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Impact of Environmental policy stringency on FDI: A global perspective

Publisher : International Journal of Pure and Applied Mathematics

Campus : Kochi

School : School of Business

Year : 2018

Abstract : One of the prime factor that attracts allure direct investment to a particular country is its investor friendly atmosphere. The FDI to a particular country is depended upon the county’s take on environmental regulations. So this paper evaluates the impact of Environmental policy stringency on FDI. For evaluating the environmental regulation prevailing in a country, its environmental policy stringency index (ESI) is taken. The ESI and FDI data of 33 countries for the period from 2005- 15 is analyzed. A random effect and fixed effect test is performed on the panel data of 33 countries. The analysis shows that when the Environmental stringency index increases, the FDI also increases. This means that countries having higher level of ESI attracts more FDI. This result contradict the contentious but generally held view that more strict environmental regulations deter FDIs.

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