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1 – 10 of over 65000Abubakar Musah, Godfred Aawaar and Eric Nkansah
This paper investigates the moderating role of institutional quality in the relationship between public education financing and educational quality in Sub-Saharan Africa (SSA).
Abstract
Purpose
This paper investigates the moderating role of institutional quality in the relationship between public education financing and educational quality in Sub-Saharan Africa (SSA).
Design/methodology/approach
This paper uses a two-step system generalised method of moments (GMM) to investigate the dynamic relationships among the variables using data from the World Bank covering the periods 2002–2020 for 46 SSA countries.
Findings
The results show that institutional quality moderates the effect of public education financing on educational quality at SSA’s primary, secondary and tertiary levels. This finding shows that improved institutional quality enhances the effectiveness of public educational investments.
Practical implications
The findings of this study imply that policymakers seeking to enhance educational quality must not only increase educational investments but also institute measures to improve institutional quality.
Originality/value
Prior studies fail to examine the moderating role of institutional quality in the nexus between public education financing and educational quality. This study analyses the role of institutional quality in the public education financing–educational quality nexus in SSA. The findings of this study contribute to improving the return on public education financing in SSA.
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The studies that explore the impacts of national intellectual capital on informal economy are scant. Moreover, the effect of an external factor such as institutional quality that…
Abstract
Purpose
The studies that explore the impacts of national intellectual capital on informal economy are scant. Moreover, the effect of an external factor such as institutional quality that moderates this relationship has largely been neglected in previous studies. Institutions are considered important pillars to accumulate national intellectual capital and reduce shadow economy. As such, this paper aims to investigate how institutional quality moderates the effects of national intellectual capital on informal economy in 17 Asian countries from 2000 to 2018.
Design/methodology/approach
This paper uses the generalized method of moments techniques, which allow cross-sectional dependence and slope homogeneity in panel data, to examine the moderating role of institutional quality on the relationship between national intellectual capital and informal economy. Various tests are conducted to ensure the robustness of the findings.
Findings
Empirical findings from this paper indicate that an increase in national intellectual capital and institutional quality declines the informal economy. Interestingly, better institutional quality aggravates the negative effects of national intellectual capital on reducing the size of informal economy. The author also finds that enhancing international trade and economic growth results in a decrease in the informal economy in Asian countries.
Practical implications
Empirical findings offer policymakers an indication of the relationships between national intellectual capital, institutional quality and informal economy, pointing out that national intellectual capital and institutional quality should be strengthened to allow Asian countries to limit the informal economy.
Originality/value
This study provides a conceptual model through which the moderating role of institutional quality on the national intellectual capital–informal economy nexus can be recognized. This approach has thus far not been investigated in the existing literature. To the best of the author’s knowledge, this study makes an original contribution to the empirical of national intellectual capital and informal economy nexus and produces new insights into the fields of the moderating effects of institutional quality on this nexus.
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Chensheng Xu, Feng Yao, Fan Zhang and Yonghong Wang
This study aims to investigate the influence of the Confucius Institute (CI) on outward foreign direct investment (OFDI) by China and its potential interaction with cultural…
Abstract
Purpose
This study aims to investigate the influence of the Confucius Institute (CI) on outward foreign direct investment (OFDI) by China and its potential interaction with cultural difference and institutional quality in host countries.
Design/methodology/approach
In the empirical study, the gravity model is adopted as the benchmark to investigate the effects of CI on China's OFDI using the ordinary least squares or Poisson Pseudo Maximum Likelihood estimators. Panel data on China's OFDI from 2004 to 2015 are used. Cultural difference and institutional quality are included explicitly as control variables to examine the effects of CI on China's OFDI.
Findings
CI has a significant positive effect on China’s OFDI, and this effect depends on the cultural difference and institutional quality of the host country. The impact of CI on China’s OFDI is more prominent in host countries with a smaller cultural difference or lower institutional quality.
