Quality Of Governance In Countries Research Articles

Impact of country governance mechanisms on carbon emissions performance of multinational entities

This study investigates the impact of country governance mechanisms on carbon emissions performance of private sector organisations, using empirical evidence from 336 top multinational entities (MNEs) over a 15-year period. The results show that, at the aggregate level, Control of Corruption (b = −0.021, p < 0.01) and Voice & Accountability (b = −0.015, p < 0.05) are significantly and negatively associated with carbon emissions rate. While Political Stability (b = 0.007, p < 0.05) and Government Effectiveness (b = 0.018, p < 0.05) have significant positive impact on carbon emissions rate, the impact of Regulatory Quality and Rule of Law is negative but insignificant. Empirical evidence supports the conclusion that the existing institutional environment is not sufficient to deliver the net zero transition. There is a need for more coordination, strategic planning, and delivery monitoring in government institutions to achieve decarbonisation targets. The study contributes to knowledge within the context of the identified research gaps. First, the study adds to the limited literature on the impact of country governance on carbon emissions reduction, particularly with reference to scope 3 emissions. Second, with the sustainable development goals (SDGs) set to expire by 2030, the study provides empirical evidence on efforts governments of countries are making in achieving decarbonisation targets through improvement in country governance quality. Third, the study shows that the impact of the country governance on the carbon emissions performance of MNEs is contextual and varies across jurisdictions/geographical regions. Finally, the paper contributes to the debate on the actualisation of Agenda 2030, because presenting empirical evidence on the impact of country governance mechanisms on carbon emissions reduction—particularly scope 3 emissions—is an important discourse in the realisation of the SDGs.

The Role of Country Governance in Achieving the Banking Sector’s Sustainability in Vulnerable Environments: New Insight from Emerging Economies

Extant literature suggests that the banking sector’s sustainability is achievable by minimizing the risk factors, in particular, credit risk (CR). Despite prior studies, there are fewer attempts to considerably probe the role of country governance settings in managing CR and ultimately achieving sustainability. Therefore, this study aims to test this nexus for the banking sector operating in BRICS developing economies. Specifically, this research attempts to explore whether country governance has a moderator role between CR and the exposure of environments to risk factors. To achieve these objectives, we conduct panel data analysis using the quantile (QR) and fixed effects (FE) estimation methods. The results show that increasing liquidity, profitability, capital requirements, and income diversification lead to decreasing CR, whereas increasing inefficiency causes an increase in CR. In addition, the results reveal that a country’s increasing vulnerability to a specific financial risk index (FRI), economic risk index (ERI), and political risk index (PRI); developing capital markets; increasing lending interest rates; and weakening country governance quality is significantly linked to increasing CR. Remarkably, the results underscore that country governance has a significant moderator role, and by enhancing the quality of country governance, the impact of country-specific FRI, ERI, and PRI on CR could be attenuated.

Corruption and Population Health in the European Union Countries-An Institutionalist Perspective.

Even though the European Union (EU) is considered one of the best performers in the world in fighting corruption, the situation changes when the analysis is shifted to the national dimension of its member states, with significant differences concerning the effects of corruption on population health. Using the theory of New Institutional Economics as a complementary tool that provides additional representativeness to this phenomenon, the aim of this paper is to empirically investigate the impact of corruption on population health, considering also other demographic and socio-economic determinants. Using data collected at the EU level registered between 2000–2019, we employ panel date models to validate the ongoing effect of perceived corruption on population health. Our empirical findings fully validate the institutionalist perspective, according to which countries with inclusive institutions better control the anomaly of corruption while benefitting from higher life expectancy and reducing child mortality rates. Conversely, the EU countries with rather extractive institutions suffer in terms of both longevity of population and infant mortality. Our study emphasizes that in tackling corruption pressure on population health, the most effective way is to improve the quality of governance in countries with fragile institutions.

