Governance Indicators Research Articles

Towards better governance: creating a corporate governance index for South African firms

PurposeThe purpose of this study is to construct a robust index and subindices to measure the quality of corporate governance for 266 firms listed in South Africa from 2004 to 2021.Design/methodology/approachPublic information on the compliance of King Code of Good Corporate Governance is used to construct a main index predicated on provisions relating to board characteristics, accounting and auditing and risk management. These categories are transformed into three subindices. All constructs are scored with binary coding and equally weighted.FindingsCronbach’s alpha test reveals that the index and subindices are highly reliable measures of corporate governance. The principal component analysis supports the construct validity of all measures.Research limitations/implicationsThe index is limited to only three corporate governance subcategories and only focuses on South Africa.Practical implicationsThese corporate governance indices provide governing authorities, policymakers, investors and other market participants direct information on the quality of corporate governance in South African firms.Originality/valueAs South Africa lacks a formal corporate governance indicator, the development of an appropriate corporate governance index and subindices contributes towards understanding the quality of corporate governance in South African firms. To the best of the authors’ knowledge, this is the first paper to conduct robustness tests on corporate governance indices designed for South African companies.

Corporate governance dynamics in financial institution performance: A panel data analysis

The study aims to identify the effect of corporate governance factors on financial institution performance in Bangladesh. This study employs annual data for 20 financial institutions, including banks, NBFIs, and insurance companies, data is collected from 2011 to 2022. Here, three corporate governance indicators are utilized – board size, board independence, and director’s ownership. The performance of the financial institutions is measured using return on assets (ROA), return on equity (ROE), and net asset value (NAV). Apart from the corporate governance variables, three company-specific factors, i.e., firm age, financial leverage, and firm size, are used as the control variables. Panel data analysis is conducted through the dynamic Feasible Generalize Least Square (FGLS) method, and the robustness is performed using the random effect model. The results show that corporate governance parameter such as board size has a significant positive influence on financial institution performance in Bangladesh, where board independence and director ownership do not have a significant influence on the performance of financial institutions. Thus, the performance of financial institutions increases when board size increases. This indicates that board members are actively engaged in strategic decision-making and ensure the rights of all stakeholders, which helps improve financial institutions’ overall performance. Therefore, financial institutions may increase their board size to the maximum level to ensure better corporate governance practices in the organizations, which ultimately increases performance.

Corporate social responsibility and firm value: the role of enterprise risk management and corporate governance

Purpose Corporate social responsibility (CSR) has gained tremendous importance after several corporate scandals, financial crises and the rise of the hyper-competitive world. Firms must address multiple stakeholders’ interests to increase firm value. This study aims to investigate the effect of CSR on firm value. This study also examines the mediating role of enterprise risk management (ERM) and the moderating influence of corporate governance (CG) in this CSR-firm value relationship. Design/methodology/approach The sample of the study comprises 119 Pakistan Stock Exchange (PSX) listed firms and the study covers the period from 2010 to 2021. The corporate social responsibility performance has been quantified across five dimensions. These aspects are product, environment, employee relations, diversity and community. Four proxies i.e. strategy, operation, reporting and compliance, have been used to measure ERM. The governance quality of the sample companies was evaluated using the governance index, which included 29 governance provisions. The authors used the dynamic panel data technique (system-GMM) is used to achieve the objectives of the study. Furthermore, a firm’s engagement in CSR activities can also be measured through a multinational financial approach to check the robustness of the result. Findings Based on the regression analysis, the authors discovered that CSR was positively connected with firm value, validating the stakeholder view of CSR. Furthermore, following Baron and Kenny’s (1986) mediation technique, the findings confirm that ERM mediates this association. These results are robust by using the bootstrapping tests by Preacher and Hayes (2004). Furthermore, the result shows that corporate governance (CG) is positively connected with firm performance, and this relationship is strengthened in the presence of an effective governance system in the organization. Practical implications This study provides useful insights to regulators, investors and policymakers to consider CSR as a value-enhancing factor and encourage the development of enterprise risk management and compliance with CG mechanisms to improve firm value. Originality/value The presented analysis strengthens the existing CSR–firm value relationship by analyzing the mediating and moderating roles of ERM and CG, which have not yet been tested, particularly in the context of Pakistan.

