Business and Economic Research ISSN 2162-4860 2012, Vol. 2, No. 2 www.macrothink.org/ber 156 An Empirical Investigation on The Effect of Business Environment Factors on The FDI Inflows in Pakistan: The Moderating Role of Political Stability Arfan Shahzad Othman Yeop Abdullah Graduate School of Business, University Utara Malaysia. Abdullah Kaid Al-Swidi (Corresponding author) Schools of Quantitative Sciences, College of Arts and Sciences, University Utara Malaysia Tel: 60-1-2466-2754 E-mail: swidi@uum.edu.my Dawood Ali Mithani Othman Yeop Abdullah Graduate School of Business, University Utara Malaysia. Faudziah Hanim Bt Fadzil Othman Yeop Abdullah Graduate School of Business, University Utara Malaysia. Abd Ghani Bin Golamuddin School of Computing, College of Arts and Sciences, University Utara Malaysia Received: October 30, 2012 Accepted: November 13, 2012 doi:10.5296/ber.v2i2.2597 URL: http://dx.doi.org/10.5296/ber.v2i2.2597 Abstract This study has examined the moderating role of Political Stability (PS) on the relationships between microeconomic variables, business environment variables and the Foreign Direct Investment (FDI) inflows in Pakistan.This study confined to the annual data for the period from 1991 to 2011 obtained from the authentic sources.The empirical analysis involved using the ADF test to check the stationary of the data, the EViewssoftware and hierarchal regression