Quality of governance and corporate real investment: Assessing the impact of foreign aid

AbstractDeveloping economies are the main recipients of foreign aid. Nonetheless, such countries must face trade‐offs regarding poor governance due to the inflow of foreign aid because aid hampers governance situations. Given that, the current study aims to examine the role of country governance in defining corporate investment decisions and to ascertain how this effect varies across those countries that receive substantial amounts of foreign aid. To test the hypotheses, we collect the financial information of non‐financial sector enterprises from seven economies and apply the generalized method of moments and two‐stage least square models. The statistical results reveal that governance has a positive influence on corporate investment choices. This positive effect is consistent across individual effects of foreign aid. However, foreign aid systematically deteriorates the governance quality of the host country, referring to donor agencies’ unnecessary interruption of the host country's institutional proceedings. This factor reduces institutional efficiency, which further deteriorates corporate investment. Our empirical analysis suggests that all the countries analysed should focus on better governance situations to promote industrial growth. Policymakers from these economies should ensure the effectiveness of foreign aid and introduce better governance practices to expediate industrial growth.HIGHLIGHTS Country level governance has a positive and significant impact on CI decisions. Foreign aid affects CI decisions positively. Foreign aid deteriorates the host country's governance quality. The interaction effect of country governance and foreign aid on CI is negative.

Country-governance quality and signals in the alliance formation process: a meta-analytic approach

Country-governance quality and signals in the alliance formation process: a meta-analytic approach

Country-governance quality and signals in the alliance formation process: a meta-analytic approach

Country-governance quality and signals in the alliance formation process: a meta-analytic approach

Multinational enterprise parent-subsidiary governance and survival

We investigate the relationship between multinational enterprise parent-subsidiary governance (MNEPSG), host country governance quality (HCGQ), and foreign subsidiary survival. We draw upon agency theory, MNEPSG literature, and institutional theory to develop a holistic conceptual model. We test our hypotheses using a large longitudinal sample of 1,711 MNEs and 13,398 subsidiaries in 63 countries from 1990-2013. We find that key MNEPSG mechanisms (Ownership, Expatriates, and Regional Headquarters) positively impact foreign subsidiary survival, whereas HCGQ negatively impacts it; and that increasing Ownership and Expatriates is more effective in high HCGQ contexts. We discuss important implications for research and practice.

Toward sustainable development: Board characteristics, country governance quality, and environmental performance

AbstractThe objective of this study is to examine the effects of board characteristics and country governance quality on both individual aspects and the overall level of environmental performance through the lens of agency, resource dependency, and institutional theories. The study is based on a sample of 3023 firm‐year observations from European companies operating in 22 countries between 2009 and 2016. Data on the resources, emissions, and innovation dimensions of environmental performance and board governance data were collected from the Refinitiv database, whereas financial data were extracted from the Worldscope database. The study employs a multilevel modeling analysis and the generalized method of moments (GMM) estimation technique to analyze the data. The findings suggest that board gender diversity and the presence of a corporate social responsibility and sustainability committee have a positive impact on environmental performance. The results also show that country governance quality is positively related to environmental performance. The findings have important implications for practitioners, regulators, and policymakers with respect to the effectiveness of corporate governance mechanisms and country governance systems in determining corporate environmental practices.

Organizational Resources, Country Institutions, and National Culture Behind Firm Survival and Growth during COVID-19

We provide one of the first comprehensive and most updated studies on the effects of firms’ organizational resources, country institutions, and national culture on the survival and growth of private firms around the world during the COVID-19 pandemic. Analyzing World Bank Enterprise Follow-up Surveys on COVID-19 that covers 18,770 firms from 36 countries, we document four sets of findings. (1) During the pandemic, firms with favorable organizational resources (i.e., state ownership and affiliation with parent companies) are more likely to survive and grow, whereas firms with foreign ownership or with more financial obstacles are less likely to survive or grow. Firms in countries with a higher per capita income, a lower COVID spread, and a less stringent COVID control policy are more likely to survive and grow. (2) Favorable ownership and parent-company affiliations help cushion the pandemic shock during the pandemic. (3) The relationship between firm characteristics and firm survival/growth is significantly affected by the stringency of a country’s COVID policy. (4) Firm survival and growth are positively related to a country’s cultural tendency in terms of long-term orientation, and are not significantly related to uncertainty avoidance and individualism. The overall country governance quality is negatively linked to the odds for firm survival as well as revenue and employment growth.

