Foreign direct investment and governance: an empirical evidence from Sub-Saharan Africa

Abstract

This thesis employed a panel data of 36 countries from sub-Saharan Africa over the period 1996-2000 to examine the impact of governance on foreign direct investment flows. Within the governance variable there are six sub-indices which are the rule of law, political stability, control of corruption, voice and accountability, government effectiveness, and regulatory quality. The estimates show that political stability, regulatory quality and accountability have a positive impact on foreign direct investment, while corruption, government ineffectiveness, and lack of rule of law do not affect foreign direct investment. The conclusion drawn from this research was that besides market size, trade openness, human capital, macroeconomic stability and physical infrastructure, governance plays a great role in attracting foreign direct investment into the sub-region.