High-quality Institutions Research Articles

Strengthening the fight: is the adoption of IPSAS helping Latin America tackling corruption?

PurposeThis paper examines the relationship between the adoption of accrual-based IPSAS and the level of perceived corruption of Latin-American countries, considering the moderating effect of the country’s institutional quality.Design/methodology/approachThe study adopted a longitudinal analysis of 19 countries, between 2010 and 2020, following a quantitative approach by using multiple linear regression with panel data.FindingsMain findings indicate that the harmonization of public sector accounting through the adoption of IPSAS generates a positive effect on the corruption level in Latin-American countries, causing a reduction in their indexes of perception of corruption. The countries’ institutional context, as hypothesized, increases such effect, making it even more significant in the cases of partial adoption.Practical implicationsTo improve accountability and decision-making in public sector entities overall, contributing to reduce corruption, IPSAS adoption requires an institutional environment favorable to take the best of their benefits.Social implicationsThe adoption of IPSAS in an environment with a high institutional quality, allows a greater effect in reducing corruption in the jurisdiction.Originality/valueThis study contributes by providing a comprehensive view of IPSAS and its impact on perceived corruption levels, expanding the existing research to Latin America, where corruption is generally high and IPSAS may contribute to reduce it. It makes an important addition by defining and considering an index of the country’s institutional quality, providing evidence that when this is high, the context enhances the work of institutions, including IPSAS, to fight corruption.

Linkages between industry, agriculture, growth, renewable energy and the environment and the role of institutional quality, evidence from selected South and East Asian economies

This study aims to reveal the influence of industrial progress and agricultural value addition on environmental harm and explores how the unique moderating role of institutional quality handles this association; using the panel ARDL approach on a panel of South and East Asian economies from 1980 to 2020. The baseline model proposes that for each 1% increase in agricultural added value and industrial progress, carbon dioxide emissions may fluctuate considerably positively by 0.563% and 0.758% respectively. In the long term, the plausibility of the upturned U-shaped association between economic growth and carbon dioxide emissions in South and East Asian economies has been confirmed in the analysis. The use of renewable energy considerably condenses long-term emission levels. Institutional quality is found to have a strong moderating effect on the link between the main model regressors (renewable energy use, industrial growth, GDP per capita, and agricultural value addition) and CO2 emissions. Institutional quality supports the enhancement of industrial and agricultural capabilities and the improvement of environmental worth. Finally, the threshold results indicate that the influence of the main regression variables of the model (renewable energy utilization, industrial growth, per capita GDP, and agricultural added value) on carbon dioxide emissions has fully penetrated the institutional quality level. Strong, high-quality institutions, rather than weak institutions, can improve the aptitude of industry and agriculture to mitigate environmental degradation. In this pursuit, it becomes increasingly important to develop policies that support renewable energy based on institutional values.

Influence of Non-Economic Factors on the Formation and Development of the Design of Financial Systems

The purpose of this scientific work is to investigate the impact of non-economic factors on the design of financial systems, focusing on the concept of institutional quality, which is measured using six indices according to the World Bank's methodology. To assess this impact, we utilized data from 1996 to 2022 for a wide range of countries, grouped into five clusters based on per capita income. The comparative analysis of these country clusters revealed a direct and consistent relationship between per capita income dynamics and financial development with changes in institutional quality. It also highlighted the significant influence of this relationship on the structural features of national financial systems. The study demonstrates that institutional quality is the starting point of this entire process, determining the effectiveness of the link between financial development and economic growth through changes in the financial structure. The findings confirm the convergence of financial development levels among countries with different financial system structures and legal traditions, provided they maintain high-quality institutions. The study underscores the importance of institutional quality in minimizing the consequences of structural distortions in the financial system and addressing gaps in financial and economic development. These results are crucial for economic policymakers in developing countries and those with low per capita incomes. Doi: 10.28991/ESJ-2024-08-05-08 Full Text: PDF

Analyzing the impact of tax-based vs. rent-based funding on the effectiveness of environmental protection policies

