Foreign Direct Investment and Firm Value: Evidence from Selected Countries in Sub-Saharan Africa

ABSTRACT The study investigates empirically the impact of foreign direct investment inflows to firms on firm value in South Africa, Nigeria and Ghana using listed firms. In order to control for any possible endogenity problems in the model, the study adopts a robust System Generalized Method of Moments to investigate the relationship between Foreign Direct Investment (FDI) and firm value (measured using Tobin’s Q and ROA) from the period of 2008 to 2019. From the findings, it is established that FDI has a positive significant impact on firm value in all the three countries (South Africa, Nigeria and Ghana). This positive relationship between FDI and firm value in the selected countries can be attributed to; technological transfer, managerial transfer, innovation transfer and skills transfer in favor of the host firms through inflows of FDI. This study does not only serve as a reference work for subsequent investigations into the impact of FDI on firm value in Sub-Saharan Africa, but it also serves as a guide to policy makers on the impact of FDI inflows to firm value in the region. It is one of the pioneering works that comprehensively examines the effect of FDI inflow on firm value among firms in Sub-Saharan African and also controls for endogeneity effects in the panel set.