Impact of Governance and Financial Development on Foreign Direct Investment in BRICS Nations

Abstract

The study tries to understand the impact of Governance and Financial Development on the FDI inflow in the BRICS nations. The study uses the panel regression method to analyze the degree of impact of these indicators on the FDI inflow. The study found that the unit change in Government Effectiveness, Political Stability, and Regulatory Quality will have a positive impact on the FDI inflow in BRICS nations by 1.353, 0.945, and 0.148536 times respectively, while any unit change in the Control of Corruption will have a negative impact on the FDI inflow by 2.820 times. Likewise, for Financial Development, any unit change in the Financial Market Depth and Financial Market Efficiency will positively impact the FDI inflow by 1.634 and 1.624 times, respectively. The study implies that the BRICS nations should focus on strengthening their Government Effectiveness, maintaining Political Stability, improve Regulatory Quality while combating corruption to attract FDI. Similarly, enhancing the Depth and Efficiency of their Financial Markets will significantly strengthen their FDI inflow. The researchers and scholars may pursue the policy implications provided within the study for gauging measures to improve the FDI Inflows in the BRICS nations through Governance and Financial Developments.