The necessity of government intervention, particularly through public spending, to address market failure in providing public goods like environmental quality is widely recognized. However, the effectiveness of fiscal environmental policies in improving the environment remains unclear. This paper aims to explore the impact of funding sources for government expenditures on environmental quality. Using a Ramsey growth model, we investigate the consequences of two alternative funding sources for environmental protection: Taxes and natural resources rents. The model highlights that along the balanced growth path, financing environmental spending through taxes enhances environmental quality, while funding from natural resources rents leads to its deterioration. Furthermore, the model emphasizes the crucial role of socio-political institutions governing the economy in understanding the link between environmental protection expenditures and environmental outcomes. To test the model's propositions, we utilize a panel dataset of 76 countries spanning from 1995 to 2018. Our empirical findings corroborate the notion that the funding sources of environmental protection expenditures significantly impact environmental outcomes. Additionally, the results indicate that higher institutional quality, such as greater state capacity, enhances the effectiveness of the government's environmental spending in improving environmental quality. Our findings offer valuable insights for policymakers and researchers seeking to design effective strategies for environmental preservation and sustainable growth.

Moderating effects of country-level institutional quality and cultural dimensions on CSR-stock price crash risk relationship: a meta-analysis study

PurposeThis study uses meta-analysis to examine the relationship between corporate sustainability reporting (CSR) and stock price crash risk (SPCR) and to discern the moderating effects of country-level institutional quality and cultural dimensions on this link.Design/methodology/approachThe study used mean correlation coefficients to test the relationship between CSR and SPCR and meta-regressions to test the moderating effects. The analysis considers 65 effect sizes from 24 empirical studies.FindingsThe results showed that CSR reduces the chances of SPCR. The inverse relationship between CSR and SPCR is stronger in masculine, high power distance and long-term oriented cultures and is less pronounced in individualistic, uncertainty avoidance and indulgent cultures. The inverse relationship is also stronger in countries where high-quality institutions exist.Research limitations/implicationsThis study is based on correlation coefficient analysis and excludes studies publishing only regression results. Furthermore, it provides guidance to lessen SPCR. Findings suggest that such initiatives may mitigate the risk of stock price crashes for firms. Through meta-analysis, this research investigates the correlation between environmental, social and governance (ESG) disclosure and stock price crash occurrences, offering insights with significant implications for the European financial landscape and globally.Originality/valueThis is a pioneer meta-analysis that investigates the link between CSR and SPCR and the moderating effects of country-level institutional quality and cultural dimensions. Our study sheds light on the potential impact of promoting a sustainable and responsible business environment in Europe through comprehensive ESG disclosure under the Corporate Sustainability Reporting Directive (CSRD).

Nexus between natural resource endowments and economic growth in selected African countries

Africa began implementing the Sustainable Development Goals (SDGs) in 2015 emphasizing on sustainable management and effective use of natural capital to spur economic growth (Goals 12, 14, and 15). This study using World Bank data sets from 46 African countries selected for the years 2000 to 2022, examined the nexus between natural resource endowments and economic growth in Africa. We used the system generalized method of moments (sys-GMM) and dynamic panel threshold regression (DPTR) to analyze the data. The findings of the two-step sys-GMM estimation using 'xtabond2' revealed that when the institutional quality variable is added and excluded from the model, natural resource dependence negatively impacts economic growth, but the impact is greater when the institution is excluded. In the estimation of the interaction variable of natural resource dependence and institutional variable included in the model, natural resource dependence positively impacts economic growth. The results of the DPTR using "xthenreg" showed that when the threshold value of natural resource dependence is ≤ 1.73% of gross domestic product, natural resource dependence has a positive impact on economic growth and a negative impact when the threshold value is above 1.73%. Similarly, when the institutional quality threshold is ≤ 0.277, natural resources dependence impacts economic growth negatively; above the threshold (0.277), the impact is positive. In conclusion, natural resource endowment is a curse with no or low-quality institutions and a blessing with high-quality institutions. Thus, building strong institutions and proper utilization of natural resources helps to minimize the adverse impact of resource endowments on economic growth.

