The Joint Effect of Earnings quality and Investor Protection on Foreign Direct Investment across The MENA Countries

Abstract

This paper aims to explore the association of foreign direct investment (FDI) inflow into the Middle East and North Africa (MENA) countries with earnings quality and investor protection between 2001 and 2010. Considering the findings in other cross-country studies that earnings quality are of relatively higher in countries with strong investor protection. This study reinforces whether the relationship between earnings quality and investor protection matter for FDI inflow into the MENA region. The evidence shows that there is an important tie between firm-level governance (measured by the quality of reported earnings) and the strength of the country-level judicial efficiency (measured by investor protection) due to the complementary role as both facilitate FDI inflows. The findings of this paper have implications for policy makers and international investors.

Keywords: Foreign Direct Investment, Earnings quality, investor protection, MENA region