Corruption and Foreign Direct Investment: The Role of Institutional Quality and Natural Resources in Ghana

• In Event: Issues in Renewable Energy Policies: Assessing Benefits, Effects, and Corruption

Abstract

Foreign Direct Investment (FDI) is a critical driver of economic growth in developing countries, and it provides capital, technological transfer, and managerial expertise. However, corruption remains a significant impediment to FDI inflows, particularly in resource-rich economies like Ghana. This study empirically examines the role of institutional quality and natural resource wealth in moderating the relationship between corruption and FDI inflows in Ghana. Using a panel data analysis approach, the study evaluates the extent to which corruption perceptions, institutional strength, and resource dependency shape Ghana’s ability to attract sustainable foreign investment.

Guided by Scott’s Institutional Theory, Resource Curse Theory, and International Political Economy (IPE), the study investigates whether institutional quality can mitigate corruption’s adverse effects on FDI inflow. It also seeks to examine whether resource wealth exacerbates corruption, thereby deterring investment. Drawing on secondary data from 2012 to 2023 from sources including the World Bank, International Monetary Fund (IMF), and Transparency International, the study employs panel regression models with interaction terms to assess the moderating effects of institutional quality and natural resource rents.

The findings are expected to reveal that higher institutional quality mitigates corruption’s deterrent effects on FDI, while resource dependency exacerbates corruption, further discouraging investment. These results will contribute to the theoretical discourse on governance and investment while providing policy insights for strengthening anti-corruption institutions. It also seeks to expand on strategies to improve regulatory frameworks and diversify Ghana’s economy beyond its resource-dependent sectors. The study’s implications underscore the importance of fostering institutional reforms to enhance transparency and accountability, ensuring that Ghana remains an attractive destination for sustainable foreign investment.

This study is relevant for policymakers, development practitioners, and scholars examining governance, corruption, and FDI in emerging economies. The study will offer empirical evidence on the interplay between institutional quality, natural resources, and corruption. It will also inform strategies for improving Ghana’s investment climate while addressing structural challenges that hinder economic development.

Author

• Isaac Kwabena Yeboah, Virginia Commonwealth University
  Presenting Author