statistical analysis of the behavior of foreign investors in Russia on the basis of macroeconomic data of the Central Bank of Russia and microeconomic data of the “Ruslana” database. Results. The author gives various assessments of sanctions and counter-sanctions impact on the Russian and European economies, and compares the effects of sanctions policies in Russia and Iran. The stylized facts, identified by the author at the micro level, allow to interpret the macro statistics provided by the Central Bank of Russia at a qualitative level. The conclusion . In conclusion, the author gives recommendations on the possibilities of using new mechanisms of interaction with international institutions to overcome the investment crisis as a consequence of the sanctions regime.

scholarly journals Just Look behind the Data! Czech and Hungarian Outward Foreign Direct Investment and Multinationals

2019 ◽  
Vol 69 (S2) ◽  
pp. 73-105 ◽  
Author(s):  
Magdolna Sass ◽  
Jana Vlčková
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Transition Process ◽  
Balance Of Payments ◽  
Foreign Direct Investments ◽  
Outward Foreign Direct Investment ◽  
Outward Fdi ◽  
Foreign Investors ◽  
The Czech Republic ◽  
Main Factors

There has been an increase in outward foreign direct investment (FDI) and in the number of locally-owned or controlled multinationals in the Czech Republic and Hungary. However, data problems hinder to determine accurately the underlying trends and the main factors behind the changes. Data on outward FDI contain investment realised by all locally operational firms, regardless of their ownership. We rely on newly available balance of payments manual 6 (BPM) data and on company case studies. We show that outward investment by Czech firms must be much higher than what balance of payments data show. Hungary's case is the opposite. The leading Czech and Hungarian foreign investor firms can be categorised as “virtual indirect” foreign investors: they are in majority foreign ownership, but under domestic control. The reason for this special type of firms dominating in outward foreign direct investments can be found in the privatisation technique applied in these countries during the transition process.

Does Trust Matter for Foreign Direct Investment Decisions?

2016 ◽  
pp. 224-239 ◽  
Author(s):  
Sibel Bali Eryigit
Keyword(s):  
Direct Investment ◽  
Emerging Market ◽  
Investment Decisions ◽  
General Level ◽  
Location Decisions ◽  
Foreign Direct Investments ◽  
Cultural Characteristics ◽  
Host Countries ◽  
Foreign Investors ◽  
Factors Affecting

Factors affecting the investment decisions of multinational companies are heavily researched in the literature. However, the number of studies dealing with the socio-cultural characteristics of host countries among these factors is quite limited. Among the cultural characteristics affecting location decisions, one of the primary cultural characteristics is the general level of trust between individuals. In this scope, this chapter intends to research whether the general level of trust in a society has an effect on the location decisions of foreign investors. In line with this objective, an analysis will be conducted by employing the panel data method for 39 emerging market countries for the period between 1998 and 2011. According to the results of the study, a low general level of trust in the host country represents a significant disadvantage for the attraction of foreign direct investments.

scholarly journals Frequency Domain Causality Relationship Analysis Between Poverty, Economic Growth and Financial Development in Algeria

2019 ◽  
Vol 12 (2) ◽  
pp. 93-111
Author(s):  
Ayad Hicham ◽  
Belmokaddem Mostefa ◽  
Sari Hassoun Salah Eddin
Keyword(s):  
Economic Growth ◽  
Frequency Domain ◽  
Financial Development ◽  
Poverty Reduction ◽  
Financial Sector ◽  
Real Sector ◽  
Relationship Analysis ◽  
Long Run ◽  
Short Run ◽  
The Time Domain

AbstractSince the previous periods, poverty reduction has been a big concern for many countries especially in developing countries like Algeria; in this paper, we shall explore the causal relationship between poverty reduction, economic growth and financial development in Algeria during the period of 1970-2017, the aim of this research is to answer the question which sector causes the poverty reduction: real sector or financial sector? Therefore, we employed the modern frequency domain causality presented by Breitung and Candelon (2006) with a comparison with the time domain causality under Lutkepohl (2006) procedure, the results suggest that there is unidirectional causality running from the real sector (economic growth) to poverty rates in the short and long run terms, also, we found that there is an unidirectional causality running from the financial sector to poverty rates only in the long run term, while another causality running from poverty rates to the financial sector but in the short run term. This article aims at contributing to enlarge the literature review by utilizing the frequency domain causality in the field of poverty studies because of its effectiveness to test the causalities in different frequencies.

scholarly journals Post-Keynesian Empirical Research and the Debate on Financial Market Development

2014 ◽  
pp. 1-13
Keyword(s):  
Economic Growth ◽  
Empirical Research ◽  
Financial Development ◽  
Financial Market ◽  
Financial Sector ◽  
Market Development ◽  
Real Sector ◽  
Economic Activities ◽  
Financial Market Development

Literature suggests that financial intermediation affects growth through various channels. The questions, however, are “Whether financial development affects real economic activities?” and “Does the structure of the financial system matter for the economic growth outcome?” The aim of this chapter is, therefore, to briefly describe the concept of financial market development by highlighting the important role of the financial sector in the development of the real sector. Later in the chapter, the scope of the book is discussed, and research objectives are identified.

