Impact of Governance Structures and Tax incentives on Foreign Direct Investment: Evidence from Africa

Seth Nana Kwame Appiah-Kubi

Doctoral thesis

Abstract:

African countries have faced competition and several challenges to attract foreign direct investment given the role that FDIs play in the development process. Several efforts made have been futile because of numerous factors that play against the business environment for foreign investments. This study sought to challenge this conventional wisdom by investigating the ways in which country-level governance structures and tax incentives influenced the inflows of foreign direct investment in African countries for the period 2000–2019. The study used panel sampling annual data from forty-six countries in Africa, with Ordinary Least Squares (OLS) and Feasible Generalized Least Squares (FGLS) as our discussion estimators and Generalized System Method Moments (GMM) as robustness check estimator. The statistical results reveal that there is a significant positive relationship between government effectiveness, longer tax holidays, and the inflows of foreign direct investment in African countries. Furthermore, foreign direct investment predominates in African economies that have sound rule of law, voice, and accountability, embrace effective and efficient regulations, and higher tax withholding. Moreover, the relationship between corruption, corporate tax rate, and the inflow of foreign direct investment is negative but significant. However, political stability and tax concession are insignificant to the predominance of foreign direct investment in Africa. Summarizing, the results recommend that, governments in Africa should adopt robust and efficacious measures, proper restructuring of the governance structures to deal with policy lapses by, achieving the four main goals, i.e., poverty eradication, sustainable growth and development, African integration in the competitive global economy, and women empowerment, will be hindered.

Keywords

corruption, tax incentives, tax holiday, foreign direct investment

Language used: English

Date on which the thesis was submitted / produced: 29. 12. 2022

Thesis defence

• Supervisor: prof. Ing. Mansoor Maitah, Ph.D. Ph.D.

Czech University of Life Sciences Prague

Faculty of Economics and Management

Doctoral programme / field:
Economics and Management / Sector Economics and Economics of Enterprise