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Effect of Country Governance Quality on International Portfolio Investments

Author

Listed:
  • Eyyüp Kaya

    (Yalova University)

  • Mine Aksoy

    (Yalova University)

Abstract

Based on panel data analysis of 18 emerging market countries from 2002 to 2018, the impact of governance quality on international portfolio investments (IPI) was examined. As a result of the analysis, it was observed that the quality of governance indicators, excluding political stability and absence of violence, had a positive effect on IPI. Voice and accountability were observed to be the variable that most affects portfolio investments. Voice and accountability were followed by government effectiveness. Control of corruption, the rule of law, and regulatory quality were other indicators of governance that affected portfolio investments, respectively. In this study, foreign direct investments, current account deficit, stock market size, and stock market returns were used as control variables. It was concluded that there is a negative relationship between foreign direct investments, current account deficit, and IPI. There is also a positive relationship between stock market size, stock market returns, and IPI.

Suggested Citation

  • Eyyüp Kaya & Mine Aksoy, 2020. "Effect of Country Governance Quality on International Portfolio Investments," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 35(114), pages 181-210, October.
    • Handle: RePEc:acc:malfin:v:35:y:2020:i:114:p:181-210
    DOI: https://doi.org/10.33203/mfy.740324
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    More about this item

    Keywords

    Governance; international portfolio investments; emerging markets; world governance indicators.;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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