Curbing environmental degradation to balance sustainable development: Evidence from China

To achieve the goals of sustainable development, it is crucial to check the balance of increased level of international trade along with financial development, foreign direct investment (FDI), energy consumption, and institutional advancement with the quality of the environment. This study focuses on how these variables have caused environmental degradation in China. To achieve Goal 13 of the Sustainable Development Goals (SDGs), i.e. to increase the nation's resilience to natural disasters and hazards related to climate change, to promote climate action and safeguard life as part of sustainable development, this involves the analysis of time-series data sets from 1975 to 2021 and the use of the dynamic version of ARDL (Autoregressive Distributed Lag) cointegration or simulation model. The results show that FDI is essential for lowering carbon dioxide (CO2) emissions over the long term, but financial development, the volume of international trade, and the level of energy use or consumption contribute to environmental deterioration. Moreover, China's environmental degradation is decreased by high institutional quality. To accomplish the SDGs and reduce environmental degradation, it is essential to take into account how these elements interact and to adopt a holistic strategy that includes regulations, policies, and education. On the basis of our trustworthy findings, suggestions are made to keep the sustainable development.

The impact of FDI on R&D investment of small and medium-sized enterprises in Vietnam: The role of institutions

This paper investigates how the quality of the local institutional environment affects the impact of foreign direct investment (FDI) on R&D investment of domestic small and medium-sized enterprises (SMEs) in Vietnam. By analysing data of 2690 manufacturing SMEs in 2011, 2013 and 2015, we find that FDI presence hinders R&D activities of domestic SMEs, probably due to SMEs' low absorptive capacity, large technological gap, lack of economies of scale and low market power. However, institutions positively moderate the relationship, that is better institutions mitigate the negative impacts of FDI on R&D investment of domestic SMEs. When the quality of local institutions improves beyond a certain minimum level, FDI exerts positive spillovers that encourage R&D activities of domestic SMEs. Our hypothesis suggests that institutions can moderate FDI spillovers to SMEs' R&D by promoting the foreign investors' incentive and ability to create technological spillovers, mitigating FDI crowding-out effects, enhancing domestic SMEs' absorptive capacity, and facilitating interaction and knowledge sharing in the local business environment. We also find that the institutional moderating effect is less pronounced for FDI originating from countries with lower institutional quality compared to that from countries with higher institutional quality. This suggests that multinational enterprises (MNEs) in the former group may be more susceptible to institutional impacts due to their unfamiliarity with institutional obstacles in the host economy. Our study highlights the importance of institutions to researchers who explore the relationship between FDI and domestic firms’ R&D investment and to policymakers in emerging economies where FDI inflows and domestic SMEs play a pivotal role.

Trade, gender equality and institutional quality: Evidence from the gravitational approach

Purpose The contributions of gender equality to trade and the moderating impact of institutional quality on the trade-gender link have been understudied in contemporary literature. Therefore, this paper aims to use the augmented gravity model to investigate the impacts of gender equality and institutional quality on trade, and the moderating impact of institutional quality on the trade-gender link. Design/methodology/approach The panel data is comprised of bilateral trade flows of Vietnam and 40 major trading partners in the 2002–2021 period. Estimation methods include combined fixed effect, random effect, system generalized method of moments two-step (SGMM-II) and Poisson-pseudo maximum likelihood (PPML) which allow the treatment of heterogeneity, endogeneity and heteroskedasticity in the research models. Findings The exporting country’s gender equality has an inconclusive impact on trade in SGMM-II and PPML estimations. However, female labor force participation in the exporting country increases trade. Importing country’s gender equality and female labor force participation increase trade. The direct impact of institutional quality on trade is inconclusive, which is dependent on estimation methods. Most noticeably, the institutional quality of exporting and importing countries facilitates the hampering effects of gender equality and female labor force participation on trade. Research limitations/implications Future research should apply the framework of this paper to sectoral trade, which allows more sector-specific policy implications to be delivered. Moreover, gender development, gender inequality and institutional quality should be included in the SGMM estimations as endogenous variables for robustness checking purposes in future research. Practical implications The paper has justified the integration of gender-specific issues in trade policies, which aligns trade with sustainable development agenda. The explored moderating impact of institutional quality of the exporting country has implied the trade-off relationship between gender equality and export growth in the effort to improve institutional quality. Reversely, in the case of importing countries with higher institutional quality, improved gender equality may mitigate the trade deficit by hampering import growth. Originality/value Investigating the impact of gender equality on trade is the prominent contribution of this paper. Gender equality is considered by three component indicators which include gender development, gender inequality and female labor force participation. New measurement approach to the institutional quality level is also introduced. Furthermore, the explored moderating impacts of institutional quality on the trade-gender link are novel in the literature on sustainable development.

