Governance Indicators Research Articles

External Debt and Economic Growth: Does the Role of Governance Matter in Emerging Countries?

This study empirically investigates the impact of external debt on economic growth, and assesses whether institutional quality matters for this influence, using data from 18 emerging countries during 1996 to 2020. The findings indicate that although an upsurge in external debt negatively affects economic growth, this impact is mitigated when there is an improvement in institutional quality, as reflected by three governance indicators: anti-corruption perception, voice and accountability, and perceptions of the rule of law. However, other three governance indicators (political stability, government effectiveness, and regulatory quality) failed to affect the economic growth favorably. These results have important implications for policymakers in emerging countries who are currently facing major fiscal and external imbalances due to high expenditure on military goods/thigh cost of war, decrease in trade, and financial loss due to the COVID-19 pandemic.

Evaluation of collaborative water governance in the Cinambo Sub-watershed, Bandung City (case study: Wetland Park Cisurupan)

The “Wetland Park Cisurupan” Retention Area development program is one of the multi-stakeholder collaboration programs in the Cinambo Sub-watershed initiated by Bandung City Public Works Agency. This retention area is expected to reduce water runoff to Gedebage Sub-Region. Collaborative governance efforts carried out at Wetland Park Cisurupan need to be evaluated to serve as lessons for stakeholders and as follow-up recommendations. Therefore, this study aims to evaluate the extent to which the Cisurupan Wetland Park development program in the context of the cinambo sub-watershed has implemented the principles of collaborative water governance. To achieve this goal, this research uses qualitative descriptive methods. Data processing uses data sourced from primary data, namely observation, interviews, collecting big data from social media in the form of WhatsApp chat groups “Cisurupan Temporer”, “Strategic plan Cisurupan”, and “Cisurupan 4 october” as well as Instagram posts with the hashtag #wetlandparkcisurupan, interviews, then secondary data from government agencies and the internet. Based on the measurement of 23 indicators of collaborative water governance in the sub-watershed, it can be concluded that the Wetland Park Cisurupan program is sufficient to meet the principles of collaborative water governance in the sub-watershed. Communication between stakeholders in this collaboration, which is seen from WhatsApp and Instagram, is considered effective for coordination, increasing public participation, and avoiding latent conflicts becoming manifest by being open to the collaboration process. Facilitative leadership is one of the keys to consistency in collaborative governance.

Idiosyncratic risk and market volatility: Threat or opportunity for returns? A study of Borsa Istanbul stocks

This study investigates the relationship between idiosyncratic risk, market volatility, and stock returns for companies traded on the Borsa Istanbul. The analysis calculates idiosyncratic risk and market volatility and estimates the coefficients using cross-sectional and panel data approaches. The GARCH and EGARCH models are used to calculate market volatility, while idiosyncratic risk is measured using the Capital Asset Pricing Model, and three-factor, four-factor, and five-factor models. We run the Fama-MacBeth regression to investigate the cross-sectional relationship between idiosyncratic risk, market volatility, and stock returns and the Arellano-Bover/Blundell-Bond panel regression technique to unveil firm-specific effects. The estimated coefficients demonstrate a positive relationship between idiosyncratic risk and stock returns and a negative relationship between market volatility and stock returns. Furthermore, the findings suggest that larger firm size, higher trading volume, higher market returns, and higher book-to-market ratios have positive effects, while beta and corporate governance indices have negative effects on returns.

Intelligent Bankruptcy Prediction Models Involving Corporate Governance Indicators, Financial Ratios and SMOTE

Intelligent Bankruptcy Prediction Models Involving Corporate Governance Indicators, Financial Ratios and SMOTE

Unravelling Structural Underdevelopment: Is Governance Quality the Key?

Structural underdevelopment remains a critical economic challenge globally. Despite significant advancements, many countries and regions continue to face developmental hurdles due to historical and systemic factors. Among the myriad of factors, the quality of governance has garnered extensive focus for its role in economic outcomes. This study aimed to investigate the relationship between governance quality and economic performance of the countries, guided by institutional theory. Employing data from 197 countries over 1996 to 2022, sourced from the World Bank and the World Governance Indicators, we applied fixed effects and random effects. In addition, the Hausman test was applied in order to initiate the choice between fixed and random effect models. Furthermore, the data was also analysed through descriptive statistics and quantile regression for detailed revelations. Initial findings indicated considerable disparities in governance quality and GDP per capita among income groups. The beta coefficients from our regression analysis elucidated the significance of governance on economic outcomes. Specifically, Voice and Accountability implied a non-positive relation with GDP per capita, whereas Regulatory Quality and Rule of Law exhibited significant positive impact. Stronger positive relationships were evident in the random effects model, reinforcing the connection between governance improvements and economic growth. This research aimed to inform public policy in Pakistan and similar contexts, highlighting how governance quality can affect macro-economic outcomes.

