EXPLORING THE MEDIATING PROCESSES OF QUALITY OF GOVERNANCE BETWEEN FOREIGN DIRECT INVESTMENT AND ECONOMIC GROWTH

Authors

  • Fazlida Mohd Razali Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, 40450 Shah Alam, Selangor, Malaysia
  • Norlaila Md Zin Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, 40450 Shah Alam, Selangor, Malaysia
  • Hazlina Mohd Padil Faculty of Law, Universiti Teknologi MARA, Cawangan Negeri Sembilan, Kampus Seremban, 70300 Seremban, Negeri Sembilan, Malaysia
  • Eley Suzana Kasim Accounting Research Institute, Universiti Teknologi MARA, Shah Alam, 40450 Shah Alam, Selangor, Malaysia

Keywords:

Foreign Direct Investment, Quality of Governance, Economic Growth, ASEAN countries

Abstract

Foreign direct investment contributes to the changes in economic growth of ASEAN countries. Past studies showed mixed nature of relationship between foreign direct investment and economic growth. Good governance factors such as government effectiveness, political stability and absence of violence, rule of law, voice and accountability, control of corruption and regulatory quality also showed positive significant effect on economic growth. However, there is a lack of evidence on the mediating process of quality of governance between foreign direct investment and economic growth. Hence, this study aims to explain the process of quality of governance in mediating the relationship between FDI and economic growth. This study analysed secondary data for the period from 2009 to 2020 of five ASEAN countries with high human development scores based on the 2020 Human Development Report by the United Nations. Findings indicated that quality of governance mediates and improves the relationship between foreign direct investment and economic growth. The findings have significant policy implications as they suggest that policymakers in ASEAN countries can foster economic growth by further promoting FDI whilst considering the appropriate governance mechanism that can enhance economic growth.

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Published

2023-04-30

Issue

Vol. 11 No. 1 (2023): April 2023

Section

Archives

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