The Impact of Political Risk on Foreign Direct Investment

Mashrur Mustaque Khan, Mashfique Ibne Akbar

Abstract


Political risk, like all other risks, has an adverse effect on any economy. Even though other forms of risk, such as economic risk and financial risk have been studied quite extensively, political risk has not received much attention owing primarily to lack of data. The current paper attempts to study a negative and significant relationship between political risk and Foreign Direct Investment (FDI), accounting for 94 countries over a span of 24 years from 1986-2009. It was found that most of the political risk indicators have a negative relationship with FDI for the world as a whole and also, the high-income countries but the relationship was the strongest for the upper middle-income countries.



Full Text: PDF DOI: 10.5539/ijef.v5n8p147

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International Journal of Economics and Finance  ISSN  1916-971X (Print) ISSN  1916-9728 (Online)

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