Corruption distance and foreign direct investment

• Autores: Xingwang Qian, Jesus Sandoval Hernandez
• Localización: Emerging Markets Finance & Trade, ISSN-e 1558-0938, Vol. 52, Nº. 2, 2016, págs. 400-419
• Idioma: inglés
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• Resumen

  • We study the effects of “corruption distance,” defined as the difference in corruption levels between country pairs on bilateral foreign direct investment (FDI). Using a “gravity” model and the Heckman (1979) two-stage framework on a data set of forty-five countries from 1997 to 2007, we find that corruption distance adversely influences both the likelihood of FDI and the volume of FDI. A novel finding in this study is that we identify the asymmetric effect of corruption distance and find that the positive corruption distance, defined as the corruption distance from a high corruption source to a low corruption host country, is the prominent one that affects the behavior of bilateral FDI.