The strong influence of sound corporate governance on economic Growth: evidence from Zimbabwe

Alexander Maune

doi:10.21511/ppm.15(2-2).2017.13

Alexander Maune

Open Access

https://doi.org/10.21511/ppm.15(2-2).2017.13

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Abstract

The study examined the impact of sound corporate governance on economic growth in Zimbabwe using an econometric model. A multiple linear regression analysis was employed to examine the relationship. Secondary data for the period 1968 to 2015 was collected from World Bank’s Worldwide Governance and World Development Indicators databases. It was found that sound corporate governance is significantly correlated to economic growth in Zimbabwe in a positive and negative manner with a p-value of 0.000023235 at 5% level of confidence. On one hand, control of corruption is negatively significantly related to economic growth and, on the other hand, political stability and absence of violence/terrorism positively significantly related to economic growth. Government effectiveness, regulatory quality, rule of law and voice and accountability are insignificant in influencing economic growth in Zimbabwe at 5% level of significance. The findings from this article will assist policy formulation, policy implementation and future research. This article, however, is of great importance to government, private sector and the academia.

Highlights

How critical is sound corporate governance for economic growth given the attention paid to it in the aftermath of corporate scandals such as Enron, WorldCom and the global financial crisis and whether it can be considered a panacea for economic challenges facing the developing world in general and Zimbabwe in specific? One is forced to ask
The study examined the impact of sound corporate governance on economic growth in Zimbabwe using an econometric model
GDP was used as a dependent variables representing economic growth with the explanatory variable denoted by the six dimensions of governance as given by the World Bank’s Worldwide Governance Indicators, that is, control of corruption, government effectiveness, political stability and absence of violence/terrorism, regulatory quality, rule of law and voice and accountability

Summary

INTRODUCTION

How critical is sound corporate governance for economic growth given the attention paid to it in the aftermath of corporate scandals such as Enron, WorldCom and the global financial crisis and whether it can be considered a panacea for economic challenges facing the developing world in general and Zimbabwe in specific? One is forced to ask. According to World Bank (2017), the Organization for Economic Co-operation and Development and the American Law Institute, principles of corporate governance have formed foundational references for sound corporate governance in the world over among others. These principles guarantee a minimum standard through which companies are directed and controlled. Extent of conflict of interest regulation index extent of disclosure index; extent of director liability index; ease of shareholder suits index

Measuring corporate governance

Findings

CONCLUSION