The Impact of Corruption on a Countrys FDI Attractiveness: A Panel Data Analysis, 1984-2004

Abstract

Some argue that foreign investors would not be attracted to countries where uncertainty induced by arbitrariness in corruption, is pervasive. On the other hand, it is contended that MNEs have been seeking the investment opportunities where they can exploit rent benefits, so they would not mind paying a small price for the big gain. Consequentially, theory cannot provide us with the dominant framework to hypothesize the relationship between the corruption and the FDI attractiveness of host countries. Empirical results of this study suggest that corruption generally causes a harmful effect on attracting FDI.