Does FDI Caused Profit Repatriation: Exploring the Moderating Role of Governance Institutions

23 Pages Posted: 3 Sep 2020 Last revised: 23 May 2022

See all articles by Ghalib Faheem

Ghalib Faheem

Karachi University Business School

Danish Ahmed Siddiqui

University of Karachi - Karachi University Business School

Date Written: August 26, 2020

Abstract

This paper investigates the impact of foreign direct investment, institutional quality on profit repatriation, and net primary income taken as a proxy of profit repatriation. Inflation and GDP per capita were taken as controls. A data sample of 54 countries (developing) has been used for the first model of this research. And data sample of 100 countries (developed and developing both) has been used for the second model. The sample period is from 2008-2017. The finding of this study indicates that institutions' quality is negatively impacting profit repatriation and net primary income. It also reveals foreign direct investment is negatively affecting profit repatriation but positively impacting net primary income. Results reveal that investors are unwilling to invest in countries where institutions encourage corruption because these factors increase the cost of doing business. Developing countries have weaker institutions than developed countries and so, investors will be taking their profit back and not willing to re-invest in that particular country.

Keywords: Profit Repatriation, Foreign Direct Investment, Institutional Index, Accountability, Profitability, Corruption

Suggested Citation

Faheem, Ghalib and Siddiqui, Danish Ahmed, Does FDI Caused Profit Repatriation: Exploring the Moderating Role of Governance Institutions (August 26, 2020). Available at SSRN: https://ssrn.com/abstract=3681259 or http://dx.doi.org/10.2139/ssrn.3681259

Ghalib Faheem

Karachi University Business School ( email )

Karachi
Pakistan

Danish Ahmed Siddiqui (Contact Author)

University of Karachi - Karachi University Business School ( email )

University Road
Karachi, Sindh 75270
Pakistan
3333485884 (Phone)

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