A Dynamic Model for determining Inward Foreign ... - Business School

investors look for the markets which provide accurate and quick information in an
appropriate time in order to control their investments (Amman financial market, 2009).
Public shareholding companies were set up and their shares were traded in long before the
setting up of the Jordanian securities market. In the early thirties the Jordanian public
already subscribed to and traded in the shares. For example, Arab Bank was the first public
shareholding company to be established in Jordan in 1930, followed by Jordan Tobacco and
Cigarettes in 1931, Jordan Electric Power in 1938 and Jordan Cement Factories in 1951. In
the 1975 and 1976, the Jordan Central Bank cooperated with the World Bank’s
International Finance Corporation to establish the Amman financial market (Amman
financial market, 2009).
Jordan has done well in catching the attention of foreign investors as a consequence of
numerous factors, such as internal and external political stability, supported investment
legislations, privatisation plans, advanced private sectors, joining and merging with a
variety of unilateral, bilateral and multilateral trade agreements. Moreover, foreign capital
has been attracted by some factors such as the legal system, developed infrastructure, cheap
and skilled labour, and feasible projects to be undertaken (Investment Encouragement
Corporation, Amman, Jordan).
The rest of the paper is organised as follows: section 2 describes the literature review and
theoretical framework and hypotheses. Section 3 presents the research methodology
including research models, the mechanism used to measure the extent of risk, data analysis
method and methods of gathering data. Section 4 shows the results and discussion and
section 5 conclusion.
2. Theoretical Framework and Review of Literature on FDI and Country Risk.
Numerous studies have analysed the relationship between FDI, country risk,
macroeconomic factors and stock market price to determine the extent, if any, to which
country risk influences FDI in host economies. The assumption common to these studies is
that country risk affects inward FDI. Overall, conclusions have been mixed, but most
research find that country risk prevent FDI to flow into hot countries. The differences in the
findings could arise from a number of methodological and conceptual factors such as lack
of comprehensive, different definitions of FDI and different econometric specifications.
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