The effect of governance indicators on direct foreign investments:Evidence from European Union countries

The aim of this study is to investigate the effect of governance on foreign direct investments within the framework of European Union countries. For this purpose, the effect of governance, which includes institutional and political determinants, on foreign direct investments was examined through panel data regression analysis using European Union countries annual data for 2002-2017. As a result of the analysis, it is seen that there is a statistically significant and positive relationship between the foreign direct investment and the quality of political stability and nonviolence and regulatory quality among the governance indicators. However, a statistically significant and negative relationship was found between freedom of expression and accountability and foreign direct investments. The findings show that countries that want to attract foreign direct investments should give importance to the quality of political stability and nonviolence and regulatory quality.