ASEAN COUNTRIES GOVERNANCE QUALITY AND FOREIGN DIRECT INVESTMENT: A PANEL DATA REGRESSION ANALYSIS OF WORLD GOVERNANCE INDICATORS

Authors

  • Vicente Montano, DBA Faculty of Business Economics Program, University of Mindanao, Davao City (8000), Philippines
  • Leomar Sabroso, MSc Faculty of Business Economics Program, University of Mindanao, Davao City (8000), Philippines

Keywords:

Foreign Direct Investments (FDI), World Governance Indicators (WGI), ASEAN, Panel Data Regression Fixed-Effect, UNSDG 8

Abstract

This study investigates the impact of six dimensions in the World Governance Indicators (WGI) of control of corruption, rule of law, regulatory quality, government effectiveness, political stability, and voice and accountability, on Foreign Direct Investment (FDI) inflows using a fixed effect panel data regression model. The analysis covers the six major economies in the ASEAN, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam, covering 1998 to 2022, using country-specific fixed effects to control for unobserved heterogeneity. The results reveal that improvements in specific governance indicators enhance FDI inflows, confirming the Institutional Theory of Douglass North (1986) and Oliver Williamson (1985). Specifically, higher rule of law, regulatory quality, and government effectiveness are positively associated with increased FDI. Conversely, the influence of control of corruption, political stability, and voice and accountability on FDI were negative, though it was only significant in the political stability. These findings infer that while overall good governance is crucial, certain aspects of the governance framework assume a more pivotal role in attracting FDI. The study’s insight focuses on the importance of policymakers' emphases on strengthening specific governance dimensions to create a more favorable environment for foreign investors. ASEAN countries that succeeded in improving their Rule of Law, Regulatory Quality, and Government Effectiveness attract and sustain higher levels of FDI

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Published

2024-07-08

How to Cite

Vicente , M., & Leomar , S. (2024). ASEAN COUNTRIES GOVERNANCE QUALITY AND FOREIGN DIRECT INVESTMENT: A PANEL DATA REGRESSION ANALYSIS OF WORLD GOVERNANCE INDICATORS. British International Journal of Applied Economics, Finance and Accounting, 8(4), 1–15. Retrieved from https://aspjournals.org/Journals/index.php/bijaefa/article/view/697

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