Publication Date

2024

Document Type

Dissertation/Thesis

First Advisor

Xia, Michelle

Degree Name

M.S. (Master of Science)

Legacy Department

Department of Statistics and Actuarial Science

Abstract

This study explores the relationship between tax policy and foreign direct investment (FDI) in sub-Saharan African (SSA) countries, differentiating between two major components of FDI, namely greenfield investment and cross-border merger and acquisition (M&A). Using longitudinal data on 32 SSA countries across 16 years and a mixed effect model approach, I find that corporate income tax (CIT) rates aren’t a key factor for FDI inflow in the region. Instead, the study finds that trade openness, governance quality, and natural resources promote overall FDI inflow, while GDP growth and governance quality particularly attract greenfield FDI. In contrast, bank credit to the private sector is found to increase cross-border M&A, while natural resource availability appears to discourage it. These findings suggest that SSA countries might benefit more from focusing on improving their business environment rather than using tax policy to attract foreign investment. The findings further caution against a one-size-fits-all approach to FDI attraction via CIT reductions. While this policy seems to work in other regions, it does not work in SSA countries.

Extent

64 pages

Language

en

Publisher

Northern Illinois University

Rights Statement

In Copyright

Rights Statement 2

NIU theses are protected by copyright. They may be viewed from Huskie Commons for any purpose, but reproduction or distribution in any format is prohibited without the written permission of the authors.

Media Type

Text

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