Environment, Institutional quality and corruption impact on Trade in Developing Countries

The objectives of this study are to examine the impact of environment, institutions and corruption on trade in developing countries. For this purpose, the study considers 37 developing countries and data from 1990 to 2021 has been used in this study and it is collected from World Development Indicators and the study has utilized the index for institutions and eight governance indicators developed by World Governance Indicators. Generalized method of moments (GMM) is employed on the panel data for estimation of econometric results. The results conclude that environment and institutions have positive effects on trade while corruption has negative effect on trade in developing countries.

Moderating the Effect of the Multidimensional Poverty Index on the Relationship between Sustainable Governance Indicators and Worldwide Governance Indicators

This research comprehensively addresses the complexity of the Multidimensional Poverty Index (MPI). The research objective is to understand the moderating effect of the MPI on the relationship between Sustainable Governance Indicators (SGIs) and World Governance Indicators (WGIs) in the context of 41 countries belonging to the Organization for Economic Cooperation and Development (OECD) while also analyzing the validity and reliability of the indicators. The applied methodology involves using Structural Equation Modeling with Partial Least Squares (SEM-PLS), and data from 41 OECD countries were analyzed. Data on SGIs, WGIs, and the MPI were extracted from the SGI-2022, WGI-2022, and SGI-MPI (2022) databases. Moderating the interaction between the MPI and SGIs reveals a significant overall negative effect (−0.184) on the relationship between SGIs and WGIs (total effect = 0.474); this implies that elevated levels of the MPI negatively impact sustainable governance between SGIs and WGIs, whereas lower levels of the MPI lead to a stronger relationship between SGIs and WGIs, enhancing sustainable governance. The validity of the structural model is affected by low Average Variance Extraction (AVE) in key variables, such as Economic Policy-EP (0.470) and MPI (0.439), indicating potential limitations in their measurement.

Trends in household out-of-pocket health expenditures and their underlying determinants: explaining variations within African regional economic communities from countries panel data

BackgroundThe persistently high out-of-pocket health spending (OOPHE) in Africa raise significant concern about the prospect of reaching SDG health targets and UHC. The study examines the convergence hypothesis of OOPHE in 40 African countries from 2000 to 2019.MethodsWe exploit the logt\\documentclass[12pt]{minimal} \\usepackage{amsmath} \\usepackage{wasysym} \\usepackage{amsfonts} \\usepackage{amssymb} \\usepackage{amsbsy} \\usepackage{mathrsfs} \\usepackage{upgreek} \\setlength{\\oddsidemargin}{-69pt} \\begin{document}$${\ ext{log }}t$$\\end{document}, club clustering, and merging methods on a panel of dataset obtained from the World Development Indicators, the World Governance Indicators, and the World Health Organization. Then, we employ the multilevel linear mixed effect model to examine whether countries' macro-level characteristics affect the disparities in OOPHE in the African regional economic communities (RECs).ResultsThe results show evidence of full panel divergence, indicating persistent disparities in OOPHE over time. However, we found three convergence clubs and a divergent group for the OOPHE per capita and as a share of the total health expenditure. The results also show that convergence does not only occur among countries affiliated with the same regional economic grouping, suggesting disparities within the regional groupings. The findings reveal that countries' improved access to sanitation and quality of governance, increased childhood DPT immunization coverage, increased share of the elderly population, life expectancy at birth, external health expenditure per capita, and ICT (information and communication technology) significantly affect within-regional groupings’ disparities in OOPHE per capita. The results also show that an increasing countries’ share of elderly and younger populations, access to basic sanitation, ICT, trade GDP per capita, life expectancy at birth, childhood DPT immunization coverage, and antiretroviral therapy coverage have significant impacts on the share of OOPHE to total health expenditure within the regional groupings.ConclusionTherefore, there is a need to develop policies that vary across the convergence clubs. These countries should increase their health services coverage, adopt planned urbanization, and coordinate trade and ICT access policies. Policymakers should consider hidden costs associated with access to childhood immunization services that may lead to catastrophic health spending.

