engleski

Impact of Foreign Direct Investments on Stock Market Development in Croatia

The aim of this study is to empirically analyze the role of foreign direct investment in stock market development in Croatia. In economic theory FDI has a big influence on economic growth, export, investment, employment, know- how transfer. In this work, we concentrated on FDI influence on the Zagreb Stock Exchange market capitalization. We applied Ordinary Least Square method of multiple regressions by using annual time series data for the period 1997 - 2011 to estimate empirical relationships among variables. Result discloses a positive, but almost neutral impact of FDI together with other explanatory variables in developing stock market in Croatia. Other variables in our model are domestic savings and portfolio investments and as we expected, both have a very positive influence on stock market capitalization. Our study could be useful for policy makers to make efforts in removing all (bureaucratic) obstacles to create investment friendly environment, necessary to attract a fresh foreign capital in this turbulent time. Croatia needs new investments to boost economic cycle and to turn on growth path. Budget deficit does not allow local government to start desperately needed investments, local entrepreneurs’ needs financing, while local banks are risk averse. In such situation, FDI could be a trigger for positive changes in the Croatian economy, which would then pull local companies and banks to start new projects and investments. This work is divided in four parts. Firs part is introduction, in second we give literature on this subject. In third part we bring overview of all variables for our mode ; FDI, market capitalization, domestics savings and portfolio investments in Croatia. In fourth part we explain methodology and results of multiple regression model. Finally, part five is reserved for our conclusion.

stock market ; FDI ; portfolio investment ; domestic saving

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