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Title: The impact of sovereign credit rating downgrade on foreign direct investment in South Africa.
Authors: Mugobo, Virimai Victor 
Mutize, Misheck 
Keywords: Investors;Risk;Reaction;Foreign Direct Investment;Multilateral institutions;Emerging economies;Sovereign credit rating (SCR);South Africa;SCR downgrade
Issue Date: 2016
Publisher: Virtus interpress
Source: Mugobo, V and Mutize, M.,2016.The impact of sovereign credit rating downgrade on foreign direct investment in South Africa. Journal of Risk Governance & Control: Financial Markets & Institutions, 13(2): 14 – 19, January.
Abstract: Foreign Direct Investment (FDI) has grown to be an attractive alternative to borrowing from multilateral institutions such as the World Bank and the International Monetary Fund for emerging economies. Global investors prefer investing in countries which have received a Sovereign Credit Rating (SCR) as they perceive it as a good measure of risk allocation. This research applied an event study methodology to SCR downgrades from the three international CRAs (Moody, Standard and Poor and Fitch) over the period 2004 to 2014 to investigate the impact of SCR change on FDI flow into South Africa. Empirical findings show that there is a statistically significant relationship between FDI and SCR downgrades. Evidence also shows that not all downgrades from the three CRAs equally affect investors’ decisions as Moody’s downgrades tend to dominate, causing FDI to reaction at with a higher magnitude. However, not only SCR downgrade determines FDI flow into SA but there is a host of other fundamentals that government should address to attract investment and stabilise financial markets.
Appears in Collections:Dr. Virimai Victor Mugobo
BUS - Journal Articles (DHET subsidised)

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