Foreign Direct Investment and Bank Performance in South Africa

Claudia Govender, Lydia Pelcher () and Marise Mouton ()
Additional contact information
Claudia Govender: University of Johannesburg
Lydia Pelcher: University of Johannesburg
Marise Mouton: University of Johannesburg

A chapter in Embracing Technological Agility in Accounting and Business – Vol. 1, 2026, pp 209-223 from Springer

Abstract: Abstract It is important for countries to constantly look for ways to attract foreign investments, as this helps develop capital structures within the country, supporting economic growth. This study sought to investigate whether foreign direct investment (FDI) affects the banking sector’s financial performance in South Africa. It also set out to understand if the COVID-19 pandemic significantly influenced the effect that FDI had on the financial performance of the banking sector. A quantitative method was used to measure and quantify the research variables, using secondary data for statistical analysis. Five South African banks were included from 2007 to 2021. The dependent variable was return on equity (ROE), representing the bank performance of the South African listed commercial banks. Represented by FDI, the independent variables were foreign equity capital, foreign intracompany loans, foreign reinvested earnings, and bank size for control. A dummy variable was also used to test whether the COVID-19 pandemic had influenced the effect of FDI on banks’ financial performance. A panel regression analysis was employed to explore the relationship between FDI and the financial performance of banks in South Africa. This study concludes that FDI influences bank performance in South Africa, with foreign equity capital and foreign reinvested earnings being significant, negative, and positive, respectively. It was also found that bank performance suffered during the COVID-19 pandemic. The conflicting results of the three FDI components indicate that policymakers should prioritise the importance of foreign direct investments by fostering an environment conducive to foreign investments that can support bank profitability.

Keywords: Foreign direct investment; Bank performance; Foreign equity capital; Foreign intracompany loans; Foreign reinvested earnings; Bank size; COVID-19 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-032-13380-9_14

Ordering information: This item can be ordered from
http://www.springer.com/9783032133809

DOI: 10.1007/978-3-032-13380-9_14

Access Statistics for this chapter

More chapters in Springer Proceedings in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().