Originality/value
CI is a comprehensive platform for foreign cultural exchange and signifies the rebirth of Confucianism in China. The present study shows that CI can stimulate the growth of China’s OFDI, with implications for other Asian countries influenced by Confucianism. Based on the results of the study, strategies for “Going Global” and encouraging economic growth based on cultural exchange and the recognition of host country heterogeneities are proposed.
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Fouad Jamaani, Manal Alidarous and Esraa Alharasis
This study aims to examine the impact of the International Financial Reporting Standards (IFRS) mandate and differences in national institutional quality on the underpricing of…
Abstract
Purpose
This study aims to examine the impact of the International Financial Reporting Standards (IFRS) mandate and differences in national institutional quality on the underpricing of Initial Public Offering (IPO) companies.
Design/methodology/approach
Multiple Difference-in-Differences (DiD) ordinary least squares estimations were conducted for 100 corporations listed on the Saudi Arabian stock market using country-level institutional quality data from 2005 to 2017.
Findings
IFRS requirements and improvements in institutional quality have a combined effect on minimizing IPO underpricing. The analysis of the combined impact of IFRS requirements and differences in transparency revealed that IPO vendors leave $5 on average for IPO investors to cash out post the IFRS mandate, compared to $29 previously. Thus, IFRS serves as a quality certification instrument that alleviates IPO investors’ ex ante uncertainties, even in nations with undeveloped institutions.
Practical implications
The findings may be beneficial to researchers and policymakers. The results suggest that institutional quality enhancements and obligatory IFRS implementation highlight IFRS’s synergistic influence on the IPO market. While European harmonization efforts drove the adoption of IFRS in Europe in 2005, Saudi Arabia’s adoption of IFRS is not being driven by such initiatives (Daske et al., 2008; Persakis and Iatridis 2017). In reality, when IFRS was officially imposed in Saudi Arabia in 2008, it, like many other emerging market nations, made considerable reforms to its formal institutions. However, research on the combined impact of IFRS and disparities in institutional quality in emerging IPO markets remains sparse. Emerging markets represent more than half of economies that use IFRS. Therefore, to the best of the authors’ knowledge, this study is the first to conduct an empirical investigation to identify this combined effect in emerging countries using the DiD analytical technique. Equity market legislators remain concerned regarding IPO underpricing, as it has a detrimental influence on economic growth (Bova and Pereira, 2012; Jamaani and Ahmed, 2021; Mehmood et al., 2021). Depending on the degree of information asymmetry in national stock markets, underpricing costs increase the cost of going public for entrepreneurs. Consequently, prospective private firms are discouraged from accessing equity financing through the stock markets. This is likely to impede private sector development plans, causing a negative effect on economic growth.
Originality/value
Emerging countries represent over 50% of the IFRS mandating economies. However, there is insufficient research on the combined effect of IFRS requirements and improvements in institutional quality in developing IPO markets. To the best of the authors’ knowledge, this study is the first empirical attempt to identify this combined effect in one of the largest developing countries. The results may aid academics and policymakers in better understanding the interaction between these two variables.
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Taiwo Akinlo and Busayo Olubunmi Aderounmu
This study aims to provide an empirical investigation into rising capital flight and the role of institutional quality to mitigate its effect on the real sector in sub-Saharan…
Abstract
Purpose
This study aims to provide an empirical investigation into rising capital flight and the role of institutional quality to mitigate its effect on the real sector in sub-Saharan Africa (SSA).
Design/methodology/approach
The study uses the system generalized method of moments and uses data spanning from 1989 to 2020 from 26 SSA countries.
Findings
The findings show that capital flight has no direct impact on the real sector while institutional quality adversely impacted the agricultural and industrial sectors. The study also found that institutional quality is unable to mitigate the effect of capital flight on the industrial sector.
Originality/value
This study investigates if institutional quality mitigates the impact of capital flight on the real sector proxied by industrial value-added and agriculture value-added.