The Moderating Role of Institutional Quality in the Relationship between Foreign Capital Inflows and Stock Market Development: A Panel Data Analysis

The study examines the impact of foreign capital inflows (FCI) on stock market development (SMD), with a specific focus on the moderating role of institutional quality (IQ). The study uses a panel dataset of 28 emerging economies for the period of 1998 to 2022. The findings reveal that both international remittances (REM) and foreign portfolio investment (FPI) have a significant positive impact on SMD. These findings imply that REM inflows enhance the availability of financial resources in the economy, promoting stock market growth and stability. Similarly, FPI increases market liquidity and fills the saving-investment gap in the host country, thereby increasing SMD. However, the results show that foreign direct investment (FDI) has a significant negative impact on SMD. This finding implies that FDI could negatively affect SMD in the host country due to the diversion of investments from the stock market to other business ventures, profit repatriation, and crowding-out effects on domestic investment by creating strong competition in the input market, making it difficult for listed domestic firms to operate. Moreover, the study reveals two unique and interesting findings. First, official development assistance (ODA) has a significant negative impact on SMD, suggesting that ODA reduces SMD due to the misallocation of resources due to aid conditions and economic instability, and the crowding-out effect on private investments. Second, IQ positively moderates the relationship between all forms of FCI and SMD in the sampled countries, implying that host countries with a good institutional framework and high IQ tend to experience high SMD.

Research on the Financial Cooperation and Economic Growth—Evidence from China and ASEAN

China has actively carried out financial cooperation with countries along the route, utilizing the new framework of financial cooperation to inject new momentum into economic growth. This paper measures the development level of China-ASEAN financial cooperation with the help of the China-ASEAN Financial Cooperation Index from 2000 to 2022, and empirically examines the impact of China-ASEAN financial cooperation on the economic growth of ASEAN countries through the fixed effect model. The study shows that China-ASEAN financial cooperation significantly contributes to the economic growth of ASEAN countries by advancing financial development, improving the degree of financial stability, and expanding financial openness. Heterogeneity analysis found that the promoting effect of China-ASEAN financial cooperation on economic growth is more pronounced in countries with high institutional quality and high economic development level.

Governance, institutions, and climate change resilience in Sub-Saharan Africa: assessing the threshold effects

The concerns about institutional weakness in Sub-Saharan Africa (SSA) are central to the discussion on environmental degradation in the region. This study employs a robust dynamic panel data estimator to explore the relationships between institutions, governance, and environmental quality, focusing on the ecological footprint of 25 SSA nations from 1990 to 2020. The results reveal the threshold effects of the interaction between institutions and governance, following an inverted U-shape pattern. This suggests that beyond a certain ecological footprint, increased interaction between institutions and governance leads to a decrease in ecological footprint. Additionally, high institutional quality (IQ) is associated with a lower environmental impact, while improved governance contributes to mitigating the decline in institutional performance. The panel causality tests among the variables and control components indicate a one-way causal relationship from ecological footprint to governance, infrastructural development, and energy use. Conversely, a feedback causal relationship exists between IQ, industrialization, and ecological footprints. Policymakers should prioritize investments in energy consumption that align with environmental quality, ensuring efficient use of energy budgets through coordinated planning, execution, and transfer of sound energy practices to prevent duplication of efforts.

