International Journal of Business and Economics Volume 17, No. 3 December, 2018

Determinants of Private Sector Investment: Evidence from Mauritius, 1981-2014

Roopnarain Darshan Sharma

Faculty of Law and Management, University of Mauritius, Mauritius

Gunesh Ramlugun Vidisha

Faculty of Law and Management, University of Mauritius, Mauritius

Abstract

Studies on private sector investments abound, yet few ever investigate the impact of corporate governance on private sector investment. Consequently, this study looks into the long-run determinants and short-run dynamics of domestic private sector investment during the period 1981-2014 in Mauritius and assesses the impact of corporate governance on such investments. For this purpose, we employ the Auto-Regressive Distributed Lag (ARDL) approach to cointegration as the time series econometric technique to examine the long-run determinants, deciphering the short-run dynamics of those determinants by means of an error correction mechanism within the corresponding ARDL framework. The results reveal that corporate governance reforms in the long run determine the Gross Domestic Product (GDP) level, the real interest rate, financial development, inflation, real exchange rate, domestic savings, and private sector investment. Moreover, the short-run dynamics indicate that the real interest rate, financial development, inflation, savings, and corporate governance reforms in the short run convincingly influence private sector investment. Given its unique microeconomic conditions, this study contributes to an understanding of private sector investment in Mauritius and is of significance to policy makers. It further shows the significance of corporate governance on private sector investment. We also discuss areas for future research and study limitations.

Keywords：corporate governance, private sector investments, Mauritius.

JEL Classifications：C50, E22, E69, G30.

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