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Cristian Barra and Pasquale Marcello Falcone
The paper aims at addressing the following research questions: does institutional quality improve countries' environmental efficiency? And which pillars of institutional quality…
Abstract
Purpose
The paper aims at addressing the following research questions: does institutional quality improve countries' environmental efficiency? And which pillars of institutional quality improve countries' environmental efficiency?
Design/methodology/approach
By specifying a directional distance function in the context of stochastic frontier method where GHG emissions are considered as the bad output and the GDP is referred as the desirable one, the work computes the environmental efficiency into the appraisal of a production function for the European countries over three decades.
Findings
According to the countries' performance, the findings confirm that high and upper middle-income countries have higher environmental efficiency compared to low middle-income countries. In this environmental context, the role of institutional quality turns out to be really important in improving the environmental efficiency for high income countries.
Originality/value
This article attempts to analyze the role of different dimensions of institutional quality in different European countries' performance – in terms of mitigating GHGs (undesirable output) – while trying to raise their economic performance through their GDP (desirable output).
Highlights
The paper aims at addressing the following research question: does institutional quality improve countries' environmental efficiency?
We adopt a directional distance function in the context of stochastic frontier method, considering 40 European economies over a 30-year time interval.
The findings confirm that high and upper middle-income countries have higher environmental efficiency compared to low middle-income countries.
The role of institutional quality turns out to be really important in improving the environmental efficiency for high income countries, while the performance decreases for the low middle-income countries.
The paper aims at addressing the following research question: does institutional quality improve countries' environmental efficiency?
We adopt a directional distance function in the context of stochastic frontier method, considering 40 European economies over a 30-year time interval.
The findings confirm that high and upper middle-income countries have higher environmental efficiency compared to low middle-income countries.
The role of institutional quality turns out to be really important in improving the environmental efficiency for high income countries, while the performance decreases for the low middle-income countries.
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Bana Abuzayed and Nedal Al-Fayoumi
This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration.
Abstract
Purpose
This study aims to examine the influence of institutional quality on the relationship between economic growth and banking sector concentration.
Design/methodology/approach
The sample of our study covers 15 Middle East and North African (MENA) countries over the period 1996-2010. The results are estimated based on static and dynamic panel data analysis.
Findings
The results reveal a positive and significant relationship between economic growth and each banking concentration and institutional quality. The results support the argument that banking concentration and institutional quality are matters for growth in MENA countries. The results also indicate that the interaction variable between concentration and institutional quality is negative and significant.
Research limitations/implications
Building on Petersen and Rajans’ (1995) argument, this study suggests that in the absence of an appropriate level of institutional quality, banks in MENA region can depend on their market power to protect their benefits. This can be achieved by building long-term relationships with their borrowers to provide continuing credit and subsequently enhancing economic growth.
Practical implications
Under the low level of institutional quality in MENA countries, regulators and decision-makers should thoroughly think before imposing any policy that aims to restrict banking market power because such action could harm the economy.
Social implications
In developing countries, banking concentration may have a positive impact on the economy. This outcome may lead to an improvement in the standard of living for the society.
Originality/value
This is the first known study, to the best of our knowledge, that examines the role of institutional quality in shaping the relationship between economic growth and banking concentration in MENA countries. The authors opted to select MENA countries’ data because they generally reflect an institutional setting similar to many developing countries. Therefore, the results could be applicable in many developing economies and will encourage other researchers to investigate this proposition.
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Ahmed Yamen, Cemil Kuzey and Muhammet Sait Dinc
This paper examines the link between culture, institutional quality and real earnings management and accrual earnings management by combing the study by Hofstede (2001) and…
Abstract
Purpose
This paper examines the link between culture, institutional quality and real earnings management and accrual earnings management by combing the study by Hofstede (2001) and Enomoto et al. (2015). The paper tries to test the effect of culture on institutional quality and both real earnings management (REM) and accrual earnings management (AEM).