INSTITUTIONAL ENVIRONMENT AND MARKET STRUCTURE AS DRIVERS OF BANKING INDUSTRY PERFORMANCE

We analyze the effects of market concentration, income diversification, and institutional environment on banking industry performance. We used a sample of 168 countries for the 1994-2019 period and the GMM estimators for dynamic panel data regressions. Our results show that market concentration and diversification have a positive effect on bank performance. The institutional environment, both public-political and private-regulatory, has a negative effect on bank profitability, showing that these financial institutions obtain higher returns in countries with institutional weaknesses. When countries have a high institutional quality, the positive impact of market concentration and income diversification is reversed. Strengthening countries’ institutional quality makes it possible to combine competition between banks and specialization in traditional activities with higher performance. These results are relevant for bank stability and financial policy design, given that the institutional framework includes both direct and indirect channels that affect the general behavior and strategies of banks in the industry.We analyze the effects of market concentration, income diversification, and institutional environment on banking industry performance. We used a sample of 168 countries for the 1994-2019 period and the gmm estimators for dynamic panel data regressions. Our results show that market concentration and diversification have a positive effect on bank performance. The institutional environment, both public-political and private-regulatory, has a negative effect on bank profitability, showing that these financial institutions obtain higher returns in countries with institutional weaknesses. When countries have a high institutional quality, the positive impact of market concentration and income diversification is reversed. Strengthening countries’ institutional quality makes it possible to combine competition between banks and specialization in traditional activities with higher performance. These results are relevant for bank stability and financial policy design, given that the institutional framework includes both direct and indirect channels that affect the general behavior and strategies of banks in the industry.

Foreign aid, institutional quality, and income inequality in Africa: A dynamic panel threshold approach

This study examines the impact of foreign aid and institutions on income inequality in 23 African countries during the period from 2005 to 2017. The study used a newly proposed novel dynamic panel threshold technique. The results of the study found an institutional quality threshold value of 1.622. Below the threshold, foreign aid was found to positively and significantly influence income inequality. However, above the threshold, the coefficient of foreign aid was negative with statistical significance. This implies that foreign aid tends to diminish income inequality in the presence of quality institutions. The study also used the quantile regression method to check for robustness. It showed that the conclusion between aid and inequality is the same in most of the quantiles (0.1 and 0.2). The findings can be worthwhile for sketching proper aid policies to lessen inequality. Policymakers in Africa should prioritize establishing high-quality institutions and developing measures to improve existing ones. Thus, aid could potentially reduce income inequality. This study suggests that it is important to note that aid programs can be effective when tailored to the particular needs and circumstances of each beneficiary country, as one-size-fits-all methods may not produce the anticipated outcomes.

Corruption in Arab countries: a grease or sand in the wheel of economic growth? a panel smooth transition regression approach

The relationship between corruption and economic growth has long been dealt with in the literature. Yet, no consensus has been drawn about the way how corruption might affect economic growth. This paper aims at revisiting the relationship between corruption and growth in the context of Arab countries using a panel threshold model with smooth transition (PSTR). The study covers 14 Arab countries over a period from 2007 to 2017. Our results show that the institutional quality variable divide the sample into two regimes. In the first regime (low institutional quality), reducing corruption risk hinders economic growth. The second regime (high institutional quality) stipulates that a lower risk of corruption will have a positive effect on economic growth. The results on a country basis reveal two heterogenous groups and one homogenous group in terms of hydrocarbons endowment: (1) Algeria, Egypt, Jordan, Lebanon Sudan ,Syria and UEA are in favor of “grease in the wheels” hypothesis, (2) Bahrain, Kuwait, Morocco and Tunisia demonstrate “the sand in the wheel” hypothesis and (3) Oman, Saudi Arabia and Qatar showed a strong support toward “the sand in the wheel” hypothesis.

Climate change and income inequality in Asia: how does institutional quality matter?

Asia – the most vulnerable continent to climate change – problematizes policy makers with its dual challenges of high income inequality and low institutional quality. This paper sheds light on the impact of climate change and institutional quality on income inequality for a panel data set of 35 Asian countries and territories over the period of 1990–2021. Results from estimations of Feasible Generalized Least Squares (FGLS) and two-step System Generalized Method of Moments (SGMM) demonstrate that the climate change – proxied by temperature and precipitation – exacerbates income inequality, while improvement in institutional quality not only reduces it, but also lessens the harmful impact of climate change on income equality. Findings are robust with various proxies of income inequality. These results strongly confirm the important role of institutional reform in the context of rising climate change and high level of income inequality in Asian countries.

