Abstract
Using a cross-sectional sample of yearly observations covering 132 countries over the 2007–2012 period, this article intends to provide empirical evidence that country-level governance has an impact on the strength of investor protection. Also, when proceeding to a multiple regression analysis based on income classification, as defined by the World Bank, one can observe a different behaviour of the relationship between country-level governance (proxied using the principal component analysis method) and the strength of investor protection.
Highlights
There is wide consensus in the academic literature that quality of country-level governance is determinant for economic and social development
It can be concluded that there is a difference between the impact of high-income classes on the relation between country-level governance and the strength of investor protection and the impact of lower income classes
The selected country-level governance variables cannot be simultaneously included in a panel model due to the high correlation between them, as demonstrated by a principal component analysis
Summary
There is wide consensus in the academic literature that quality of country-level governance is determinant for economic and social development (see, for instance, Busse & Gröning, 2009; Kray & Tawara, 2010). A recent finding by Çule and Fulton (2013) discloses that country-level governance exerts a significant impact on the business environment because an economy with a high concern for compliance with law, an adequate level of bureaucracy and efficient control of corruption is expected to provide the necessary framework for ensuring economic performance for the business environment. This idea of a strong relationship between various dimensions of country-level governance and economic growth and performance was supported by other relevant studies (Acemoglu, Johnson, & Robinson, 2001; Knack & Keefer, 1997; Price, Román, & Rountree, 2011; Rodrik, Subramanian, & Trebbi, 2004).
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
