Governance Indicators Research Articles

Financial inclusion, financial development and financial stability in MENA

PurposeThe study aims to find out the impact of financial inclusion and financial development on financial stability using panel data from eight countries in the Middle East and North Africa (MENA).Design/methodology/approachTo achieve the aim of the study, the researcher prepared two indicators of financial inclusion and governance to find out the impact of financial development on the relationship between financial inclusion and financial stability. Data on financial inclusion was obtained from the International Monetary Fund, data on financial development and financial stability were obtained from the World Bank.FindingsThe results of the fixed and random effect methods show that financial inclusion has a significant positive effect on financial stability. Additionally, financial development represents a moderating variable in the significant positive effect on the relationship between financial inclusion and stability in the MENA countries.Research limitations/implicationsThe current study suffers from some limitations that researchers must be aware of in future research. First, there is an inability to determine qualitative aspects such as time and cost when designing a composite indicator of financial inclusion. Second, due to limited data, we used only eight countries from the MENA. It is suggested to expand the sample to include other countries.Originality/valueThis paper contributes to the related literature between financial inclusion and financial stability by confirming or denying the results of previous studies. Also, to the best of the author’s knowledge, this paper is the only one that explains the role of financial development in the relationship between financial inclusion and stability in MENA countries, using a composite index to calculate financial inclusion. Finally, the study seeks to focus the attention of the government and policymakers to build a system of financial inclusion that leads to improving financial stability.

Mobile infrastructure quality, regulatory quality, government effectiveness: Does e‐government development matter?

AbstractThere is a great deal of interest in how mobile infrastructure quality, regulatory quality, and a nation's capacity to develop efficient e‐government systems affect government effectiveness. The literature ignores the part electronic government plays in either the regulatory quality‐government effectiveness or mobile infrastructure quality‐government effectiveness nexuses, despite the fact that existing research indicates that the effects of these factors on government effectiveness vary across nations. Secondary data for 52 African nations was extracted from World Governance Indicator (WGI), Mobile Connectivity Index (MCI), and United Nations E‐government Database to empirically investigate the mediating relationship of e‐governments using hypothesized model. The positivist paradigm is considered appropriate for this study because it focuses on validating and testing a hypothesized model. The results show a significant relationship between mobile infrastructure quality and e‐government development, regulatory quality and e‐government development, e‐government and government effectiveness. However, there was no significant relationship between mobile infrastructure quality and government effectiveness. Additionally, e‐government was found to mediate the relationship between regulatory quality and government effectiveness and the relationship between mobile infrastructure quality and government effectiveness. This suggests that government effectiveness is enhanced when a country is able to develop and implement a good electronic system. The successful implementation of e‐governance practices offers better delivery of services to citizens, improved interactions with business, citizen empowerment through access to information, greater convenience, and cost reductions. In addition, establishing protections and legal reforms will be needed to ensure, among other things, the privacy, security and legal recognition of electronic interactions and electronic signatures.

Global occurrence of organic micropollutants in surface and ground water: Highlighting the importance of wastewater sanitation to tackle organic micropollutants

The occurrence, fate and distribution of organic micropollutants (OMPs) in different water matrices is of increasing concern due to the negative effects towards flora, fauna and human health. This metadata study provides an updated picture of the global occurrence of OMPs in freshwater and wastewater in five geographical regions, and illustrates how socioeconomic factors are key elements that influence the concentration of these OMPs in the different water matrices. The study also aims to provide a collated database of OMPs removal efficiencies achieved by the different biological treatment technologies. Our findings demonstrated that OMPs like acetaminophen, ibuprofen, and triclosan are present globally in freshwater (> 500 ng/L) and wastewater (> 10, 000 ng/L), and at relatively higher concentrations than the other evaluated OMPs. Significant correlations between OMPs concentration in wastewater versus freshwater demonstrated wastewater to be a potential source of certain OMPs to the freshwater environment. This was further confirmed through correlation between OMPs concentration and socioeconomic factors like infrastructure index and governance index in both wastewater and freshwater. These results highlighted the importance of wastewater sanitation to control and reduce OMPs dissemination in the environment. Thus, various types of biological wastewater treatment processes including activated sludge processes, biofilm processes, wetland and lagoon, and membrane bioreactor were analyzed for their OMP’s removal efficiencies. Findings demonstrated that advanced processes like membrane bioreactors (MBR) may not always outperform other low-costs biotechnologies in the treatment of OMPs (e.g., bisphenol A removal by activated sludge with anoxic and oxic zone, AS-AAO was 93% versus MBR at 89%). But rather, the removal efficiency will depend on pollutant properties and certain operational parameters such as hydraulic retention time, treatment capacity, and removal efficiency of total suspended solids.

