Abstract:
Studies have established mixed results on the relationship between financial
market development and foreign direct investment. However, governance has
been identified in literature to influence both financial market development
and foreign direct investment, yet no study has considered the interacting of
financial market development, governance and foreign direct investment.
Thus, this study is of the view that governance could probably influence the
relationship between financial market development and foreign direct
investment in Sub- Saharan Africa. The study purported to examine the
interacting role of governance in the relationship between financial market
development and foreign direct investment in Sub-Saharan Africa from 1997
to 2016. The study was backed by Eclectic theory and new institutional
economic theory. The study adopted Generalized Method of Moment (GMM)
technique. The study first found positive relationship between financial market
development and foreign direct investment in Sub- Saharan Africa. Secondly,
it found positive relationship between financial market development and
foreign direct investment in Sub- Saharan Africa. Finally, it found that
governance plays an interaction role in the relationship between financial
market development and foreign direct investment in Sub-Saharan Africa.
Hence, this study suggests that Sub-Saharan economies should enhance both
their financial market and governance (specifically, control of corruption,
regulatory quality, political stability and voice and accountability) in order to
maximize inflows of foreign direct investment
