The quality of institution and foreign direct investmnet (FDI) in Malaysia
Since the 1990’s, institutional factors have been regarded as playing important roles in stimulating foreign direct investments (FDI). However, empirical studies on their importance in affecting FDI are still lacking, especially in regards to small open economies. This paper attempts to investigat...
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| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
FEP
2012
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| Online Access: | http://journalarticle.ukm.my/5692/1/vol3ch6.pdf http://journalarticle.ukm.my/5692/ http://www.ukm.my/ajag/issues.html |
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| Summary: | Since the 1990’s, institutional factors have been regarded as playing important roles in stimulating foreign direct
investments (FDI). However, empirical studies on their importance in affecting FDI are still lacking, especially in regards
to small open economies. This paper attempts to investigate the role of institutions in regards to the inflow of FDI in
Malaysia’s small open economy of Malaysia. Using the bounds testing approach (ARDL model), empirical findings reveal
that a long-run relationship exists between FDI and institutional variables. Several institutional variables are found to
play prominent roles in influencing the inflow of FDI, namely governmental stability, bureaucracy and corruption. Thus,
providing and maintaining the quality of domestic institutions alongside the implementation of FDI friendly policies
would be beneficial to Malaysian economic growth stemming from foreign investment. |
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