How does governance quality affect the shadow economy-sustainable development nexus? New insights from a dynamic threshold analysis

Purpose The purpose of this study is to assess the impact of the shadow economy on three sustainable development indicators while considering the moderating effect of the governance quality, and to highlight the non-linearity of the considered relationship.Design/methodology/approach A sample of 82 countries covering the period from 1996 to 2017. The dynamic first-differenced generalized method of moments (FD-GMM) panel threshold model is implemented to control for non-linearity.Findings The shadow economy hinders sustainable development in countries with low-governance quality, while the opposite result holds in countries with high-governance quality. The critical thresholds triggering the switch from one regime to another vary across the sustainable development indicators. Boosting growth requires enhancing the legal system and the economic dimension of governance, while promoting environmental quality requires the implementation and enforcement of specific environment-friendly regulations.Originality/value The study addresses non-linearity and the moderating effect of governance quality. The use of six governance indicators allows to gauge the ability of each governance dimension to curb the negative effects of the shadow economy. Considering the three objectives of sustainable development allows to identify specific policy recommendations for each of them.

Efektivitas Penilaian Tingkat Kesehatan Perbankan Menggunakan Metode RGEC pada Bank Rakyat Indonesia Tahun 2018-2020

This research aims to determine the effectiveness of assessing banking soundness levels using the PT RGEC method. Bank Rakyat Indonesia Tbk in 2018-2020. In this research, researchers used several research variables which include Risk Profile (NPL and LDR), Good Corporate Governance (GCG), Earnings (ROA, ROE, NIM, BOPO) and Capital (CAR). Based on research on the effectiveness of assessing the level of banking health at PT. Bank Rakyat Indonesia Tbk, using the RGEC method, shows that the bank's health status is in accordance with the standards set by Bank Indonesia regulations. For the 2018 period it can be concluded that PT. Bank Rakyat Indonesia Tbk received a composite rating of 1, namely "Very Healthy" with a composite score of 90%, for the 2019 period it can be concluded that PT. Bank Rakyat Indonesia Tbk received a composite rating of 1, namely "Very Healthy" with a composite score of 92.5%, for the 2020 period it can be concluded that PT. Bank Rakyat Indonesia Tbk received a composite rating of 1, namely "Very Healthy" with a composite score of 90%. As well as the bank's health level in terms of Risk Profile, Good Corporate Governance, earnings and Capital indicators at PT. Bank Rakyat Indonesia Tbk for 2018-2020 is "Very Healthy". It is hoped that future researchers will be more careful in carrying out calculations, can use better methods than this research and can add ratios so that the results of the research are more robust.

