Relevance of Sovereign Credit Risk Rating on Foreign Direct Investment

In order to have a stronger position after the financial crisis and to deal with the challenges of the global economy, a country need a tool to have innovative development in growth, with monetary boosters along with structural changes. The monetary boosters can be accumulated from sources such as, internal and external. Internal sources are economical but not enough for the innovative growth, so the nations have to depend on external sources which may be in the form of debt or equity. The debt form is more complicated than other forms of investment where the nation has to repay to the lenders at any cost unlike the investors who can expect return only when there is profit. The main objective of the study is to have an overview of the sovereign rating methodology of different international rating agencies and to associate it with FDI inflow, particularly in the form of debt using the secondary data. Thus the study attempts to examine the association of sovereign credit risk rating to foreign direct investment to know the relevance of credit rating in attracting FDI than other factors.