Constructing an Environmental, Social, And Governance (ESG) Index For Islamic Social Finance Institutions: Empirical Investigation From Indonesia

This study constructs an index to measure the performance of Islamic Social Finance (ISF) Institutions based on Environmental, Social, and Governance (ESG) dimensions. This quantitative research employs the Delphi Analytical Network Process (DANP) and Multistage Weight Index (MWI). The index is constructed using DANP, conducting empirical assessments using MWI, then developing indicators using Focus group discussion (FGD), in-depth interviews, and structured surveys. This study also empirically tests index's implementation on five ISF institutions in Indonesia. The high score of the governance factor in this study indicates that the five ISF institutions are still focused on enhancing governance. This ESG index for ISF institutions create in this research may cannot be applied generally to other nations or institutions. But this ESG-building indicators still can be utilized as a reference for adopting ESG in other institutions. This study contributes to the literature by creating an ESG index for ISF institutions, where more research is needed. The notion of ESG is connected to maqashid sharia and is particularly essential in how institutions execute good governance and social issues while focusing on environmental protection.

Effects of Environment, Social, and Governance (ESG) Disclosures on ESG Scores: Investigating the Role of Corporate Governance for Publicly Traded Turkish Companies

The world has experienced climate-related issues, which increase the importance of ESG disclosures and corporate governance (CG) of companies, which take place at the heart of economies. Therefore, improving ESG disclosures and CG practices becomes significant to combat climate change at the company level. Considering that Türkiye restructured ESG disclosures in 2022, this study investigates the role of CG on the nexus between ESG scores of publicly traded companies (PTC) and ESG reports. So, the study analyzes 102 PTC (full sample), 51 PTC in Borsa Istanbul Corporate Governance Index (in-sample), and the remaining 51 PTC (out-sample) using ESG disclosures of 2022 and applying novel super learner (SL) algorithm. Our results show that (i) SL has a higher prediction performance reaching ∼94.3%; (ii) the environment (governance) layer has the highest (lowest) total relative importance (contribution) to ESG scores in all samples; (iii) C8, S6, and E5 are the most important ESG principles in the full sample, in-sample, and out-sample, respectively; (iv) the contribution of each ESG principles to the total ESG scores varies by sample; (v) CG plays a smoothing role for the relative importance of each ESG principle, while the relative importance in the out-sample shows much higher volatility. Overall, the study reveals the non-linear contributions of ESG principles on ESG scores and suggests that PTC should prioritize highly important ESG principles, consider the moderating role of CG on the link between ESG scores and ESG disclosures, and use ESG disclosures as a strategic tool to develop ESG scores and disclosures.

African Democracy in the Context of Agenda 2063: Examining Progress and Challenges

This study examines the progress and challenges in the democratic landscape of Africa within the framework of the Africa Agenda 2063 (hereafter AA2063). Initiated in 2013, the Agenda signifies Africa’s commitment to an integrated, prosperous, and peaceful continent. Despite these aspirations, Africa faces persistent challenges, including political instability, socio-economic inequalities, and health crises. This study triangulates data from Afrobarometer public perception surveys, Varieties of Democracies expert insights, and the Ibrahim Index of African Governance to provide a broad understanding of the ten-year trend in democratic governance in Africa. The study found an increased demand for democracy, contrasted with a continuous decline in the supply of democracy. The study observed that, based on the average democratic performance over the decade, measured at 45% using V-Dem indices and 44% using IIAG percentage, Africa needs to score more than twice the current performance every year to align with the democratic aspirations of AA2063. This study underscores the need for targeted reforms to bridge the gap between current democratic performance and the envisioned goals of AA2063. It identifies key areas for improvement, including the separation of powers and checks and balances, citizens’ active participation, accessibility to state-owned media, and the independence of election monitoring bodies.

Do cultural differences affect the share price puzzle?

We examine the impact of cultural differences on nominal share prices across 63 countries from 2002 to 2018. Using institutional and catering theories, we assess how cultural dimensions—including World Governance Indicators (WGI), legal systems, religious influences, and GLOBE dimensions—affect the spatial heterogeneity of share price levels. Our findings indicate that share prices are higher in countries with common law systems and comprehensive information reporting, as these environments tend to attract institutional investors. Conversely, cultural traits emphasizing altruistic values correspond with lower share prices, reflecting the preferences of individual investors.

How do governance indicators, trade openness, industrialization, and population growth affect environmental degradation in BRICS Nations?