Nexus between good governance and financial sustainability: evidence from microfinance sector of India

PurposeMicrofinance emerged as an essential catalyst for socio-economic development and financial inclusion to reduce poverty. Microfinance institutions cannot meet their primary objective of poverty reduction if they are not sustainable financially. With the theoretical support of profit incentive theory, this paper aims to investigate the impact of organizational structure (OS), growth outreach (average loan per borrower [ALPB] and number of active borrowers), women empowerment (percentage of women borrowers [PWB]), liquidity, leverage and cost efficiency (cost per borrower) on the financial sustainability of microfinance providers (MFPs) in India and explore the possible moderating effect of the national governance indicators (NGIs).Design/methodology/approachA financial sustainability index has been developed by using principal components analysis, including both conventional measures (return of assets and return on equity) and efficiency measures (operational self-sufficiency and financial self-sufficiency). Due to the existence of endogeneity and heteroskedasticity, this study uses two-step system generalized method of moments estimates to examine the relationships for a period of 2006 to 2018.FindingsThe finding reveals that there is a strong significant relationship between financial sustainability and its influential factors. Organizatioanl Structure, loan size, women borrowers, Gross Domestic Products and inflation enhance the financial sustainability of India’s microfinance sector. However, a number of borrowers, liquidity, leverage and operating costs negatively affect the financial sustainability of MFPs of India. The estimates demonstrate that NGIs significantly moderate the association between financial sustainability and its influential factors. The NGIs negatively affect the positive impact of Organizatioanl Structure on financial sustainability. National governance increases the positive effect of loan size (ALPB) and reduces the negative effect of a number of borrowers and leverage on the financial sustainability of MFPs of India. However, NGIs negatively affect the positive relationship between Percentage of Women Borrowers and Financial sustainability of Microfinance Providers of India.Originality/valueTo the best of the authors’ knowledge, this study is the first of its kind that incorporates all of the six dimensions of the National Governance Indicators (NGIs) and uses as a moderator. Secondly, a financial sustainability index has been developed for measuring the financial sustainability of Microfinance Providers (MFPs).

The role of corporate governance in the nexus between litigation risk and corporate innovation

Amid ongoing discussion over the merits and demerits of litigation, this study addresses the impact of litigation risk on corporate innovation at Chinese listed firms from 2014 to 2022. We exploit Two-Stage GMM, DID model, and PSM techniques to address endogeneity. We find that both litigation risk and financial constraints significantly hinder innovation. We highlight the corporate governance index as a potential moderator, which mitigates the negative impacts of litigation risk and fosters innovation. Additionally, our findings emphasize the pronounced decline in innovation among highly constrained firms compared to their counterparts with low constraints. Recent changes in China's Patent Law and Copyright Law suggest a tangible increase in innovation activities since their implementation, even within a stringent legal environment. Our findings remain robust to the use of alternative measures and estimation techniques. By addressing significant gaps in the literature, our research offers actionable insights for decision makers, emphasizing the strategic importance of corporate governance in navigating legal complexities, enhancing innovative capacity, and driving sustainable growth and competitive advantage in today's business landscape.

Moderating role of political stability and economic policy uncertainty between country governance practice and stock market performance. A comparative analysis of Pakistan and Kurdistan Region of Iraq.

The objective of the study is to explore the relationship between country governance practices along with political stability and Economic policy uncertainty, and stock market performance of two different economies, Pakistan and Kurdistan region of Iraq. To meet our objectives, we used the 25 years past data from 1996 to 2021. Data is collected from the DataStream database. The regression analysis is used as the method of estimation for linear and moderation effect. Our results show that regulatory quality, rules of law and political stability has significant positive relationship with stock market performance of Pakistan, but all the governance indicators have significant positive relationship with stock market performance of the Kurdistan Region of Iraq. Moreover, political stability has significant moderating impact between the governance practices and the performance of the stock markets of both economies indicating that the governance practices perform well with the political stability that leads to rise in the stock market indices of selected countries. Economic policy uncertainty has significant negative moderation impact due to creating the risk in both economies that decrease the performance of the stock markets of the selected economies. Finally, our study advocated some implications for the investors to increase their confidence on the stock of high political stability and low economic policy uncertainty economies. Government can take significant measures to control the uncertainty of the policy and portfolio managers can adjust their risk on the ground of the political stability and efficient governance practices countries.