Environment Social Governance Performance and Capital Structure: Evidence in Indonesia and Malaysia

Purpose: This research aims to investigate the relationship between Environmental, Social, and Governance (ESG) performance and capital structure, using Debt-to-Equity Ratio (DER) and Debt-to-Asset Ratio (DAR) proxies, in Indonesia and Malaysia. The study seeks to address the gap in the literature by exploring how ESG factors influence the capital structure decisions of both financial and non-financial companies in these countries. Additionally, the research analyzes the impact of ESG performance on the cost of equity and cost of debt. Methods: The research utilizes secondary data extracted from annual reports and sustainability reports spanning from 2015 to 2020. A total of 102 companies, comprising 59 Indonesian companies and 52 Malaysian companies registered on CSRHub, are included in the analysis. ESG performance is assessed based on community, environmental, social, and governance indicators. Capital structure is measured using DER and DAR proxies. Statistical analysis techniques are employed to examine the relationship between ESG performance and capital structure, as well as its impact on the cost of equity and cost of debt. Results and Discussion: The research findings indicate that community, environmental, social, and governance performance exhibit a negative effect on the cost of equity, suggesting that companies with stronger ESG performance experience lower costs of equity financing. However, these ESG factors do not significantly affect the cost of debt. This implies that while ESG performance may influence equity holders' perceptions of risk and return, it may not have a direct impact on the cost of debt financing for companies in Indonesia and Malaysia. Implications of the Research: The results of this research have important implications for companies, investors, and policymakers interested in understanding the relationship between ESG performance, capital structure decisions, and financing costs. By demonstrating the impact of ESG factors on the cost of equity, the findings underscore the importance of integrating sustainability considerations into financial decision-making processes. Moreover, the research highlights the need for further investigation into the mechanisms through which ESG performance influences capital structure and financing costs. Originality/Value: This study contributes to the literature by offering novel insights into the relationship between ESG performance and capital structure in Indonesia and Malaysia. By examining the impact of ESG factors on both equity and debt financing costs, the research expands our understanding of how sustainability considerations influence corporate financial decisions. The findings provide valuable guidance for companies seeking to enhance their ESG performance and optimize their capital structure, ultimately contributing to more sustainable and responsible business practices in emerging markets.

Corporate Governance Indicators and Innovation in the Chinese Market

The importance of innovation as an indispensable driving force for the development of a quality economy, for the sustainability of national economies and for the support of enterprises in breaking through development bottlenecks cannot be overstated. Innovation is a key growth strategy for all businesses. It is centered on the chief executive officer (CEO) and is directly related to the cognitive level and decision-making preferences of executives. Based on the principal-agent theory and Upper Echelons Theory, this paper constructs a model to evaluate the impact of CEOs on corporate innovation using a sample of Chinese listed companies from 2008 to 2022. Based on China's political and economic system, this paper selects six relevant characteristics of CEOs, including gender, age, educational background, tenure, compensation and political affiliation to decide whether the CEO is suitable for the firm. At the same time, this paper also measures corporate innovation standards by the number of patents filed by the company, and thus finds that the CEO index has a positive and significant impact on corporate innovation. In addition, in order to address the endogeneity issue, the paper also applies a series of robustness tests, including alternative measures of firm innovation and alternative models (Poisson models), and finds that the results are consistent with the main regression results. Finally, the paper provides empirical evidence as a means of demonstrating the key driving role played by CEOs in corporate innovation. The implications of the above findings for corporate governance, including board shareholders and policymakers, are clear.

Government Effectiveness and Good Governance Index: The Case of Indonesia

Government Effectiveness and Good Governance Index: The Case of Indonesia

Foreign direct investment and carbon emissions in ECOWAS: does good governance matter?

PurposeThe present study investigates the effect of foreign direct investment (FDI) and governance quality on carbon emissions in the Economics Community of West African States (ECOWAS).Design/methodology/approachTo achieve the objective of this research, panel data for dependent and explanatory variables over the period 2005–2016, collected in the World Development Indicators (WDI) database and World Governance Indicators (WGI), are analyzed using the generalized method of moments (GMM). Also, the panel-corrected standard errors (PCSE) method is applied to the four segments of the overall sample to analyze the stability of the results.FindingsThe findings of this study are (1) FDI inflows have a negative effect on carbon emissions in ECOWAS and (2) The interaction between FDI inflows and governance quality have a negative effect on carbon emissions. These results show the decreasing of environmental damage by increasing institutional quality. However, the estimation results on the country subsamples show similar and non-similar aspects.Practical implicationsThis study suggests that policymakers in the ECOWAS countries should strengthen their environmental policies while encouraging FDI flows to be environmentally friendly.Originality/valueThe subject has rarely been explored in West Africa, with gaps such as the lack of use of institutional variables. This study contributes to the literature by drawing on previous work to examine the role of good governance on FDI and the CO2 emission relationship in the ECOWAS, which have received little attention. However, this research differs from previous work by subdividing the overall sample into four groups to test the stability of the results.