Design/methodology/approach
The sample of the research paper includes 38 countries. Hofstede cultural dimensions are used to measure cultural values. Public governance indicators published by the World Bank are used as a proxy for measuring the institutional quality. Earning management scores constructed by Enomoto et al. (2015, p. 191) are used for measuring real earnings management (REM) and accrual earnings management (AEM). Partial Least Square (PLS) based Structural Equation Modelling (SEM) is used to test the relationship between culture, institutional quality and earnings management.
Findings
The results support the relationship between culture and institutional quality. Also, the results reveal a significant relationship between culture and accrual earnings management, but an insignificant relationship between culture and real earnings management. In addition to that, another important finding is that institutional quality has a significant impact on real earnings management, but has no significant effect on accrual earnings management.
Practical implications
The results suggest that standard setters need to consider the quality of institutions to improve the quality of financial reports. Also, it highlights the role of both formal and informal cultures in shaping financial reports.
Originality/value
For the best of our knowledge, this the first time to test the link between culture and institutional quality and comparing the impact on both real earnings management and accrual earnings management.
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Haman Mahamat Addi and Attahir Babaji Abubakar
This paper analyzes the effect of institutional quality and economic freedom on investment and economic growth in sub-Saharan Africa (SSA).
Abstract
Purpose
This paper analyzes the effect of institutional quality and economic freedom on investment and economic growth in sub-Saharan Africa (SSA).
Design/methodology/approach
Focusing on a panel of 27 countries, the study employed the panel fixed and random effect models to analyze data spanning from 2005 to 2018. The study also employed the Wu–Hausman test to determine if the endogeneity problem exists in the model.
Findings
The findings of the study show that individually, an improvement in economic freedom stimulates economic growth while the improvement in institutional quality is effective in spurring investment. However, the interaction effect of improvement in institutional quality and economic freedom is the stimulation of both investment and economic growth. The findings are robust to alternative model specifications.
Practical implications
The study implies that for SSA countries to effectively achieve higher investment and economic growth outcomes, there is the need to simultaneously strengthen institutional quality and improve economic freedom. Focusing on either of the factors without the other leads to less desirable growth and investment outcomes.
Originality/value
The study examined the combined influence of institutional quality and economic freedom on investment and growth in SSA. To the best of the authors’ knowledge, no study has investigated this in the context of SSA.
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The purpose of this paper is to explore the location decision of multinationals across major cities in Latin America. Based on agglomeration economics and institutional theory…
Abstract
Purpose
The purpose of this paper is to explore the location decision of multinationals across major cities in Latin America. Based on agglomeration economics and institutional theory, the paper explores whether institutional quality of a city can temper the attraction of agglomeration factors.
Design/method/approach
The paper analyzes the geographic dispersion of three global fast-food franchise networks in 45 Latin American cities. The explanatory variables are horizontal aggregation of other multinationals and the institutional quality of a city. The direct and indirect impacts of horizontal agglomeration are explored through negative binomial regression with controls for city population and economic power [gross domestic product (GDP)].
Findings
The key finding is that location choice of fast-food networks is driven principally by market conditions and to a lesser extent by horizontal agglomeration. The institutional quality of a city has a positive influence on the agglomeration of fast-food networks. A city with strong institutional quality makes this relation stronger.
Research limitations
Other multinational and national fast-food franchises are not included in the paper. Future studies should include a greater number of global and local fast-food franchisers.
Practical implications
The positive reinforcements of agglomeration and strong institution are important for the investment location decision of fast-food multinationals. The institutional quality of the city should be an important consideration in the location decision as it expands regionally and within a country. Smaller cities may not offer the agglomeration advantages of the large metropolitan areas, but their good institutional quality may reduce the business costs for multinationals.
Social implications
Large cities in Latin America tend to reap the benefits of agglomeration. As a result, smaller secondary cities struggle to be relevant in generating economic activity and attracting private investments. One strategy to achieve relevance is to build strong and transparent institutions and a solid business environment.
Originality/value
The inclusion of institutional quality at the city level as moderation of the agglomeration factors influencing the location decision of a multinational is original. This paper contributes to our understanding of the importance of regional cities in attracting the investment of multinational firms.
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