The dynamic relationship between good governance, fiscal policy, and sustainable economic growth in Oman

The present study aimed to determine the dynamic relationship between good governance, fiscal policy, and economic growth in Oman. In the context of the current study, researchers chose a quantitative approach to answer the research questions, utilizing the latest 2023 data from the World Bank and The Global Economy databases. The data for the current study was carefully selected using variables that represent aspects of governance, fiscal policies, and economic performance. Our analysis uses Ordinary Least Squares (OLS) regression and the Autoregressive Distributed Lag (ARDL) Model. These methods help us understand these factors’ immediate and long-term impacts on Oman’s economy. The results we obtained offer fascinating insights into the country’s economic dynamics. We observe bidirectional causal relationships between the Good Governance Index (GGI) and the Regulatory Quality Index (RQI) and economic growth, while Fiscal Policy Effectiveness (FPE), Government Efficiency Index (GEI), and the Rule of Law Index (RLI) exhibit unidirectional causality towards GDP. Budget Balance (BB) shows no causal relationship with GDP, implying external factors influence it. Additionally, moderation analysis underscores the significance of digital financial inclusion in amplifying the effects of governance and fiscal policies on economic growth. These findings hold practical implications for policymakers and stakeholders in Oman. Specifically, they highlight the importance of governance, regulatory quality, and effective fiscal policies in shaping the economic landscape. To foster sustainable economic development, efforts should improve governance, enhance fiscal policy effectiveness, and promote digital financial inclusion.

Foreign ownership and product market competition's influence on firm performance: Mediating role of the corporate governance index

AbstractThis study examines the influence of foreign ownership and product market competition on firm performance in Vietnam's listed companies through the mediating role of the corporate governance index. Moreover, the study explores the moderating role of business strategy in the relationships between foreign ownership, product market competition, and firm performance. We use maximum likelihood structural equation modeling in Stata 14 software to analyze the data collected from 180 Vietnamese listed companies from 2015 to 2019. The results indicate that foreign ownership and product market competition positively influence firm performance by mediating the corporate governance index. Business strategy negatively moderates the relationship between product market competition and firm performance. This study has implications for managers focusing on foreign ownership and product market competition to improve corporate governance systems, enhancing firm performance. Additionally, managers may build business strategies when product market competition increases to avoid negative effects on firm performance.

Will Women’s Representation Reduce Bribery? Trends in Corruption and Public Service Delivery Across European Regions

AbstractWhile a growing body of work suggests that women representatives are less likely to be involved in corruption scandals, we know less about if changes in representation patterns also have implications for citizens’ first-hand experiences with corruption in public service delivery. This study suggests that women elected representatives reduce street level bribery, in particular when the share of women increases in contexts where relatively few women are elected or when the absolute increase in women’s representation is relatively large. Using newly collected data on the share of women in 128 regional level parliaments in 10 European countries and four rounds of the European Quality of Government Index (EQI) survey (2010–2021), our two-way fixed effects models show that on average, the proportion of women in regional parliaments is strongly associated with citizens’ self-reported experiences of bribery across all countries and years. Furthermore, our difference-in-difference design shows that the level of bribery in public service provision dropped more sharply in regions that experienced a greater absolute or greater marginal increase in women’s representation. Our results may be understood in light of women candidates placing priority on well-functioning and low corrupt public service provision and the important signals of inclusiveness, non-discrimination and decreased tolerance towards corruption that women’s representation conveys to civil servants.

Establishing logistics start-up companies: the role of institutions

The article examines how start-up companies in the transportation and warehousing sector can be encouraged by institutions from a macroeconomic perspective. The assumption is that start-ups are more likely to be successful in countries with higher quality institutional systems. In this article, the statistical data of the EU member states are compared using comparative analytical methods, followed by tests using econometric models to evaluate the results. On the one hand, the World Governance Indicator, Human Development Index, and International Property Rights Index of the examined European countries, and on the other hand Hit Horizon and EU startup industry databases are used to answer the puzzle. The assumption is that institutions play an important role in the success of start-up companies in the transportation and warehousing sectors.

