The Impact of Institutional Environment on Inflows of Foreign Direct Investment in European Transition Economies and Latin American Countries

The main objective of the paper is to identify and quantify the infl uence of institutional environment on infl ows of foreign direct investment in European post-socialist countries and countries of Latin America. The reference period is the period 1996–2012 due to data availability. The World Bank Governance Matters concept is used as the basic indicator of institutional environment. Panel data regression analysis is used for the identifi cation and quantifi cation purposes. According to the results, the infl uence of institutional environment on FDI is not entirely unequivocal in the European transition economies, but it is statistically signifi cant in the Latin American countries. Furthermore, there are statistically signifi cant areas – quality of democracy and government eff ectiveness – in the post-socialist countries, and all the institutional areas except the level of democracy in Latin America, mainly regulatory quality and rule of law.