The role of financial development level in the relationship of logistics performance and foreign investment: The case of BRICS-T countries

Foreign investments have a substantial impact on national economies, influencing critical areas such as economic growth, employment, and financial resources. Therefore, a country must provide favorable conditions, including robust infrastructure, logistical support, market access, a stable economy, and a well-developed financial structure, to attract and encourage foreign investors. These conditions are contingent upon the logistical performance and level of financial development within a country. High logistical performance leads to faster supply processes and lower costs. Thus, foreign investments in the country are accelerated due to facilitating market access. However, it is not enough to solely increase the level of foreign investment in the country; a robust financial system is also necessary. This is because a financial structure that instills confidence and stability in investors also facilitates the effective execution of logistics activities. This study's purpose is to investigate the impact of financial development on the relationship between logistics performance and foreign investments in the BRICS-T countries, utilizing the Smooth Transition Panel Regression Model. The analysis reveals that the calculated threshold level for the share of domestic loans allocated to the private sector in Gross Domestic Product (GDP), which represents the measure of financial development, is 37.83%. Based on this finding, when the level of financial development exceeds the threshold, logistics performance directly boosts foreign investments. Consequently, policymakers should focus on implementing strategies to foster financial development as a means of boosting foreign investment.