Financial development and FDI inflows: amplifying effect of bilateral political relations

ABSTRACT

This study investigates the effects of financial development of foreign direct investment (FDI) target countries on FDI inflows, with a focus on how bilateral political relations change the effects through evidence from China. Results show that (1) FDI target countries’ financial development significantly increases FDI inflows from China; (2) Bilateral political relations significantly amplify the effects of destination countries’ financial development on FDI inflows from China.

KEYWORDS:

• FDI inflow
• financial development
• bilateral political relations
• China

JEL CODES:

• G11
• G15
• P16
• F21

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

We thank Dr Zhitao Lin for his helpful comments. This study is supported by Guangdong Basic and Applied Basic Research Foundation NO. 2021A1515011665. All errors are our own