Low Quality Of Governance Research Articles

The Socioeconomic and Institutional Determinants of Participation in India’s Health Insurance Scheme for the Poor

The Rashtriya Swasthya Bima Yojana (RSBY), which was introduced in 2008 in India, is a social health insurance scheme that aims to improve healthcare access and provide financial risk protection to the poor. In this study, we analyse the determinants of participation and enrolment in the scheme at the level of districts. We used official data on RSBY enrolment, socioeconomic data from the District Level Household Survey 2007–2008, and additional state-level information on fiscal health, political affiliation, and quality of governance. Results from multivariate probit and OLS analyses suggest that political and institutional factors are among the strongest determinants explaining the variation in participation and enrolment in RSBY. In particular, districts in state governments that are politically affiliated with the opposition or neutral parties at the centre are more likely to participate in RSBY, and have higher levels of enrolment. Districts in states with a lower quality of governance, a pre-existing state-level health insurance scheme, or with a lower level of fiscal deficit as compared to GDP, are significantly less likely to participate, or have lower enrolment rates. Among socioeconomic factors, we find some evidence of weak or imprecise targeting. Districts with a higher share of socioeconomically backward castes are less likely to participate, and their enrolment rates are also lower. Finally, districts with more non-poor households may be more likely to participate, although with lower enrolment rates.

Can strong home country institutions foster the internationalization of MNEs?

PurposeWhile many studies on institutional environment have primarily focused on the influence of the host country environment, limited insights have been offered on how the different dimensions of home institutions affect firm internationalization. This paper aims to fill this gap by investigating the effects of regulatory institutions at home.Design/methodology/approachUsing country governance quality to proxy quality of regulatory institutions, this study attempts to reveal how regulatory institutions at home facilitate a multinational enterprise's (MNE's) international expansion and why the influence differs in different country clusters. Using hierarchical linear modeling and cluster analysis, proposed hypotheses were tested with a three‐year panel of 511 firms from 38 countries.FindingsThe results provide substantial support for the authors' hypotheses that MNEs with high governance quality at home are more engaged in internationalization than those with low governance quality at home. Moreover, differences in institutional effect do exist between country clusters.Practical implicationsThis study provides evidence that while country differences exist, governance quality at home can facilitate MNEs' expansion into foreign markets. This finding will help managers of any MNEs to consider country‐level factors and evaluate the governance quality at home before committing resources into foreign operations.Originality/valueBuilding on the institutional environment literature, this theory and results make original contributions by underscoring how the consideration of regulatory institutions at home can significantly improve understanding of institutional influence on MNEs. The findings have important implications for both international business researchers and managers of MNEs.

Does Corporate Hedging Attract Foreign Investors? - Evidence from International Firms

We study how corporate financial hedging affects the demand of foreign institutional investors. Given that investors benefit from hedging when the manager has information not directly observable to shareholders (DeMarzo and Duffie, 1991), corporate hedging is especially valuable for international investors that invest abroad facing the highest informational uncertainty. We focus on a comprehensive sample of 7,878 international non-financial companies from 2001 to 2009, for which we have collected measures of both foreign exchange hedging and interest rate hedging. We document a strong, positive relationship between foreign institutional demand and corporate hedging for both US and non-US institutions. The effect of hedging is concentrated in the demand of non-bank-affiliated foreign investors, whereas bank-affiliated investors are less sensitive to it. The impact of hedging on international demand is higher for less transparent countries, and a low quality of governance amplifies the effect of lower transparency. We address the issue of potential endogeneity of hedging with firm-fixed effects as well as with an instrumental variable specification that exploits changes in corporate hedging induced by changes in the asset quality of the relationship banks. We also use the IPO as an experiment and show that the before-IPO hedging policy is positively related to international investor demand after the IPO.

Government ownership and corporate governance: Evidence from the EU

The ongoing global financial crisis has led to the largest increase in state intervention since the Great Depression. Direct government ownership in publicly-traded corporations has increased dramatically since 2008. How will this increase in public ownership affect the governance of these erstwhile private companies? We examine the impact of government ownership on corporate governance using a sample of firms from the European Union, a region that is relatively familiar with active government participation. Our main finding is that government ownership is associated with lower governance quality. We further show that while government intervention is negatively related to governance quality in civil law countries, it is positively related to governance quality in common law countries. Finally, we find that the preferential voting rights of golden shares are especially damaging to governance quality.