Does Antitakeover Provision Harm Shareholders? Indexing for Antitakeover Provisions in China

Abstract Does antitakeover harm shareholders? Encumbered by a multitude of theoretical perspectives, the legality of antitakeover remains a shared intellectual inquiry that the A-share market has yet to fully address. This paper constructs a governance index for the A-share market based on a manually collected and hand-coded research dataset (C-index). This dataset, comprising 4251 historical firm-level profiles of Antitakeover Provisions (ATPs), is meticulously sampled from companies listed in China from 2001 to 2017. The study investigates the logical correlation between antitakeover strength, financial performance, and the governance attributes of the company by leveraging the index’s economic utility. Additionally, this paper explores the firm-level factors that prompt corporate directors to integrate ATPs. From an empirical standpoint, it provides evidence that the governance index of firm-level strength of ATPs is positively correlated with share liquidity, institutional shareholding, private ownership, and the company’s commitment to achieving specific financial performance.

Judicial efficiency, debt structure, and cost of debt

AbstractIn the framework of law and finance literature, this study investigates the link between judicial efficiency and financial debt cost in 1487 non‐financial firms across the euro zone from 2010 to 2021. Utilizing qualitative (rule of law) and quantitative (judicial proceeding length) indicators from the Worldwide Governance Indicators and Doing Business databases, our findings support the hypothesis that efficient justice lowers financial debt cost. Additionally, we observe a moderating effect of debt structure, specifically that private non‐bank debt enhances the reduction impact of judicial efficiency on debt cost, unlike bank and corporate bonds debt.

Does corporate governance affect investment efficiency of Indian firms? Panel evidence from new governance indices

AbstractThis study examines the effects of corporate governance (CG) on investment inefficiency for 506 Indian listed firms. Using new stipulations of CG and globally recognized governance practices, an overall corporate governance index (CGI) and five sub‐indices such as board index (BINDEX), audit index (AINDEX), ownership index (OINDEX), nomination and remuneration index (NRINDEX), and disclosure index (DINDEX) were constructed. Employing newly developed governance indices along with firm‐specific control variables, several pooled regression models were estimated. Robustness checks were conducted using two‐step system GMM and an alternate measure of managerial investment efficiency. The pooled estimated coefficient of CGI and sub‐indices (except OINDEX) on investment inefficiency, overinvestment and underinvest is found to be negative and significant suggesting that effective/robust governance at firm level reduces investment inefficiencies (improves investment efficiency) through effective supervision and monitoring thereby reducing the opportunistic behavior of managers.

Does trade openness improve or worsen public governance in sub-Saharan Africa?

The literature on the effect of trade openness on public governance shows contrasting results. Using a renewed empirical strategy, we contribute to the understanding of this indeterminacy by studying the influence of trade openness on public governance in Sub-Saharan Africa. We also examine how this effect varies with structural characteristics that may be subject to reforms. In this respect, we use an original measure of trade openness. We consider public governance and its three dimensions, namely economic governance, political governance, and institutional governance. Overall, we find that trade openness improves public governance, political governance, and economic governance. On the other hand, it worsens institutional governance. Moreover, these effects of trade openness on the dimensions of public governance depend on the defined levels of technology transfer, foreign direct investment, and natural resources. Our results are robust to different openness and governance indicators, alternative specifications, study periods, endogeneity, and cross-sectional dependence. Above all, they highlight the interest of dissociating public governance to understand the contrast observed in the empirical literature.

