Assessing the role of governance indicators on foreign direct investment: Insights from Southeastern European countries

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Abstract

The purpose of this research is to highlight the way that governance indicators impact foreign direct investment (FDI) as a proportion of a nation’s gross domestic product (GDP). Using data gathered from the World Bank, the authors in this research performed multiple regression for 13 Southeastern European nations using the pooled ordinary least squares (POLS) approach in order to assess the impact. According to the paper’s main findings, net FDI is significantly positively impacted by government effectiveness (GE), and the political stability and absence of violence/terrorism (PSAV), while on the other hand, net FDI is significantly negatively impacted by the rule of law (RL). The other governance indicators regulatory quality (RQ), control of corruption (CC) and voice and accountability (VA), did not significantly affect FDI attraction for the Southeastern countries. The importance of this research is mostly focused on the role of FDIs in the economic growth and development of a country (Bajçinca et al., 2024), rationally reflecting the national levels of governance. Also, this paper will contribute to enriching the existing literature related to the research topic.

Keywords: Foreign Direct Investments, Governance Indicators, Southeastern European Countries

Authors’ individual contribution: Conceptualization — M.S. and D.B.; Methodology — M.S. and D.B.; Investigation — M.S.; Writing — Original Draft —M.S.; Writing — Review & Editing — M.S. and D.B.; Visualization — M.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: D63, F02, F21, F43, F64

Received: 22.03.2024
Accepted: 16.12.2024
Published online: 19.12.2024

How to cite this paper: Sadriu, M., & Balaj, D. (2024). Assessing the role of governance indicators on foreign direct investment: Insights from Southeastern European countries [Special issue]. Journal of Governance & Regulation, 13(4), 316–321. https://doi.org/10.22495/jgrv13i4siart10