Against the backdrop of the dismal performance of BRICS nations in terms of governance, this study examines the relationship between governance indicators and carbon emissions. By employing DOLS and FMOLS cointegration techniques from 1996 to 2022, we find that effective governance helps in reducing environmental pollution. Specifically, indicators namely government effectiveness, political stability, the rule of law, voice and accountability, regulatory quality, and control of corruption show a favourable impact in mitigating carbon emissions. Additionally, our findings reveal that both foreign direct investments and trade openness contribute positively in lowering carbon emissions by introducing advanced technologies and sustainable practices. Conversely, rapid industrialization and population growth exacerbate carbon emissions due to increased reliance on fossil fuels and higher energy demand. Our study underscores the need for enhanced governance, green investments, and stringent environmental regulations to balance economic growth with environmental sustainability in BRICS nations.

Pattern of European Regional Creativity: Exploring Endogenous Sustainability

Abstract During the latest decades, regional creativity has often been considered as the precondition for innovativeness and sustainability. However, quantitative indicators of creativity are the subject of discussion. The paper aims to analyse the patterns and causes of European regional creativity distribution, revealing the influence of endogenous determinants on regional innovative development. An empirical analysis of regional patenting activity and a selection of indicators of regional creativity is conducted. Among the indicators, we include the development of regional institutions that are assessed through the data of the European Quality of Government Index. Besides the learning ability of the region (indicators of higher education prevalence and digital skills), the abundance of the creative class, regional innovative infrastructure, and population agglomeration were taken into account. The paper concludes concerning the most crucial factors contributing to endogenous sustainability through the lenses of European regions. In general, the formed model turned out to be significant with an acceptable level of standard error and a high predictive value. The influence of most of the parameters (except for the intelligence) was positive and significant. It is especially worth highlighting the parameters of regional institutions’ quality and volumes of private research and development expenditures, which exert the greatest positive influence on the resulting variable.

The Governance-FDI Nexus: A Factor-Augmented Fixed Effect Analysis of ASEAN World Governance Indicators and Foreign Direct Investment Inflows

The Governance-FDI Nexus: A Factor-Augmented Fixed Effect Analysis of ASEAN World Governance Indicators and Foreign Direct Investment Inflows

Archetypes of aquaculture development across 150 countries

In this study we compile and integrate data on 42 indicators to examine the social, economic, governance and environmental conditions shaping aquaculture development across 150 countries, including the top 100 aquaculture producing countries. We apply cluster analysis to identify social-ecological archetypes of aquaculture development across these indicators. We also calculate the percentage of global aquaculture production within the quartile ranges of 15 indicators of singular relevance for development. This shows how much aquaculture production is taking place in countries performing low or high on key indices. For example, we show that 85% of global aquaculture production is taking place in countries with the highest or high climate risk, 74% in countries with the lowest or low environmental performance scores, and 90% in countries with the highest or high food supply variability. Our cluster analysis identifies four distinct archetypes driven by the 42 country-level indicators, which includes: climate risk, inland water area, coastal population, seafood consumption, trade balance, governance indices and environmental performance. We characterize the four archetypes as: Archetype 1 - Emerging aquaculture producers, Archetype 2 - Limited aquatic food engagement, Archetype 3 - Developing economy aquaculture producers, Archetype 4 - Wealthy economy aquaculture producers. We discuss this complexity of factors driving each archetype with country specific examples, as well as the utility of integrated social-ecological analysis for both continued aquaculture research and development practice.

Examining Sigma and Beta Convergence in Emerging Market Economies

This study examines convergence among the select emerging market economies (EMEs) over two decades, from 2000 to 2020. The coefficient of variation was used to measure sigma convergence. Cross-sectional and panel regression analyses were performed to examine unconditional and conditional beta convergence, respectively. The macroeconomic variables chosen for the panel regression analysis were gross fixed capital formation, current account balance, inflation, research and development expenditure, world governance index and life expectancy index. The results supported the presence of convergence (both sigma and beta) among the EMEs over the selected period. In addition, it was found that, except for the current account balance, all selected variables contributed significantly to the growth process of EMEs.

Conservation of resources perspective on authentic leadership and employee well-being: The influence of job stress and emotional intelligence.