The use of environmental, social and governance indicators as business strategies

The use of environmental, social and governance indicators as business strategies

Measuring The Trust of Corporate Waqifs to Donate Cash Waqf to The Indonesian Waqf Board

This research aims to measure the trust of institutional waqif to distribute waqf to waqf institutions, in this case, the Indonesian Waqf Board (BWI), in the form of an index referring to the Waqf Core Principles (WCP). This study measures the trust of institutional waqif to distribute cash waqf through BWI based on WCP using an index (100 scale), which composed of individual index of waqf supervision, nazhir governance, risk management, sharia governance, and the overall trust index. The institutional waqif trust index to distribute waqf to BWI is “trust” (53.36). Based on components: a. waqf supervision index is trust (13.49), b. nazhir governance index is trust (3.18), risk management index is trust (25.24), and sharia governance index is trust (11.45). Increasing the trust of institutional waqf in BWI can be done through the improvement and management of waqf from large-scale institutional waqf, preparation of BWI communication strategies which include implementation of waqf and policies, and transfer of knowledge from waqf institutions to institutional waqif. This thesis will provide additional knowledge to academics regarding the potential of institutional waqif and the implementation of WCP in Indonesia. In addition, this research practically provides recommendations for regulators, waqf institutions, and related parties to optimize the collection, management, and supervision of waqf in Indonesia. Based on the author's knowledge, this is the first paper to measure the trustworthiness of institutional waqif. This paper is expected to provide novelty regarding the level of trust of a institutional waqif to a waqf institution in the form of an index.

Toward revolutionizing water-energy-food nexus composite index model: from availability, accessibility, and governance

The water-energy-food (WEF) nexus has emerged as a critical research interest to support integrated resource planning, management, and security. For this reason, many tools have been developed recently to evaluate the WEF nexus security and monitor progress toward the WEF-related sustainable development goals. Among these, calculating the WEF composite index model is critical since it can provide a quantitative approach to demonstrate the WEF nexus security status. However, the current WEF nexus index model framework needs to include the incorporation of governance indicators, neglecting the importance of governance in the WEF nexus framework. Thus, this article develops a new WEF nexus composite index model that incorporates governance indicators in each subpillar. The principal component analysis (PCA) is adopted to reduce the variables’ collinearity and the model’s dimensionality. A quasi-Monte Carlo-based uncertainty and global sensitivity analysis are applied to the index model to assess its effectiveness. Finally, the new WEF index model is applied to the 16 South African Development Community (SADC) countries as a case study. A critical synergy effect within the WEF nexus framework is identified that nations with better WEF governance ability tend to perform better in improving the WEF accessibility capability, suggesting the importance of governance in the WEF nexus security framework.

External Debt and Poverty Headcount Ratio in West African Countries: Does Governance Matter?

This paper analyses the link between external debt and poverty headcount ratio in the fifteen (15) West African countries, taking into account governance. Using the feasible generalized least squares (GLS) panel method for the period 1996-2021, we find that an increase in external debt contributes to the worsening poverty headcount ratio in the region. Then, enhancing governance while borrowing external funds does improve the poverty level. The regression shows that in West African Countries, governance indicators as well as the composite index of governance and the interaction term (governance composite index* external debt) contribute significantly to the reduction of the poverty rate. Therefore, there is a need for West African governments to be cautious when borrowing external funds and work towards sustainable debt management to prevent negative effects on poverty rates. In addition, the level of good governance should be improved in external debt management and poverty ratio reduction.

The impact of artificial intelligence (AI) on employment and economic growth in BRICS: Does the moderating role of governance Matter?

The BRICS countries, namely Brazil, Russia, India, China, and South Africa, are committed to achieving and sustaining Sustainable Development Goal (SDG) 8 of the United Nations, which focuses on sustainable economic growth and productive employment and decent work for all. However, the empirical research question on how to effectively harness the use of artificial intelligence (AI) in the presence of governance dynamics is yet to be addressed in the literature, particularly concerning the BRICS economy. Hence, it is crucial to examine the impact of AI investment on employment and economic growth in the BRICS countries from 2012 to 2022, taking into account the moderating role of overall governance as well as specific governance indicators such as political governance, institutional governance, economic governance etc. Cross-Sectional Augmented Autoregressive Distributed Lag (CS-ARDL) technique is used to analyze the data. The findings of the study suggest a long-run equilibrium relationship among the variables analyzed in both the employment and growth models. The causality results for our main variables of interest differ in the employment-growth models. Based on the CS-ARDL results, the study recommends that BRICS governments and policymakers prioritize and enhance the integration of AI into their governance systems to promote employment and stimulate growth in both the short- and long-term. However, the study cautions against overlooking interaction between AI and general governance as it did not demonstrate support for growth, it is crucial to implement robust measures to mitigate any potential negative effects arising from AI's interaction with political and institutional governance. Therefore, the study proposes the formulation of AI-friendly governance policies among BRICS nations to stimulate employment and growth, recognizing the embryonic status of AI as a pivotal technology in the Fourth Industrial Revolution.

