The institutions generate the guidelines for the

    The paper is organized as follows. Section two sets out the literature review followed by the methodology. And the last section will cover the results and the conclusions. 2. Literature review2.1 FDI and theoriesThe economic research study of FDI from different points of view enabled the existence of several theories in the particular field. Traditional FDI concept focuses on the economic motives of the company for expansion. Such reasons are the behavior of rivals, alternative markets, and business performance. Traditional theory determines the main purpose of the foreign direct investment as generating rents by using capabilities of the firm. Moreover, FDI gives the opportunity to expand the area of company’s influence and to receive the access to scarce resources. Manufacturers often seek for the way to use advantages in production costs. Simultaneously, companies in other fields pursue the markets with a high level of unsaturated demand. Therefore, resources and market access are factors that impact FDI from the economic point of view.Institutional concept highlights the role of institutions in attracting foreign direct investments. Hence, the rivalry between governments of different countries influences FDI. Therefore, scientists highlight that institutions generate the guidelines for the game. Institutional theory’s importance increased in the 1990th. The reason for that was a transition process in Central and Eastern Europe. Countries in this region created institutions suitable for the market economy. Adherents of the particular theory believe that governments are able to create a positive business climate through the right policy. In the majority of cases, the economic openness, market conditions, level of corruption and transparency are dependent on the legislation and the quality of governmental institutions (Popovici & Cantemir C?lin, 2014).2.2 IFRS adoption and FDI    Maryam, Azlina, Fairuz, and Ruzita (2017) stated that foreign investors lean toward markets with less data asymmetry and high-quality financial reporting that enable them to evaluate investment opportunities at a lower cost. In this manner, IFRS is used as one of the basic contributions to increase transparency. It decreases information asymmetries and ultimately impacts investors’ decision-making. The study inspected the economic and the market outcomes of IFRS on financial reporting on firms’ level. Also, It recommends that adoption of IFRS might be an essential driver of FDI.2.3 The role of governance and economic growth on FDI    Adem and A. Suut (2016) suggested that weak governance infrastructure makes a negative influence on the investment climate. Since the economic development of host countries is another essential factor influencing the choice of FDI, they investigate the impact of governing infrastructure and economic growth with other control factors on FDI inflows in developing countries. Both statistical and empirical examination covers 119 countries for the period 1996-2010. The results demonstrate that enhancing all dimensions of governance quality attracts more FDI inflows in developing countries. The effect of FDI on growth is twofold. Which is reached through the capital accumulation in the beneficiary economy and through knowledge transfers. Market-enhancing governance concentrates on the role of governance in lowering exchange prices to make markets more efficient. Growth-enhancing governance concentrates on the role of governance in enabling catching up by developing nations in a context of high-exchange costs in developing country markets. Weak governance structure adversely influenced the investment climate of the countries. The economic growth of the countries is likewise another essential factor that influences the FDI decisions of MNC along with governance quality.2.4 The impact of national policies on FDI    FDI is regarded as a source of economic growth, modernization, and employment. Countries have amended their national policies and pursued other policies to attract investments. The presence of FDI in the domestic economy is influenced by the following factors: the expected profitability of individual projects, the ease of operations in a given country, and the overall quality of the host country’s enabling environment. Consequently, the manner of ruling private companies is important in boosting the benefits of FDI (OECD, 2002).2.5 FDI worldwide trendDiagram 1 represents the dynamics of FDI in the world during the period of 1970-2016. The biggest increase was fixed in 2000 and 2007 (52% and 44% respectively). However, after the economic and financial crises in 2008, the amount of FDI still didn’t reach the level of 2007. In 2016, Worldwide FDI amounted to $2144 billion compared to $3096 billion in 2007. 2.6 FDI in the MENA region     Very nearly after a time of strong FDI growth, inflows began dropping in 2009, after the worldwide economic and financial crisis followed by political instability in several Arab Countries in 2011. These events have adversely affected the investing decision of foreigners in the entire region. Mainly Yemen, Egypt, Libya, and to some extent Tunisia, have been probably the most affected nations. Between 2010 and 2011 Egypt witnessed a decline of 600 million USD in FDI inflows.     