IDEAS home Printed from https://ideas.repec.org/a/taf/jsustf/v12y2022i2p554-569.html
   My bibliography  Save this article

How does the impact of foreign direct investment on institutional quality depend on the underground economy?

Author

Listed:
  • Cong Minh Huynh

Abstract

This study sheds light on the impacts of FDI inflows and underground economy on institutional quality, as well as the moderating effect of underground economy on FDI – institutional quality nexus in 43 developing countries worldwide during 2002-2009. By using FGLS and SGMM for estimation, we find that FDI inflows have a positive impact on institutional quality, while underground economy and the interaction term between FDI and underground economy have negative impacts on institutional quality. Our results indicate that FDI inflows initially help improve institutional quality, but the presence of underground economy reduces this effect until the underground economy reaches a threshold, then above this threshold, the total impact of FDI on institutional quality turns negative. The findings imply that to foster the role of FDI in ameliorating institutional quality, governments in developing countries must control the underground economy at certain levels below the threshold.Highlights FDI inflows improve institutional quality in the host countries.The underground economy reduces institutional quality.The impact of FDI on institutional quality depends on the underground economy.There is a threshold of the underground economy. Below this threshold, FDI inflows enhance institutional quality; but FDI inflows jeopardize institutional quality when the underground economy is above this threshold.

Suggested Citation

  • Cong Minh Huynh, 2022. "How does the impact of foreign direct investment on institutional quality depend on the underground economy?," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 12(2), pages 554-569, April.
    • Handle: RePEc:taf:jsustf:v:12:y:2022:i:2:p:554-569
    DOI: 10.1080/20430795.2020.1788851
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/20430795.2020.1788851
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/20430795.2020.1788851?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Faryal, & Faisal, Faisal & Amin, Muhammad Yusuf & Haq, Zahoor Ul & Rahman, Sami Ur & Ali, Adnan, 2023. "Natural resources revenues, shadow economy and financial institutions depth: The way forward," Resources Policy, Elsevier, vol. 85(PB).
    2. Lompo, Miaba Louise & Ouoba, Marie Madeleine, 2022. "How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers," MPRA Paper 113410, University Library of Munich, Germany.
    3. Lompo, Miaba Louise & Ouoba, Marie Madeleine, 2022. "How they hide money? An investigation on tax evasion of large corporations and wealthy taxpayers," MPRA Paper 114235, University Library of Munich, Germany.
    4. Tran, Viet Nhu Anh & Huynh, Cong Minh, 2022. "The impact of foreign direct investment on financial development in Asian countries," MPRA Paper 114311, University Library of Munich, Germany.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:jsustf:v:12:y:2022:i:2:p:554-569. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/TSFI20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.