Health care industries must consider their sustainable development, and employee well-being is a crucial environmental, social, and governance indicator that should be prioritized. During events such as the COVID-19 pandemic, information transparency is a concern for health care workers. Authentic leaders can build trust by openly sharing their thoughts and feelings. Understanding how authentic leadership affects employee well-being through job stress and how emotional intelligence reduces job stress is essential for health care workers. This study investigated the effect of authentic leadership on employee well-being and considered the mediating role of job stress and moderating role of emotional intelligence in this effect. A time-lagged survey of 452 full-time health care workers (comprising nurses, allied health professionals, and administrative workers) from a general hospital in Taiwan was conducted. Authentic leadership was positively associated with employee well-being, and job stress mediated the effects of authentic leadership on employee well-being. Among the employees who perceived leadership to be authentic, those with higher emotional intelligence felt less job stress. From the perspective of conservation of resources theory, authentic leadership was identified as a crucial factor influencing how health care workers reduce job stress and improve their well-being. Emotional intelligence was identified as essential in enhancing the effects of authentic leadership on reducing the job stress of health care workers. Organizations should promote authentic interactions between leaders and followers and provide training for developing authentic leadership. They should also provide training to improve their employees' emotional intelligence.

Institutional Quality as a Determinant of Economic Growth: Analyzing GDP Trends in Western Balkan Countries

Introduction: The main goal of this paper is to investigate the influence of the quality of (economic) institutions according to the data from the World Bank's specialized Worldwide Governance Indicators database on the gross domestic product per capita of 7 Western Balkan countries: Albania, Bosnia and Herzegovina, Montenegro, Croatia, North Macedonia, Serbia and Kosovo. Methods: We applied Correlation and regression analysis were used for the set of mentioned data for the period from 2008 to 2022. Results: The analysis showed that the indicator of the dependent variable (GDP/pc) has a statistically significant strong positive relationship with all indicators of the independent variable (quality of economic institutions), while the regression model determined that only the constant term and Rule of Law are statistically significant. Discussion: The results of the research can serve to better understand the relationship between institutions and economic growth, and as such can be a starting point for future policies aimed at improving institutions and economic growth in Western Balkan countries.

Sustainable development goals achievement in European companies. An empirical analysis in the technology industry

ABSTRACT This study investigates through an empirical analysis the achievement of companies’ Sustainable Development Goals (SDGs) in the Technology Industry. Based on institutional and legitimacy theories, the main objective is to examine the relationship between country’s governance indicators and companies’ SDGs achievement, for the time frame 2019–2021. Mixed datasets with information for 359 companies (852 panel data observations) in the field of technology from European countries were tested to address homogeneity, robustness and regression analysis. The results show a significant impact of most country’s governance indicators on companies’ SDGs achievement, with notable differences across the Technology Industry’s Business Sectors. Furthermore, the SDGs reporting score analysed by each of the three pillars (economic, environmental and social) reveals that companies are more oriented towards social corporate actions than economic or environmental ones during the researched period. Adding to previous research, this study contributes by relating country characteristics to company’s SDGs achievement for a specific industry, and its main business sectors.

New technologies and income inequalities into Sub-Saharan Africa: Using a new technological indicator

The studies which analyzed the impact of technology innovation on income inequalities have considered only one factor of change at a time. The results are overall inconclusive: technology innovation appears to either reduce or increase inequality, depending on which factor is considered. In the literature of technological change, there is a technology innovation indicator that comprises multiple factors simultaneously. Using this technology innovation indicator and three different measures of income inequality (Gini index, Atkinson index, and the ratio of Palma), the paper analyzed the effect of technology innovation on income inequalities into Sub-Saharan Africa countries. A dynamic panel model was specified and estimated with the Generalized Moments Method (GMM) in System. The data used come from the Global Consumption and Income Project (GCIP), the World Development Indicator (WDI) and the World Governance Indicator (WGI). They were observed over the period 1996–2014 of 30 Sub-Saharan Africa countries. The paper finds robust evidence that technology innovation contributes to reducing income inequalities into Sub-Saharan Africa countries. The implementation of learning policy through improving education condition associated with social policy can contribute to limit the income inequalities due to technologies change into Sub-Saharan Africa countries.

