This paper examines the relationship between political risk, institutions, and foreign direct investment (FDI) inflows. Using econometric techniques on data from 83 developing countries between 1984 and 2003, the study identifies key indicators that influence multinational corporations' investment decisions. Twelve indicators for political risk and institutions are analyzed, including government stability, law and order, and the quality of bureaucracy. The results show that these factors are significant determinants of FDI inflows. Government stability, law and order, and the quality of bureaucracy are found to have the strongest positive impacts on FDI. Additionally, investment profile, internal and external conflict, ethnic tensions, and democratic accountability are also significant determinants. The study uses both cross-sectional and panel data analyses, employing different econometric models to assess the impact of political risk and institutional quality on FDI. The findings suggest that changes in political stability and institutional quality are highly relevant for multinational corporations' investment decisions. The paper also highlights the importance of considering the dynamic nature of political risk and institutions in understanding FDI flows. Overall, the study underscores the role of political institutions and stability in attracting foreign direct investment.This paper examines the relationship between political risk, institutions, and foreign direct investment (FDI) inflows. Using econometric techniques on data from 83 developing countries between 1984 and 2003, the study identifies key indicators that influence multinational corporations' investment decisions. Twelve indicators for political risk and institutions are analyzed, including government stability, law and order, and the quality of bureaucracy. The results show that these factors are significant determinants of FDI inflows. Government stability, law and order, and the quality of bureaucracy are found to have the strongest positive impacts on FDI. Additionally, investment profile, internal and external conflict, ethnic tensions, and democratic accountability are also significant determinants. The study uses both cross-sectional and panel data analyses, employing different econometric models to assess the impact of political risk and institutional quality on FDI. The findings suggest that changes in political stability and institutional quality are highly relevant for multinational corporations' investment decisions. The paper also highlights the importance of considering the dynamic nature of political risk and institutions in understanding FDI flows. Overall, the study underscores the role of political institutions and stability in attracting foreign direct investment.