Foreign Aid and Economic Growth in the Sub-Saharan African Countries

ABSTRACT: Official Development Assistance (ODA) remains an important tool for nurturing economic growth in Sub-Saharan African (SSA) countries. This is evidenced by numerous studies that have investigated the ODA-growth nexus in SSA region. However the existing studies on the relationship between ODA and economic growth is subject to identification issues. More specifically, the issue of distributional heterogeneity has not been given the attention it deserves in this field. In other words, the issue of whether ODA-growth nexus differ among developing nations with different economic growth levels has not been meticulously explored. This study aims to examine the heterogeneous impact of ODA on economic growth across 24 SSA countries over a 38-year period. To achieve this, an attempt is made in this study to investigate how the effect of ODA varies along the conditional economic growth distribution by employing the Moment of Moments Quantile Regression (MM-QR) approach, an approach that is able to capture the diverse effects of ODA across different levels of growth distribution. Moreover, this study explores the role of social infrastructure and institutional quality in shaping this relationship. The results suggest that ODA has a positive impact on economic growth in the SSA region, with a larger positive impact in countries with high levels of economic growth. This finding is key as it underlines the important idea that though ODA positively influence growth, it doesn’t homogeneously affect all nations; but instead, it remarkably enhance it in areas with relatively robust and healthy economic conditions. The study also finds a positive and significant relationship between social infrastructures and institutions quality and economic growth, particularly in the 50th, 75th, and 95th quantiles, thereby highlighting the fact that well-developed social infrastructures and high-quality institutions play a pivotal role in nurturing economic progress, particularly at the mid to higher percentiles of economic development. The inclusion of institutions quality and interaction terms in the model influences the effect of aid on economic growth, with ODA being effective in countries located within the 25th and 50th quantiles. The findings suggest that aid can be strategically used to stimulate economic growth in SSA countries, particularly low-income countries.

Enhancing Student Performance Prediction in Higher Education: A Data-Driven Approach

Abstract — Student performance is a crucial factor in higher education institutions, as admission to a high-quality institution often relies on a good academic record. The primary objective of this paper is to predict student performance by considering their personal and academic achievements. By identifying poorly performing students, teachers can offer timely guidance and support to improve their academic outcomes. However, predicting student performance becomes challenging due to the processing of a large amount of data, including both numerical and non-numerical values. This work aims to determine the most effective prediction algorithm and identify the key variables in student data to enhance student performance and success rates through classification techniques using educational databases from both universities and schools. The proposed system leverages this data to predict a student's next year's result (GPA). The dataset used for this experiment is locally obtained from third-year students, encompassing their core subject results (6 subjects, 2 laboratories), and personal details. The methods employed in this work include the Multiple Linear Regression, Naive Bayes and Decision Tree. The extracted factors impacting the results will help students prepare better in advance. The highest accuracy achieved in this prediction is 88.44%, bringing significant benefits to students, teachers, and educational institutions. Keywords— Prediction; Multiple Linear Regression; GPA; Decision Tree; Naive Bayes;

The role of higher education and institutional quality for carbon neutrality: Evidence from emerging economies

Economic development is frequently held accountable for environmental degradation, a situation that is particularly dire in E-7 economies. This problem is further exacerbated by inadequate education on its repercussions. Previous studies have explored various socioeconomic determinants of CO2 emissions, but the effects of education and institutional quality remain underexplored. Using data from 1995 to 2020 for E-7 economies, this study fills the gap by investigating the link between higher education, institutional quality, and CO2 emissions, factoring in R&D's role. Our findings reveal that better education and improved institutional quality significantly decrease emissions, a trend most pronounced in countries with stronger institutions. Interestingly, the role of R&D in emissions diverges based on institutional quality, showing a positive correlation in countries with lower and a negative correlation in higher institutional quality. The findings highlight the significance of quality education and robust institutions for carbon mitigation, offering critical insights for future sustainability research.

Exploring the cultural forces behind green bond issuance

Green bonds, a rapidly emerging financial instrument designed to bolster environmentally sustainable initiatives, are subject to the influence of the national culture on economic decisions. This study examines varying levels of green bond issuance and cultural dimensions based on Hofstede’s theory. Fixed-effects regression was employed to analyze a sample of 67 countries from 2008 to 2021. The results suggest that cultural dimensions such as individualism and long-term orientation promote green bond issuance, while masculinity restrains it. Additionally, this study examines the moderating effects of institutional quality and economic conditions. The findings show that the relationship between national culture and green bonds is more significant in countries with high institutional quality and lower income levels. While this study offers valuable insights for policymakers, investors, and issuers seeking to promote sustainable finance in different cultural contexts, it could be enhanced by providing more information on the methodology and data sources used, as well as by exploring the potential mechanisms underlying the observed relationships between cultural values and green bond issuance.