Date of Publication

7-6-2022

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management Department

Thesis Advisor

Edralin C. Lim

Defense Panel Chair

Liberty S. Patiu

Defense Panel Member

Faith Abigail Hilomen
Mc Reynald II S. Banderlipe, CPA

Abstract/Summary

Finance is at the heart of today’s economy and is a crucial engine for fostering a country’s economic progress. Foreign direct investment has been considered to be an important source of capital inflow for developing countries, while new institutional economists claim non-economic factors, particularly institutional quality, affect the development of a financial system. With these factors in mind, this paper examined the impact of foreign direct investment and institutional quality, which includes indicators such as control of corruption, political stability and absence of violence/terrorism, voice and accountability, and economic freedom on the financial development index, financial institutions index, and financial markets index of developing countries in ASEAN, with real GDP and inflation rate as the control variables. The study has three objectives. The first is to identify the effect FDI has on financial development. The second is to investigate the effect institutional quality has on financial development by conducting two separate regression models. The third would be to examine the effect FDI and institutional quality have on financial development if the independent variables are to be analyzed conjointly using a panel regression model. The findings of the study exhibited FDI and institutional quality to have no effect on financial development when analyzed separately. Whereas regulatory quality, rule of law, and economic freedom are deemed to have a significant effect on financial development when analyzed conjointly. The inconclusive results recommend ASEAN developing countries enhance their financial regulatory framework, which would help improve governance amongst banks, other financial institutions, and financial markets. In other words, financial transparency and strong institutional frameworks should be prioritized by policymakers through increased investor protection and contract rights as well as activities that promote economic freedom for the country’s citizens and enterprises.

Abstract Format

html

Language

English

Format

Electronic

Keywords

Investments, Foreign—Southeast Asia; Economic development—Southeast Asia

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Embargo Period

7-9-2022

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