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The Dynamic Linkage between Corruption Index and Foreign Direct Investment: The Case of Developed and Developing Countries

Author

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  • Manu K.S.

    (Assistant Professor, Department of Management Studies, CHRIST (Deemed to be University), Bengaluru, India.)

  • Vivek Patel

    (Student, BBA, Department of Management Studies, CHRIST (Deemed to be University), Bengaluru, India.)

Abstract

In today’s competitive business world, attracting foreign investment and creating investors friendly environment is highly important. MNCs invest in countries where they have the best economies of scale. Corruption is one of the factors deterring FDI froma country. The study has been undertaken to analyse the impact of corruption on the foreign direct investment of developed countries and developing countries. The study used correlation, regression and granger causality test to analyse the relationship. The study found high positive correlation between FDI and CPI for developing countries. The study observed low negative and positive correlation between FDI and CPI for developed countries. Further the study found uni directional causality from corruption index to FDI of India. The respective government can take stringent policies and regulations to curb corruption in order to attract more and more FDI.

Suggested Citation

  • Manu K.S. & Vivek Patel, 2018. "The Dynamic Linkage between Corruption Index and Foreign Direct Investment: The Case of Developed and Developing Countries," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 9(2), pages 59-67, May.
    • Handle: RePEc:aii:ijcmss:v:09:y:2018:i:2:p:59-67
    DOI: 10.18843/ijcms/v9i2/07
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    References listed on IDEAS

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    1. Cristina Mihaela Amarandei, 2013. "Corruption And Foreign Direct Investment. Evidence From Central And Eastern European States," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 5(3), pages 311-322, September.
    2. repec:jes:wpaper:y:2013:v:5:p:311-322 is not listed on IDEAS
    3. Tomáš Evan & Ilya Bolotov, 2014. "The Weak Relation between Foreign Direct Investment and Corruption: A Theoretical and Econometric Study," Prague Economic Papers, Prague University of Economics and Business, vol. 2014(4), pages 474-492.
    4. Javorcik, Beata S. & Wei, Shang-Jin, 2009. "Corruption and cross-border investment in emerging markets: Firm-level evidence," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 605-624, June.
    5. Bin Dong & Benno Torgler, 2010. "The Consequences of Corruption: Evidence from China," Working Papers 2010.73, Fondazione Eni Enrico Mattei.
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    Cited by:

    1. Shi Wang & Hua Wang & Qian Sun, 2020. "The Impact of Foreign Direct Investment on Environmental Pollution in China: Corruption Matters," IJERPH, MDPI, vol. 17(18), pages 1-20, September.

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