The Effect of Institutional and Shariah Governance on Sukuk and Bond Performance in Asian Region

Purpose: This study investigates the influence of shariah and institutional governance on the performance of sukuk and bonds in the Asian landscape, particularly Malaysia and Indonesia. It aims to unravel the impact of Shariah principles and various aspects of institutional governance (IG) indicators; hence offering a deeper understanding of sukuk and bond performance. Method: Data was collected from 34 companies in Asian region. The study developed and validated the SG index using principle component analysis. Results and Discussion: The findings from panel regression analysis showed that Shariah and institutional governance improve sukuk performance. In addition institutional governance affected bond performance. Indicators of IG affected positively sukuk issuance and return. However, only government effectiveness and rule of law affected the bond issuance. All the indicators affected bond return except voice and accountability. Implications of the Research: The study contributed to the literature by examined both type of governance and compared between their effects. It also developed an SG index for financial and non-financial companies. Improving Shariah governance and institutional governance will enhance sukuk and bond performance. Originality/value: The study contributed to the knowledge by developing an index of shariah governance for financial and non-financial organization.

Does Corporate Governance Matter?

This study examines the influence of corporate governance on performance. Corporate governance is measured using the corporate governance index developed by Schweizer et al. (2019). Research data were obtained from the documentation of the Indonesia Stock Exchange (www.idx.co.id). The data were tested using multiple linear regression analysis. The results of the regression analysis document showed significant evidence of the influence between corporate governance index, board age, ownership concentration, and performance. The findings of this research contribute to corporate management in improving and maintaining corporate governance. Furthermore, this research can also be used by regulators as a consideration in designing and implementing guidelines for corporate governance mechanisms. The results of this research can also be used by investors as a consideration in investing in companies with good corporate governance. Keywords: board age, corporate governance, ownership concentration, performance

INCOME INEQUALITY, ECONOMIC GROWTH, AND INSTITUTIONAL FACTORS: A COMPARATIVE ANALYSIS AT THE EUROPEAN UNION (EU) LEVEL

The rising income inequality around the world and its persistence represent a social phenomenon raising concerns at all levels (global, regional and country) for governments and pose huge challenges to master it and to identify effective solutions. The aim of the paper is to provide a comparative insight at the European Union (EU) level involving 25 Member States regarding the interplay between income inequality, economic growth, and institutional quality. Gini Index sourced from World Income Inequality Database, GDP per capita series extracted from the World Bank database, and institutional indicators collected from the World Governance Indicators database represent the examined variables over the period 1990-2022. Their dynamic is comparatively analysed and discussed. The clustering method is applied to identify similarities and differences between European Union countries in terms of the interplay between income inequality, economic growth and institutional factors and to draw relevant conclusions for future effective policy measures meant to reduce inequality and to boost economic growth. The clustering analysis based on the average growth rate of income inequality and per capita GDP revealed that European Union countries are differently facing the challenge of income inequality rising. Six groups of countries with similar paths regarding the income inequality and economic growth were identified. High-income countries face low levels of income inequality but with an upward trend. Economic growth is accompanied with high levels and increasing levels of income inequality. The institutional quality level may strength the capacity of a country to address the problem of rising income inequality, but it remains unclear the interplay of institutional quality dynamic in reducing income inequality. The implications of the paper’s findings are framed in the context of the European policies.

Impact of Urbanization, Development Level, and Openness on Institutions in Bangladesh: An ARDL Investigation Using Two Measures of Institutional Quality

Future development policies require a better understanding of the various factors that affect the quality of institutions in Bangladesh. In this paper, we estimate empirical ARDL models to investigate the roles of urbanization, openness, and the level of development as determinants of institutional quality. We use two measures of institutional quality, both derived from the World Bank’s Worldwide Governance Indicators (WGIs). The first proxy, INQ, is a composite index developed from the six WGIs using Principal Component Analysis (PCA). The second indicator, AvgINQ, is the average of the six WGIs. For each indicator of institutional quality, three models were estimated, resulting in six models in total. The impact of urbanization on institutional quality is consistent in terms of sign and significance across all six models, a claim that cannot be made for the other variables in the model. The error correction term reflects dampening convergence to equilibrium for the first proxy for institutional quality but regular convergence when the second proxy is used. In terms of ARDL diagnostics, models with AvgINQ as the dependent variable perform better. The Johansen cointegration test confirms the existence of a long-term relationship among the variables in all the models. Pairwise Granger causality tests are also conducted. The findings emphasize the importance of managing urbanization pressure for better institutional quality.