The UAE and Saudi Arabia continue to be the most attractive destinations of FDI inflows in the region. As a result of better trade and regulatory climate. GCC economies have invested plenty in mega projects, for example, energy and telecommunications sectors, commonly in association with private partners, involving foreigners, in a form of PPPs. Some observers explain the relative decline in FDI inflows to the GCC by focusing on local investments. In the MENA region, the FDI stays concentrated in specific sectors, mainly in oil and gas industries. However, MENA regulators should introduce fundamental improvements that will help in attracting foreign investments and rising economic growth. These include business diversification and better labor markets. Also, building up transparent regulation and easier business procedures to improve the trade environment and return investor confidence (OECD, 2014).3.1 Hypothesis development    The study has three variables, one dependent variable, and two independent variables. The dependent variable relates to the FDI inflows of 14 countries in MENA region. The independent variables consist of the economic growth and the adoption of IFRS. Dependent variable: FDI inflows    The reason behind this study was to find, which factor would affect the inflows of FDI in MENA region. The study uses the foreign direct investment, net inflows (BoP, current US$) as a dependent variable that was obtained from DataBank.Independent variables Economic growth    Nicole (n.d) cited in his paper that foreign direct investment, which is stimulated by economies, that are big or fast developing, are seen to attract more FDI (Faras & Ghali, 2009).Therefore, the subsequent hypothesis is examined.H1. There is a positive relationship between countries’ GDP growth and FDI inflows.IFRS adoption    Maryam, Azlina, Fairuz, and Ruzita (2017) suggest that adoption of IFRS attract more FDI since it reduces information asymmetry. Therefore, the hypothesis is as follows:H2. There is a positive relationship between FDI inflows and the adoption of IFRS. 3.2 Methodology3.2.1 sample    This paper draws a sample of 14 MENA countries for the year-end of 2015 due to data availability. Additionally, the study excludes countries with missing data and countries with wars. The sources included secondary data such as DataBank and IAS plus; this data was used to provide a greater understanding of FDI inflows in MENA region. Figures of the sample were inspected to set out the empirical testing. This study employs the multiple regression analysis to assess the determinants of FDI inflows.3.2.2 Research design and variables measurement    The study applies a cross-sectional research model. It analyzes the relationship between FDI inflows as a depended variable and two sets of independent variables: countries’ economic growth and adoption of IFRS.     Prior studies focus on different directions to deal with FDI. For example, some researchers investigated the role of governance in investment climate (Axel, 2008; Adem and A. Suut, 2016). On the other hand, many studies focus on the economic growth and FDI (Nicole, n.d.; Mohammed, Liu & Walaa, 2012; Mohammed and Mahfuzul, 2016). Additionally, some studies investigated the effect of adopting IFRS on FDI inflows (Gene, Tam, and Eric, 2016; Maryam, Azlina, Fairuz and Ruzita, 2017). While this study aims to shed the light on the relationship between FDI inflows and the countries’ economic growth, and the adoption of IFRS in MENA countries. The statistical model is as follows:FDI inflows= ?0+?1Economic growth+ ?2IFRSWhere:FDI: foreign direct investment, net inflows (BoP, current US$)Economic growth: GDP growth rateIFRS: Adoption of International Financial reporting standards (Dummy variable: 1 for countries adopting IFRS, and 0 otherwise)Table (1) illustrates the regression analysis model. The results demonstrate that the GDP growth rate of the country, as well as the adoption of IFRS, has a positive relationship with FDI inflows that is consistent with the hypothesis statement. This result is similar to the argument of Adem and A. Suut (2016) that economic growth of host countries is another important factor affecting the FDI decisions. In addition, Maryam, Azlina, Fairuz, and Ruzita (2017) found that IFRS adoption helps to reduce information asymmetry which in turn increase FDI.Conclusion    In summary, FDI is an important way of transferring funds, know-how, and technologies across nations and it can take two forms either acquisition or Greenfield investment. FDI decision is affected by several factors such as the regulatory climate of the host country and availability of resources. Further, an economy with less information asymmetry is more attractive to foreign investors because it enables them to assess investment opportunities at a lower cost. In addition, developing countries with high economic growth tend to attract more FDI inflows as it reflects a good economic system. This study implies cross-sectional design, future researchers are highly recommended to utilize longitudinal model in analyzing data to get more precise results. Finally, this paper will help to assess regulators in providing fundamental improvements to current regulation in order to attract foreign investments and rising economic growth.


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