Published: 2022-06-07

Page: 868-878


Faculty of Law, Governance & International Relations, Kings University College, Accra, Ghana.

*Author to whom correspondence should be addressed.


This empirical study saliently investigates if law significantly moderates the impact of politics on foreign direct investment inflow to Ghana using 2003 – 2019 secondary data from different international institutions (World Bank, International Monetary Fund, Transparency International, and United Nations Conference on Trade and Development). Institutional foreign direct investment fitness theory underpins the study. Politics is the independent variable; law is the moderating variable; and foreign direct investment is the dependent variable. Using hierarchical regression analysis, this quantitative parametric study establishes thus: (i) political system has 67% significant positive effect on foreign direct investment inflow to Ghana within the period 2003 to 2019; (ii) legal system has 25% nonsignificant positive effect on foreign direct investment inflow to Ghana within the period 2003 to 2019; and  (iii) legal system significantly but negatively moderated the relationship between political system and foreign direct investment inflow to Ghana within the period covered in the study. The study established the relevance of institutional FDI fitness theory as political and legal institutions have positive relationship with foreign direct investment inflow to Ghana within the studied period. There is need to replicate this study in other emerging and emerged economies for good generalization of the findings. Finally, the need to strengthen the legal and political institutions of Ghana cannot be overemphasised. This is because it would result to improved foreign direct investment inflow to the country.

Keywords: Foreign direct investment, law, institutional fitness theory, politics

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