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Financial Development and Investors Location Choice in The Arab World

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  • Shah, Mumtaz Hussain
  • Azam, Ayesha

Abstract

There are several variables/factors which play an important role in influencing investors’ location choice. In this paper, we gauge the impact of financial development (FD) along with other variables i.e. market size, development level, openness and human capital on Foreign Direct Investment (FDI) in the Arab World. Using fixed effects panel method for 8 Arab countries i.e. Bahrain, Egypt, Jordan, Kuwait, Morocco, Qatar, Saudi Arabia and Tunisia from 2003 to 2016 it is shown that there is a significant effect of financial development on FDI in the Arab World. Whether this relationship is positively significant or negatively significant, it depends on the proxy used for measuring FD. Domestic credit to private sector is negatively significant and market capitalisation of listed companies positively. Hence, depending on the multinationals objective both are plausibly possible. Among the conventional FDI determinants market size and openness have a positive effect on FDI, whereas development level and human capital negatively influence the overseas investors. However, like financial development these results are sensitive to the use of proxy measures.

Suggested Citation

  • Shah, Mumtaz Hussain & Azam, Ayesha, 2018. "Financial Development and Investors Location Choice in The Arab World," MPRA Paper 107245, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107245
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    References listed on IDEAS

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    12. Shah, Mumtaz Hussain & Jamil, Iqra, 2016. "Trade Agreements and Transnational Corporations Presence in the Developing Asia," MPRA Paper 107250, University Library of Munich, Germany.
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    20. Shah, Mumtaz Hussain, 2016. "The Effect of Macroeconomic Stability on Inward FDI in African Developing Countries," MPRA Paper 82014, University Library of Munich, Germany.
    21. Shah, Mumtaz Hussain & Ali, Zahid, 2016. "What Drives Foreign Direct Investment to BRICS?," MPRA Paper 107252, University Library of Munich, Germany.
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    24. Shah, Mumtaz Hussain & Faiz, Mehreen, 2015. "Terrorism and Foreign Direct Investment: An Empirical Analysis of SAARC Countries," MPRA Paper 82008, University Library of Munich, Germany.
    25. Shah, Mumtaz Hussain & Zeb, Aisha, 2017. "Prudent Macro Management of the Economy and Inward FDI in ASEAN Member States," MPRA Paper 107249, University Library of Munich, Germany.
    26. Mumtaz Hussain Shah & Saba Qayyum, 2015. "Impact of Double Taxation Treaties on Inward FDI in Latin American and Caribbean Developing Countries," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 7(1), pages 1-18, April.
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    Cited by:

    1. Shah, Mumtaz Hussain, 2018. "Corruption & Foreign Direct Investment: The Case of South Asia," MPRA Paper 107253, University Library of Munich, Germany.
    2. Shah, Mumtaz Hussain & Khan, Faisal, 2019. "Telecommunication Infrastructure Development and FDI into Asian Developing Nations," MPRA Paper 107255, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial Development; Multinational Firms; Panel Data; FDI;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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