Institutional factors: Their Significance on Foreign Direct Investment inflows in Selected Former British Colonies in Africa

Abstract Research on the relationship between foreign direct investment and institutional factors has gained momentum. Conflicting views exist with some literature suggest that foreign direct investment inflows are influenced by institutional factors while others suggest institutional factors improve when foreign direct investment increases. The current study uses data from a panel of fifteen former British colonies to test whether institutional factors attract foreign direct investment inflows. Using Fully Modified Ordinary Least Squares method, findings indicate that the aggregated component of institutional quality improves inflows of foreign direct investment in the selected countries. For disaggregated institutional quality components, some components have negative effects on foreign direct investment inflows. The study recommends that improving on the control of corruption and the rule of law may attract more foreign direct investment in the fifteen selected former British colonies. JEL Classification: F, F21, F23,