Nexus of governance, macroprudential policy and financial risk: cross-country evidence

The quake of the financial crisis has restored macroprudential policy as an apparent policy paradigm to minimize financial risk; however to a great extent, its impact depends on different externalities including country governance. Therefore, this paper aims to explore the joint impact of macroprudential policies (MPPs) and quality of country governance (CG) on financial risk (FR) for a panel of 124 countries covering the period 2000–2017. To attain this objective, we use directed acyclic graph to decide our model, construct indices for FR and governance by principal component analysis, investigate the impact of CG and MPPs at different quantiles of FR and explore their nonlinear relationship by panel threshold model. Besides, we also apply two-stage least squares (2SLS) and system GMM to address the endogeneity of the estimation. Our results show that both CG and MPPs are effective to minimize financial exposures and their effectiveness increases with higher FR, though after certain level, governance moderates the effect of MPPs on FR. Overall, we find MPPs are more effective in emerging economies and in normal time, whereas during crisis they are found less effective. Our findings are robust to alternative measures of risk and control variables and different econometric tests, which could be useful for policy makers to formulate MPPs, minimize financial risk and to maintain financial stability.

Relationship Between International Portfolio Investments and The Country Governance Quality

Relationship Between International Portfolio Investments and The Country Governance Quality

The Firm Value and Marketing Intensity Decision in Conditions of Financial Constraint: A Comparative Study of the United States and Latin America

Marketing managers generally have to make marketing decisions under financial constraints (i.e., the firm’s inability to generate cash flow for investments and marketing), with limited assurance of the outcomes. Little investigation has been made into the effect of financial constraints on marketing intensity and the subsequent effect on firm value and performance, particularly when it is a volatile environment (e.g., Latin America) that creates the financial constraints. Using a conceptual framework grounded in agency theory, the authors develop a model and test it using a panel data set from the United States and five Latin American countries. The results indicate that financial constraints have a negative effect on marketing intensity and ultimately negatively affect firm value and performance. Furthermore, this study confirms the effect of three moderators—market sensitivity, country governance quality, and country economic development distance—on the relationship between financial constraint and marketing intensity and helps explain differences across the United States and Latin America.

Linking Country Governance Quality and Derivatives Use: Insights from Firms’ Hedging Behavior in East Asia

This paper examines the link between countries’ governance quality and firms’ use of derivatives using a novel hand-collected dataset. Our panel data includes 881 non-financial firms across eight East Asian countries. We found that better country governance induces firms to use derivatives to hedge exposure and mitigate costs. Firms in countries with weak governance use derivatives for speculative and/or selective hedging or self-management purposes. Overall, our findings provide strong evidence of the role of countries’ governance quality in driving firms’ derivatives-related behaviors. This macro-based effect on derivatives use is independent of firm-specific factors, which are frequently invoked by hedging theories.

Linking Country Governance Quality and Derivatives Use: Insights from Firms’ Hedging Behavior in East Asia

This paper examines the link between countries’ governance quality and firms’ use of derivatives using a novel hand-collected dataset. Our panel data includes 881 non-financial firms across eight East Asian countries. We found that better country governance induces firms to use derivatives to hedge exposure and mitigate costs. Firms in countries with weak governance use derivatives for speculative and/or selective hedging or self-management purposes. Overall, our findings provide strong evidence of the role of countries’ governance quality in driving firms’ derivatives-related behaviors. This macro-based effect on derivatives use is independent of firm-specific factors, which are frequently invoked by hedging theories.

