Does Institutional Quality Affect Foreign Direct Investment? A Panel Data Analysis

  • Girijasankar Mallik
  • Mamta Chowdhury
Part of the India Studies in Business and Economics book series (ISBE)


This study investigates the effects of the institutional quality along with socio-economic factors on foreign direct investment (FDI) of 156 countries using Ordinary Least Square (OLS) and Fixed Effect (FE) method. The findings of the study suggest that while corruption lowers FDI significantly, democracy, government stability, law and order, civil liberty and political rights have significant positive effects on FDI inflows. Results of the study also indicate that increased levels of educational attainment and openness in a trade regime lead to a higher level of FDI. Thus the policy prescription to attract higher FDI requires focussing on ensuring better institutional quality with a lower level of corruption along with raising the skill-base of the labour force in an outward looking external trade regime.


Corruption Institutional quality Foreign direct investment Fixed effect 

JEL Classification

F23 R38 C23 


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Copyright information

© Springer Nature Singapore Pte Ltd. 2017

Authors and Affiliations

  1. 1.School of BusinessWestern Sydney UniversityPenrith South DCAustralia
  2. 2.School of BusinessWestern Sydney UniversityPenrithAustralia

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