Foreign direct investment and institutional quality: Some empirical evidence

► We examine the impact of institutional quality on FDI levels and volatility. ► A panel data analysis of 164 countries from 1996 to 2006 is used. ► Institutional quality has a positive and significant effect on FDI. ► A one standard deviation change improves FDI by a factor of 1.69. ► Institutional quality is negatively and significantly associated with FDI volatility.