The impact of Governance Indicators on Foreign Direct Investment Evidence from countries in Southeastern Europe.

Published: 8 May 2024| Version 1 | DOI: 10.17632/b6bsfhmbfw.1
Mirsad Sadriu


This research paper aims to emphasize how governance factors can have an impact on Foreign Direct Investment (FDI) inflows, focusing on six key indicators: Control of Corruption, Government Effectiveness, Political Stability and Absence of Violence/Terrorism, Regulatory Quality, Rule of Law, and Voice and Accountability, within the context of net FDI attraction expressed as a percentage of a country’s GDP. In order to quantify this impact, the authors used the Pooled Ordinary Least Squares (POLS) method to perform multiple regression for thirteen Southeastern European selected countries using secondary panel data over the period from 2009 to 2022 that were collected from a World Bank source. Refereeing to the results, it can be concluded that variables Government Effectiveness, and Political Stability and Absence of Violence/Terrorism have a significant positive impact on net FDI, while Rule of Law, on the contrary, has a significantly negative impact, and the two remaining governance indicators Control of Corruption and Voice and Accountability didn’t show any significant impact on attracting FDI for the Southeastern countries that are part of the study. The importance of this research is mostly focused on the role of foreign direct investments as one of the main factors in the economy, more precisely in the growth and economic development of a country, and logically reflecting the level of governance in those countries.


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Data was gathered from World Bank Database - Governance Indicators


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