How Does Country Risk Matter for Foreign Direct Investment?

Kazunobu Hayakawa, Fukunari Kimura, Hyun Hoon Lee

Research output: Contribution to journalArticle

27 Citations (Scopus)

Abstract

Using the overall FDI inflows for 89 countries during the period from 1985 to 2007, we empirically investigate the effects on inward FDI of various components of political and financial risk. We examine the effects of not only the level of these risks but also their changes over time. One of the major findings is that among the political and financial risks, only the political risk is adversely associated with FDI inflows. Specifically, not only the initially low level of political risk, but also a decrease in the level of political risk helps to bring a greater amount of FDI inflows. On the other hand, lower financial risk does not attract FDI inflows, especially to developing countries. Among the various components of political risk, in the sample of developing countries only, it is found that internal conflict, corruption, military in politics, and bureaucracy quality are inversely related to inward FDI flows.

Original languageEnglish
Pages (from-to)60-78
Number of pages19
JournalDeveloping Economies
Volume51
Issue number1
DOIs
Publication statusPublished - 2013 Mar

Fingerprint

foreign direct investment
direct investment
foreign investment
inflow
developing world
developing country
Country risk
Foreign direct investment
Political risk
bureaucracy
corruption
politics
Military
Financial risk

Keywords

  • Country risk
  • D22
  • F21
  • F23
  • Financial risk
  • Foreign direct investment
  • Institution
  • MNEs
  • Political risk

ASJC Scopus subject areas

  • Economics and Econometrics
  • Development

Cite this

How Does Country Risk Matter for Foreign Direct Investment? / Hayakawa, Kazunobu; Kimura, Fukunari; Lee, Hyun Hoon.

In: Developing Economies, Vol. 51, No. 1, 03.2013, p. 60-78.

Research output: Contribution to journalArticle

Hayakawa, Kazunobu ; Kimura, Fukunari ; Lee, Hyun Hoon. / How Does Country Risk Matter for Foreign Direct Investment?. In: Developing Economies. 2013 ; Vol. 51, No. 1. pp. 60-78.
@article{ce5d13080da444528fa9f10a5e65c678,
title = "How Does Country Risk Matter for Foreign Direct Investment?",
abstract = "Using the overall FDI inflows for 89 countries during the period from 1985 to 2007, we empirically investigate the effects on inward FDI of various components of political and financial risk. We examine the effects of not only the level of these risks but also their changes over time. One of the major findings is that among the political and financial risks, only the political risk is adversely associated with FDI inflows. Specifically, not only the initially low level of political risk, but also a decrease in the level of political risk helps to bring a greater amount of FDI inflows. On the other hand, lower financial risk does not attract FDI inflows, especially to developing countries. Among the various components of political risk, in the sample of developing countries only, it is found that internal conflict, corruption, military in politics, and bureaucracy quality are inversely related to inward FDI flows.",
keywords = "Country risk, D22, F21, F23, Financial risk, Foreign direct investment, Institution, MNEs, Political risk",
author = "Kazunobu Hayakawa and Fukunari Kimura and Lee, {Hyun Hoon}",
year = "2013",
month = "3",
doi = "10.1111/deve.12002",
language = "English",
volume = "51",
pages = "60--78",
journal = "Developing Economies",
issn = "0012-1533",
publisher = "Wiley-Blackwell",
number = "1",

}

TY - JOUR

T1 - How Does Country Risk Matter for Foreign Direct Investment?

AU - Hayakawa, Kazunobu

AU - Kimura, Fukunari

AU - Lee, Hyun Hoon

PY - 2013/3

Y1 - 2013/3

N2 - Using the overall FDI inflows for 89 countries during the period from 1985 to 2007, we empirically investigate the effects on inward FDI of various components of political and financial risk. We examine the effects of not only the level of these risks but also their changes over time. One of the major findings is that among the political and financial risks, only the political risk is adversely associated with FDI inflows. Specifically, not only the initially low level of political risk, but also a decrease in the level of political risk helps to bring a greater amount of FDI inflows. On the other hand, lower financial risk does not attract FDI inflows, especially to developing countries. Among the various components of political risk, in the sample of developing countries only, it is found that internal conflict, corruption, military in politics, and bureaucracy quality are inversely related to inward FDI flows.

AB - Using the overall FDI inflows for 89 countries during the period from 1985 to 2007, we empirically investigate the effects on inward FDI of various components of political and financial risk. We examine the effects of not only the level of these risks but also their changes over time. One of the major findings is that among the political and financial risks, only the political risk is adversely associated with FDI inflows. Specifically, not only the initially low level of political risk, but also a decrease in the level of political risk helps to bring a greater amount of FDI inflows. On the other hand, lower financial risk does not attract FDI inflows, especially to developing countries. Among the various components of political risk, in the sample of developing countries only, it is found that internal conflict, corruption, military in politics, and bureaucracy quality are inversely related to inward FDI flows.

KW - Country risk

KW - D22

KW - F21

KW - F23

KW - Financial risk

KW - Foreign direct investment

KW - Institution

KW - MNEs

KW - Political risk

UR - http://www.scopus.com/inward/record.url?scp=84874070123&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84874070123&partnerID=8YFLogxK

U2 - 10.1111/deve.12002

DO - 10.1111/deve.12002

M3 - Article

AN - SCOPUS:84874070123

VL - 51

SP - 60

EP - 78

JO - Developing Economies

JF - Developing Economies

SN - 0012-1533

IS - 1

ER -