A Study on the Effects of the Corruption of Host Countries on Foreign Direct Investment Inflows in South East Asian Countries

Foreign direct investment (FDI) inflows have been considered a powerful engine for the economic growth of host countries. The surge of FDI inflows to developing countries during the last decades has motivated research interest in subjects such as the determinants, motivations, and effects of FDI inflows. Recently, various studies have focused on the corruption level in host countries as an important factor influencing the attraction of FDI in host countries. However, most previous studies used a cross-sectional analysis rather than panel data analysis to examine the impact of such a complex phenomenon, and there was no study that exclusively concentrated on quantifying the impact of the corruption level on FDI inflows in South East Asian countries. This study aims to investigate the effect of corruption on FDI inflows in eight countries in South East Asia during the period of 1995-2016. The study also compares the effect of institutional quality and corruption level on FDI inflows, and investigates the effects of income and quality of regulation on the relationship between corruption and FDI inflows. In addition, this study identities the significance of other important variables Gross Domestic Product (GDP) per capita, urban population growth, regulation quality, labor cost, and government expenditure of education). This study uses two indices to measure the level of corruption (Corruption Perceptions Index and Control of Corruption Index). KCI Citation Count: 1