Legal source, institutional quality and FDI flows in Africa

Godfred A. Bokpin, Lord Mensah, Michael E. Asamoah

Research output: Contribution to journalArticlepeer-review

22 Citations (Scopus)

Abstract

Purpose: This paper aims to find out how the legal system interacts with other institutions in attracting Foreign Direct Investment (FDI) into Africa. Design/methodology/approach: The authors use annual panel data of 49 African countries over the period 1980 to 2011, and use the system generalized method of moments (GMM) estimation technique and pooled panel data regression. Findings: The authors find that the source of a country’s legal system deters FDI inflow as institutions alone cannot bring in the needed quantum of FDI. In terms of trading blocs, it was found that there is negative significant relationship between institutional quality and FDI for South African Development Community (SADC) as well as Economic Community of West Africa States (ECOWAS) countries. Practical implications: For policy implications, the results suggest that reliance on institutions alone cannot project the continent to attract the needed FDI. Originality/value: Empiricists have devoted considerable effort to estimating the relationship between institutions and FDI on the African continent, but this paper seeks to ascertain the effect of legal systems and institutional quality within African specific trade and regional blocks.

Original languageEnglish
Pages (from-to)687-698
Number of pages12
JournalInternational Journal of Law and Management
Volume59
Issue number5
DOIs
Publication statusPublished - 2017
Externally publishedYes

Keywords

  • Africa
  • FDI
  • Institutions
  • Legal origin

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