Effects of corruption on MNEs' reinvestment decisions

Demirbag, Mehmet and McGuinness, Martina and Bayyurt, Nizamettin (2012) Effects of corruption on MNEs' reinvestment decisions. In: Academy of International Business Annual Meeting, 2012-06-30 - 2012-07-02. (Unpublished)

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Abstract

A range of studies have found that corruption has a significant impact upon FDI decisions, however to date there has been little investigation into longer term investments made by firms. Utilising 2005 World Bank Enterprise Survey data, this study explores the relation ship between corruption and MNEs' strategic decision to reinvest profits. Drawing together institutional and transaction costs approaches , we find variation in the different dimensions of corruption and their impact upon relationship between corruption and reinvestment. We find that pervasive corruption impacts negatively upon reinvestment whilst bribery in not found to be significant. Perceived robust legal institutions have a positive correlation with reinvestment. Firm level attributes of increased size and age are important factors in positive reinvestment decisions.