Governance and Poverty Reduction in Thailand

The objective of this study is to find out how Thailand achieves her economic growth along with poverty reduction without good governance practice. The relationships among economic growth, poverty indicators and governance indi- cators are computed by using Pearson’s correlation. The computed results show that the poverty reduction in Thailand is achieved through populist policies which are exercised with low quality of governance, not through growth. It sup- ports general belief that the “pro-poor growth” policy alone without good governance performance is insufficient for enhancing poverty reduction equally. A strategy for reducing poverty and income inequality for Thailand is not to en- hance economic growth but to promote major improvements in governance especially in variable that reflect the per- ception in three governance composite indicators namely Voice and Accountability, Political Stability and Absence of Violence, and Rule of Law.

International Evidence on the Link between Quality of Governance and Stock Market Performance

This paper examines the link between country-level governance and global stock market returns. We find a negative relation between governance quality and equity return. Countries with low governance scores, on average, have higher equity returns than those with high governance scores after controlling for global risk factors known to influence international equity returns. This implies that investors associate low governance quality with increased risk and thus demand higher risk premium. We find that the quality of governance as measured by Political Stability and Absence of Violence is key governance dimension affecting international equity returns, suggesting that heightened investor concerns over political risks have profound impact on equity markets. Interestingly, we find no evidence that variation in equity returns is affected by the governance indicator representing Voice and Accountability. The findings of this study provide important policy implications.

The Role of Governance in Agricultural Expansion and Intensification: a Global Study of Arable Agriculture

Mandemaker, M., M. Bakker, and J. Stoorvogel. 2011. The role of governance in agricultural expansion and intensification: a global study of arable agriculture. Ecology and Society 16(2): 8. https://doi.org/10.5751/ES-04142-160208

Cultural values and governance quality as correlates of road traffic fatalities: A nation level analysis

This study investigated the relationships between governance quality, cultural dimensions and road traffic fatality rates in a sample of 46 countries. Government quality was measured with six World Governance Indicators (WGI) published by World Bank, and the cultural factors included Hofstede's four cultural dimensions and seven Schwartz value dimensions. Both direct and moderator effects of the WGI on traffic fatality rates per million vehicles were found. Each of the six WGI scores correlated negatively with traffic fatalities indicating that the quality of governance and institutions contribute to traffic safety. Hofstede's “power distance” dimension and Schwartz value dimensions “embeddedness”, “hierarchy” and “mastery” were positively and “intellectual autonomy” and “egalitarianism” negatively related to traffic fatalities. The WGI score moderated the effects of “hierarchy” and “mastery” on traffic fatalities so that in countries with low governance quality these cultural factors had stronger impact on traffic fatalities. It was concluded that improvement of the quality of governance and institutions would also result in improvement in traffic safety.

Government Ownership and Corporate Governance: Evidence from the EU

The ongoing global financial crisis has led to the largest increase in state intervention since the Great Depression. Direct government ownership in publicly-traded corporations has increased dramatically since 2008. How will this increase in public ownership affect the governance of these erstwhile private companies? We examine the impact of government ownership on corporate governance using a sample of firms from the European Union, a region that is relatively familiar with active government participation. Our main finding is that government ownership is associated with lower governance quality. We further show that while government intervention is negatively related to governance quality in civil law countries, it is positively related to governance quality in common law countries. Finally, we find that the preferential voting rights of golden shares are especially damaging to governance quality.

Quality of Governance and the Formation of Preferential Trade Agreements

AbstractThis paper investigates economic and political factors which explain the presence or absence of preferential trade agreements (PTAs). A model of three countries with imperfect competition markets is employed for theoretical analysis of political economy. The validity of theoretical results is tested by econometric analysis with a logit model. It is shown that countries with similar incomes are more likely to form PTAs, and that governments with low quality of governance have little incentive to form PTAs.

The Quality of Governance: 'Second-generation' Civil Service Reform in Africa

This paper argues that an important ingredient missing in the set of second-generation reforms that has been advocated for Africa is the development of human capital in the public sector. Over the past three decades, the stock of human capital in the public sector, which was comparatively lower than that of other developing countries to begin with, has been seriously eroded by increasingly compressed government wages and a general flight of human capital from many of the countries in the continent, leading to low quality of governance. The paper develops a simple theoretical framework to discuss these issues and the continent's experience with foreign technical assistance in supplementing the low level of domestic human capital. Copyright 1999 by Oxford University Press.