The causal relationship between foreign direct investment and financial development in ASEAN countrues

Roslan, Farah (2014) The causal relationship between foreign direct investment and financial development in ASEAN countrues. Masters thesis, Multimedia University.

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Abstract

The purpose of this study is to seek the causal relationship between foreign direct investment (FDI) and financial development in selected ASEAN countries. This study used sampling of panel data of 92 observations of panel data taken from 1989 - 2011 from four different countries; Malaysia, Singapore, Thailand and Philippines by using Granger causality approach. For indicators of financial development, we have grouped those indicators based on two broad components, which are stock market development indicators and financial institutions indicators. In a nutshell, based on financial institutions components, the causality analysis tests provides slight evidence for the hypothesis that FDI can promote to the expansion of the financial institutions sector in ASEAN countries. Moreover, the impact of FDI on the development of financial institutions also dissimilar from one country to one country. Only in certain ASEAN countries, FDI is proof to notably influence the development of financial institutions. This study also provides slight evidence that the development of financial institutions causes FDI. It is assume that the single presence of financial institutions development sector is not vital determinant in affecting the FDI to ASEAN. Contrary, this study provides strong evidence that FDI affect the development of local stock market in ASEAN and vice versa. Plus, the significant two-ways causation effect running from development of stock markets to FDI signifies that the fundamental and well-developed of stock market is necessary to promote FDI in ASEAN countries. This study contributes by filling the gap of analyst coverage literature where empirical studies on how FD indicators especially on the development of stock market and financial institutions in ASEAN are scarce. The second contribution is a better understanding of the impact of financial development on the performance of foreign direct investment in selected ASEAN countries.

Item Type: Thesis (Masters)
Additional Information: Call No.: HG4538 F37 2014
Subjects: H Social Sciences > HG Finance
H Social Sciences > HG Finance > HG4501-6051 Investment, capital formation, speculation
Divisions: Faculty of Management (FOM) > MBA Programme
Depositing User: Ms Nurul Iqtiani Ahmad
Date Deposited: 17 Apr 2014 04:47
Last Modified: 01 Jul 2015 02:33
URI: http://shdl.mmu.edu.my/id/eprint/5432

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