Linking Country Governance Quality and Derivatives Use: Insights from Firms’ Hedging Behavior in East Asia

This paper examines the link between countries’ governance quality and firms’ use of derivatives using a novel hand-collected dataset. Our panel data includes 881 non-financial firms across eight East Asian countries. We found that better country governance induces firms to use derivatives to hedge exposure and mitigate costs. Firms in countries with weak governance use derivatives for speculative and/or selective hedging or self-management purposes. Overall, our findings provide strong evidence of the role of countries’ governance quality in driving firms’ derivatives-related behaviors. This macro-based effect on derivatives use is independent of firm-specific factors, which are frequently invoked by hedging theories.

Does quality of innovation, culture and governance drive FDI?: Evidence from emerging markets

This study examines how technology, culture and corporate governance drive inward FDI in emerging economies. A study of 22 emerging economies shows that technology is the major attractive factor influencing inward FDI. Further, FDI increases as technology absorption and innovation capacity increase. The greater the quality of country governance, the greater the influence of corporate governance on FDI. Cultural dimensions such as individualism, masculinity and uncertainty avoidance exhibit a weaker influence on inward FDI, while power distance and indulgence have a stronger influence on inward FDI. Our results support the leapfrogging approach of emerging economies towards promoting innovation and enhancing technology adoption to drive FDI. Interaction effect of country governance further highlighted that the better the governance of a country the impact of technology, innovation, corporate governance and culture in attracting inward FDI also increases.

Fraud recovery and the quality of country governance

Abstract Using supervisory data from U.S. financial institutions on fraud-related losses in foreign markets, we find that losses in countries with poor governance have lower recovery rates. Our results are robust to accounting for potential endogeneity and reverse causality concerns, among numerous robustness checks. The association is driven by intuitive governance dimensions such as control of corruption, rule of law, regulatory quality and government effectiveness. In addition, country governance plays a particularly important role in fraud recovery for firms with poor risk management quality. Overall, this paper presents unique and novel evidence tying country governance quality to firm-level risk realizations.

Fraud Recovery and the Quality of Country Governance

Using supervisory data from U.S. financial institutions on fraud-related losses in foreign markets, we find that losses in countries with poor governance have lower recovery rates. Our results are robust to accounting for potential endogeneity and reverse causality concerns, among numerous robustness checks. The association is driven by intuitive governance dimensions such as control of corruption, rule of law, regulatory quality and government effectiveness. In addition, country governance plays a particularly important role in fraud recovery for firms with poor risk management quality. Overall, this paper presents unique and novel evidence tying country governance quality to firm-level risk realizations.

The moderating influence of market potential and prior experience on the governance quality-equity participation relationship

PurposeThe purpose of this paper is to theorize and examine how target country governance quality, target country market potential and acquirer’s prior experience impacts equity participation in cross-border acquisitions.Design/methodology/approachThe hypothesized effects are tested using a sample of 1,447 acquisitions undertaken over an 11-year time by US-based multinational enterprises (MNEs) in four emerging markets: Brazil, Russia, India and China (BRIC).FindingsAnalysis suggests that target country governance quality (government effectiveness, rule of law and control of corruption) strongly influences equity participation, and market potential moderates the influence of governance quality on equity participation. Further, findings demonstrate that acquirer’s target country acquisition experience amplifies the positive influence of market potential on governance quality-equity participation relationship.Originality/valueThis study adds to the existing knowledge of equity participation in cross-border acquisitions (CBAs) undertaken by foreign MNEs in BRICs. This understanding is important since MNEs across the globe invest in BRIC utilizing CBA, and related research remains limited.

Family ownership, country governance, and foreign portfolio investment

Abstract We study how different dimensions of family ownership combine to make family firms around the world appealing to foreign investors. Family firms provide the benefits of political connections, but at the same time they are more prone to expropriate minority shareholders themselves. This cost-benefit trade-off depends on the quality of country governance: families are attractive investment opportunities in countries in which the value of political connections is high, but the majority shareholders have limited ability to expropriate, i.e., “useful” countries. Foreign investors – more sensitive both to the risk of expropriation by the government and to the risk of expropriation by majority shareholders – are particularly responsive to this trade-off. While on average foreign institutional investors are less likely to invest in family firms and such firms have lower value, these effects disappear when family ownership in a country is useful.