scholarly journals External debt stock, foreign direct investment and financial development

2019 ◽  
Vol 27 (1) ◽  
pp. 81-98
Author(s):  
Daniel Agyapong ◽  
Kojo Asare Bedjabeng
Keyword(s):  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
External Debt ◽  
Financial Sector ◽  
Annual Data ◽  
Method Of Moment ◽  
Content Type ◽  
Development Indicators ◽  
High Level

Purpose The purpose of this paper is to examine the role external debt and foreign direct investment play in influencing financial development in Africa. Design/methodology/approach Annual data on external debt, foreign direct investment and financial development were extracted from the World Bank World Development Indicators from 2002 to 2015. The data employed were analysed within causal research design and the dynamic panel using generalized method of moment estimation approach. Findings The findings revealed that external debt and foreign direct investment have a significant positive relationship with financial development in African economies. Governments of the sampled economies should enact policies that would help attract high level of foreign direct investment as it contributes positively to financial development. Finally, governments of the sampled African economies should ensure foreign direct investment and external funds borrowed are channelled to productive sectors. Originality/value The paper analysed the relationship between external debt, FDI inflows and financial sector development. The paper is the first in terms of such analysis within the framework of the dual-gap framework, which is the first time in these kinds of studies. Previous studies have concentrated on the effect of financial sector on FDI and not the other way around.

scholarly journals Pakistan's Growth Empirics and Foreign Direct Investment: An Assessment of the Role of Domestic Financial Sector

2021 ◽  
Vol 7 (2) ◽  
pp. 357-367
Author(s):  
Noreen Safdar ◽  
Ruqia Shaheen ◽  
Fouzia Yasmin ◽  
Naureen Afzal
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Financial Development ◽  
Direct Investment ◽  
Time Series Data ◽  
Financial Sector ◽  
Series Data ◽  
Development Index ◽  
Financial Development Index

Purpose: This reseach endeavours to investigate the role of fiancial sector in determining the foreign direct inflows in pakistan. Design/Methodology/Approach: Autoregressive Distributed Lag Model is applied to conclude the nature of linear association among the variables, in this study, we have used time series data over the period 1980-2019 of Pakistan. A financial development index has been created to illustrate the financial development by using Principle Component Analysis (PCA). Robustness of the relation among variables is also checked, and incorporated this in the empirical model. Findings: The findings described very interesting implications, by exhibiting a positive association among FDI and economic growth in the presence of financial sector indicators. These conclusions hold notwithstanding in the presence or absence of Financial development Index. Therefore, the presence of strong financial sector is necessary to attract FDI and to smoothen the economic growth process.Implications/Originality/Value: The role of fiancial sector is indespensible in determining the economic activity. In addition to this, research at hand explore the inclusive nature of the relationships among foreign direct investment (FDI), Financial sector, and economic growth. It exhibits a reflection of the various sources of economic growth.

Does Trust Matter for Foreign Direct Investment Decisions?

2020 ◽  
pp. 1773-1788
Author(s):  
Sibel Bali Eryigit
Keyword(s):  
Direct Investment ◽  
Emerging Market ◽  
Investment Decisions ◽  
General Level ◽  
Location Decisions ◽  
Foreign Direct Investments ◽  
Cultural Characteristics ◽  
Host Countries ◽  
Foreign Investors ◽  
Factors Affecting

Factors affecting the investment decisions of multinational companies are heavily researched in the literature. However, the number of studies dealing with the socio-cultural characteristics of host countries among these factors is quite limited. Among the cultural characteristics affecting location decisions, one of the primary cultural characteristics is the general level of trust between individuals. In this scope, this chapter intends to research whether the general level of trust in a society has an effect on the location decisions of foreign investors. In line with this objective, an analysis will be conducted by employing the panel data method for 39 emerging market countries for the period between 1998 and 2011. According to the results of the study, a low general level of trust in the host country represents a significant disadvantage for the attraction of foreign direct investments.

Foreign Direct Investments

2021 ◽  
pp. 96-116
Author(s):  
Darko Marjanović ◽  
Ivana S. Domazet
Keyword(s):  
Direct Investment ◽  
Success Factors ◽  
Multinational Companies ◽  
Global Market ◽  
Foreign Direct Investments ◽  
Global Level ◽  
End User ◽  
Policy Makers ◽  
Foreign Investors ◽  
Goods And Services

Foreign direct investment is considered an effective way to enhance a country's comparative advantages. They are also a significant source of economic development, modernization, growth of production, exports, employment and income, and the main actors are multinational companies. Globalization of the market has increased the tendency for many companies to procure goods and services from different locations. The main goal of the paper is to present the structure and forms of FDI at the global level, as well as theories of FDI through the interconnectedness of multinational companies, their investments, and the economy of a country as an end user. The results of the research clearly indicate that it is in the interest of every country to attract as many FDI as possible, given that they are one of the success factors of the national economy in the global market. Therefore, the primary task of economic policy makers is to monitor world trends, harmonize domestic regulations and create an investment climate that will benefit foreign investors.

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