Financial efficiency and accounting quality: The impact of institutional micro-factors on FDI |
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| Institution: | 1. Pace University, United States;2. York College, United States;3. William Patterson University, United States;1. CeRP-Collegio Carlo Alberto and Ufficio Studi Compagnia, San Paolo, Italy;2. University of Turin, Dep. of Economics and Statistics, Turin, Italy;3. University of Insubria, Dep. of Economics, Varese, Italy;4. ISER University of Essex, United Kingdom, CeRP-Collegio Carlo Alberto, Turin, Italy and Dondena-University Bocconi, Milan, Italy;1. Université Paris-Est, IRG (EA 2354), UPEC, UPEM, Pôle du Bois de l''Étang, 5 Bd Descartes, Bureau C241A, F-77454 Marne-la-Vallée, France;2. EM Normandie Business School, Métis Lab, Paris, France;3. Institut de Recherche en Gestion (EA 2354), Université Paris Est, Créteil, France;4. College of Business Administration, King Saud University, Saudi Arabia;1. 805, Hilife Magnifique, Varthur Panathur Road, Balagere, Bangalore 560087, India;2. Xavier School of Management (XLRI), CH Area (East), Jamshedpur 831001, India;1. CIRAD, UMR MOISA, F-34398 Montpellier, France;2. MOISA, MUSE Univ Montpellier, CIRAD, Montpellier, France;3. CIRAD, ICARDA, Station Exp. INRA-Quich, Rue Hafiane Cherkaoui. Agdal, B.P. 6299 Rabat, Morocco;4. SELMET, MUSE Univ Montpellier, CIRAD, Montpellier, France;5. CIRAD, Departement Environments & Societies, TA C DIR/B Campus International de Baillarguet, F-34398 Montpellier, France;6. CIRAD, MUSE Univ Montpellier, Montpellier, France;7. CIRAD, UMR SELMET, F-34398 Montpellier, France;8. SELMET, Univ Montpellier, CIRAD, Montpellier, France;9. Department of Veterinary Services, Ministry of Fisheries and Livestock, P.O. Box 50060, Lusaka, Zambia;10. World Bank, Washington, United States |
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| Abstract: | In this paper, we explore whether factors such as financial markets and accounting qualities contribute to foreign direct investment (FDI). We use a unique data source: the survey data from World Economic Forum, to measure the efficiency of the financial markets and the quality of accounting standards. With this unique data, we demonstrate that financial markets and accounting quality are important factors of FDI inflow into a country. In particular, FDI is positively correlated with the strength of financial audits and reporting standards and venture capital availability for all countries. We also show that accounting quality measures are more important for developing and emerging countries than for developed countries. On the other hand, financial market measures, especially the access to venture capital, have a bigger impact in attracting FDI flow into developed countries. These results support the hypothesis that local financial markets and accounting quality affect FDI. The results have strong policy implications for governmental regulatory agencies. |
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| Keywords: | Foreign Direct Investment (FDI) Accounting quality Financial markets Policy implications Logistic regression C35 F33 I38 O24 |
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