Food insecurity, environment, institutional quality, and health outcomes: evidence from South Asia

BackgroundFood insecurity and environmental degradation pose significant threats to health outcomes in South Asia, necessitating effective policy interventions. Therefore, this study aims to examine the impact of food insecurity and environmental degradation on health outcome indicators amidst global inflationary shocks and institutional quality arrangements. Additionally, it aims to explore the intricate moderating role of institutional quality on the relationship between food insecurity, endogenous variables, and external shocks.MethodIn alignment with the study’s objectives, a set of panel data spanning from 2000 to 2021 is compiled for South Asia. The study introduces a novel variable representing inflationary shock, crafted through the integration of inflation datapoints and the application of the generalized autoregressive conditional heteroskedasticity model. Additionally, a distinctive aggregate institutional quality index is formulated, drawing from six key measures of the Worldwide Governance indicators. To scrutinize the effects of food insecurity, environmental degradation, and other explanatory variables, the study employs the two-step system generalized method of moment technique, offering a robust analytical approach to uncover complex relationships and dynamics in the region.ResultsThe results indicate that the prevalence of undernourishment, inequality in per capita calorie intake, and CO2 emissions significantly reduce life expectancy and increase mortality rates. Additionally, it shows that per capita kilocalorie supply, per capita GDP, per capita health expenditures, and urbanization are statistically significant for increasing life expectancy and decreasing mortality rates. The findings reveal that inflationary shocks severely affect food insecurity and environmental factors, exerting further pressure on contemporary life expectancy and mortality rates. In rebuttal, the institutional quality index is found to have significant effects on increasing and decreasing life expectancy and mortality rates, respectively. Furthermore, the institutional quality index is effective in moderating the nexus between food insecurity, environmental degradation, and health outcomes while also neutralizing the negative impact of inflationary shocks on the subject.ConclusionThe results verify triple health constraints such as food insecurity, environmental factors, and economic vulnerability to global shocks, which impose severe effects on life expectancy and mortality rates. Furthermore, poor institutional quality is identified as a hindrance to health outcomes in South Asia. The findings suggest specific policy implications that are explicitly discussed.

Institutional Quality and Economic Performance: A Study of Asian Countries

The objective of this article is to investigate the influence of institutional quality on the economic performance of 47 Asian countries, categorized into four income levels (low-income, lower-middle-income, upper-middle-income and high-income countries) over the period 1981–2021. The study utilizes six governance indicators, and a composite governance index is constructed to evaluate institutional quality. Economic performance is assessed through three key indicators: real gross domestic product (GDP), real GDP per capita (GDPPC) and the human development index (HDI). Except for HDI data, all variable data were sourced from the World Bank, while HDI data were obtained from the UNDP. The study employed panel regression, panel co-integration techniques and the autoregressive distributed lag model. The findings indicate that governance indicators have a positive and significant impact on GDP, GDPPC and HDI in Asian countries. Moreover, the study reveals that the influence of governance indicators on economic performance is more pronounced in high-income countries compared to other income levels in Asia. Consequently, the research emphasizes the importance of focusing on governance indicators for fostering economic growth and enhancing HDI in Asian countries.

Good Governance and Tourism in South Asian Emerging Economies: The Mediating Role of Foreign Direct Investment

This study examined the role of good governance in promoting tourism in emerging South Asian countries and also tested the mediating role of foreign direct investments (FDI). The study used panel data collected from seven South Asian countries from 1996 to 2018. Panel data regression models were estimated to test the research hypotheses. The results showed that the country’s good governance has a positive and significant influence on tourism receipts and arrivals. Moreover, the mediation analysis results supported that foreign direct investments mediated the relationship between good governance indicators like government effectiveness, political stability, voice and accountability, and control over corruption and tourism. Based on the results, the study proposed the governance-led FDI and FDI-led tourism hypotheses, the study’s main contribution. The study has implications for the government regulatory agencies relating to governance, tourism departments, foreign prospect investors, and policymakers.