Sustainability Goals, dividend payouts, and foreign direct investment: Strategic insights from the Saudi context

Abstract

This study examines the impact of Sustainable Development Goal (SDG) scores and corporate dividends on foreign direct investment (FDI) inflows in Saudi Arabia. Drawing on information asymmetry and institutional theories, the paper argues that while SDGs promote transparency, they may also increase compliance costs that deter FDI in emerging markets. Using panel data covering 1975–2016 (44 observations), the analysis employs robust econometric techniques, including GMM, FGLS, PCSE, OLS, and ARDL models. The results indicate that SDG scores negatively affect FDI inflows, as meeting SDG requirements imposes additional costs and obligations on international investors. However, corporate dividend payouts show no significant influence on FDI. These findings highlight the dual role of SDGs as both a transparency mechanism and a regulatory burden for developing economies. Policymakers in Saudi Arabia and other emerging markets are encouraged to balance sustainability objectives with strategies that attract foreign investment. The study contributes original empirical evidence on the SDG–FDI nexus in an underexplored context, emphasizing Saudi Arabia’s continuing commitment to global development goals, particularly SDG 1, SDG 2, SDG 9, and SDG 17, by 2030.