IFRS, financial development and pollutant emissions: an empirical analysis of developed and developing countries

PurposeThe purpose of this study is to examine the relationship between pollutant emissions, financial development and IFRS in developed and developing countries between 1998 and 2022.Design/methodology/approachData were obtained from World Development Indicators and World Governance Indicators of the World Bank.FindingsUsing FGLS and GMM estimators, the results provide evidence that financial development has a significant positive impact on a variety of pollutant emissions. However, this positive impact is moderated by IFRS for the overall sample and country income groups.Practical implicationsGovernments and regulatory organizations should support companies’ investments in clean energy and technologies to slow down environmental degradation. Tax credits and subsidies may be helpful to achieve this goal. Also, governments may encourage companies to cooperate with universities and research institutions to develop environment-friendly production and distribution methods to reduce pollution. Although stakeholders may obtain information about environmental issues in financial statements that are prepared in accordance with IFRS, there is a need for standardization of their contents.Social implicationsGreenhouse gases are major contributors to climate change and global warming. In addition to private costs borne by producers, the production and consumption of products have social costs arising from pollution that affects air, water, and soil. Pollution adversely affects people's physiological and psychological health, which decreases labor productivity, thereby leading to a decrease in economic growth. Originality/valueAccording to the author’s knowledge, this is the first study that examines the impact of IFRS on the relationship between financial development and pollutant emissions.

<b>The Impact of Good Governance Indicators on Foreign Direct Investment in Yemen, Egypt, and Tunisia during the period (1996-2012).</b>

تهدف الدراسة إلى التعرف على واقع مؤشرات الحكم الرشيد في كل من مصر وتونس واليمن، وذلك على مستوى كل مؤشر من المؤشرات المدروسة في الدول المختارة، ودراسة تطور حجم الاستثمارات الأجنبية المباشرة في تلك الدول للوصول إلى التنمية الاقتصادية، ومن ثم دراسة أثر مؤشر الحكم الرشيد على الاستثمار الأجنبي المباشر، وقد استندت الدراسة على فرضية أن الاستثمار الأجنبي المباشر يُعد عاملاً تابعًا يزيد كلما زادت مؤشرات الحكم الرشيد بوصفه عاملاً مستقلاً، وقد أظهرت تحليل مؤشرات الدراسة أن العلاقة بين مؤشرات الاستثمار الأجنبي المباشر كونه يمثل نسبة من الناتج المحلي الإجمالي ومؤشرات الحكم الرشيد مرتفعة، كما أظهر التحليل أن علاقة ارتباط ذات دلالة إحصائية بين مؤشر الاستثمار الأجنبي المباشر ومؤشرات الحكم الرشيد في حق التصويت والمساءلة، والاستقرار السياسي، ومُدركات الفساد، فيما لا توجد علاقة ذات دلالة مع مؤشرات فاعلية الحكومة، ومؤشر التنظيم وجودة الأداء، بسبب ضعف الهياكل الاقتصادية في الدول المختارة، وغلبة الطابع البيروقراطي عليها، وحاجة دول الدراسة المختارة إلى تلك المؤشرات لأهميتها في جذب الاستثمارات الأجنبية المباشرة.

Assessment of the influence of institutions and globalization on environmental pollution for open and closed economies

As the environmental sustainability effectiveness of various political systems is taken into consideration, it is doubtful as to whether the presumption of the overall efficiency of democracy can be sustained in global governance architecture. The effectiveness of autocracies and democracies (i.e., governance indicators are compared in the present study) with reference to strengths and weaknesses in environmental objectives. This analysis explores the effect of autocracy, democracy, as well as the trend of globalization on CO2 emissions for open and closed economies from 1990 to 2020. Crucial indicators such as economic growth, renewable energy and non-renewable energy are controlled for while examining the roles of economic expansion on the disaggregated energy consumption portfolios for both open and closed economies. The empirical analysis revealed some insightful results. First, for the open economies, with the exception of non-renewable energy which shows a positive significant impact on emissions, all variables show a negative effect on emissions. Furthermore, the closed economies result indicate that, apart from renewable energy which has a negative relationship with emissions, all the variables including the interaction terms have a positive relation with emissions. However, an inverted U-shaped environmental Kuznets curve hypothesis was validated for both economies.

Demystifying the Role of Governance Quality and Fiscal Space on Nonperforming Loans in Zimbabwe

Demystifying the Role of Governance Quality and Fiscal Space on Nonperforming Loans in Zimbabwe