The effect of institutional governance quality on foreign direct invesment: A research on middle income countries

Foreign direct investments play an important role in increasing the economic prosperity and international competitiveness of countries in the global and liberal economy of the 21st century. This situation directs the developing economies, which recognize the importance of foreign direct investments, to produce and renew policies to attract investments to their countries. In this context, the aim of this study is to research the effect of institutional governance indicators defined by World Bank in the 20 middle income countries which Turkey is also included. In this context, the aim of this study is to research the effect of institutional governance indicators defined by World Bank for 2002-2018 term in the 20 middle income countries which Turkey is also included for 2002-2018 term. The dependent variable of the study is the share of foreign direct investment inflows in the gross domestic product, while the independent variables are the control of corruption, government effectiveness, political stability and the absence of violence, regulatory quality, rule of law and voice and accountability. In the study, the relationship between variables is tested with panel data analysis by using annual data sets. According to the findings from the analysis, political stability and absence of violence and regulatory quality variables have a positive effect; government effectiveness has negative effect on foreign direct investment inflows. Besides, an increase in trade openness and domestic investment level increase countries' foreign direct investment inflows. Keywords: Foreign direct investment, Institutional governance, Middle income countries, Panel data analysis