Search results
1 – 10 of over 10000The 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.
Details
Keywords
Ya’nan Zhang, Xuxu Li and Yiyi Su
This study aims to explore the extent to which Chinese multinational enterprises (MNEs) rely on supranational institution – the Belt and Road Initiative (BRI) – versus host…
Abstract
Purpose
This study aims to explore the extent to which Chinese multinational enterprises (MNEs) rely on supranational institution – the Belt and Road Initiative (BRI) – versus host country institutional quality to navigate their foreign location choice.
Design/methodology/approach
This study uses a conditional logit regression model using a sample of 1,302 greenfield investments by Chinese MNEs in 54 BRI participating countries during the period 2011–2018.
Findings
The results indicate that as a supranational institution, the BRI serves as a substitution mechanism to address the deficiencies in institutional quality in BRI participating countries, thereby attracting Chinese MNEs to invest in those countries. In addition, the BRI’s substitution effect on host country institutional quality is more pronounced for large MNEs, MNEs in the manufacturing industry and MNEs in inland regions.
Originality/value
This study expands the understanding of the BRI as a supranational institution for MNEs from emerging markets and reveals its substitution effect on the host country institutional quality. Furthermore, it highlights that MNEs with diverse characteristics gain varying degrees of benefits from the BRI.
Details
Keywords
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.
Details
Keywords
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.
Details
Keywords
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.
Details
Keywords
Swechha Chada and Gopal Varadharajan
This paper aims to examine the relationship between earnings quality and corporate cash holdings in an emerging economy. Existing literature posits that earnings quality is a…
Abstract
Purpose
This paper aims to examine the relationship between earnings quality and corporate cash holdings in an emerging economy. Existing literature posits that earnings quality is a result of information asymmetry and firms with lower earnings quality increases cash holdings, to shield the firm from future uncertainties. In this paper, the authors propose a ‘private benefits hypothesis’, which suggests that lower earnings quality is an indicator of opportunism and expropriation of resources in the firm, through tunneling or excessive executive compensations. As a result, firms with lower earnings quality increase cash holdings in their control, to increase their private benefits and to avoid the scrutiny of the external stakeholders. The authors further examine the monitoring role played by institutional investors on cash holdings, with varying degrees of earnings quality.
Design/methodology/approach
This study uses an unbalanced panel data sourced from Prowessdx, from 2000 to 2019. The analysis employs 20,231 firm-year observations from 2,421 firms. Earnings quality is calculated following Dechow and Dichev (2002).
Findings
Empirical analysis confirms that the firms with higher earnings quality reduce cash. Further, institutional investors reduce the cash holdings in firms with higher earnings quality. Institutional investors effectively reduce the cash only in firms with at least 10% of equity shareholding. The results are robust to alternative measures of earnings quality and endogeneity concerns.
Originality/value
This study diverges from the information asymmetry hypothesis in the existing literature on earnings quality and cash holdings and highlights the underlying private benefits hypothesis, that will impact cash holdings. Next, the 10% institutional shareholding is important in the Indian context as it represents the minimum threshold at which block holders can request extraordinary general meetings (Section 100 of the Companies Act 2013) or the involvement of the National Company Law Tribunal (NCLT) (Section 213 of the Companies Act 2013). This study highlights that unlike in Anglo-Saxon economies, institutional investors or other minority shareholders are empowered by the Companies Act 2013 to play a vital role in corporate governance with a mere 10% equity.
Details
Keywords
Hung Son Tran, Thanh Dat Nguyen and Thanh Liem Nguyen
The purpose of this study is to carry out an empirical investigation about how the level of market concentration or competitiveness of the banking system and institutional quality…
Abstract
Purpose
The purpose of this study is to carry out an empirical investigation about how the level of market concentration or competitiveness of the banking system and institutional quality are associated with bank’s financial stability.
Design/methodology/approach
This study uses dynamic panel data techniques on the sample of 133 developing and emerging countries over the years 2002–2020.
Findings
The authors document several significant findings. First, there is evidence that bank stability is positively associated with the level of market concentration. The result is in line with the concentration–stability view that banks operating in a more concentrated market tend to be more stable than those in a less concentrated market. Second, the results confirm that the quality of the institutional environment plays a critical role in improving the stability of banks in developing and emerging countries. Third, the authors find that institutional development can moderate the effect of market concentration (or competitiveness of the banking system) on bank stability. Specifically, the results show that better institutional quality enhances the positive influence of bank concentration on the bank’s financial stability in developing and emerging countries. These results are robust to different specifications with the alternative measures of bank stability and market concentration.
Originality/value
This study provides further understanding regarding the effects of the level of market concentration or competitiveness of the banking system and institutional quality on bank stability in 133 developing and emerging countries over the years 2002–2020.
Details
Keywords
Yuxiao Ye, Yiting Han and Baofeng Huo
In this research, we explore the adverse impact of foreign ownership on operational security, a critical operational implication of the liability of foreignness (LOF).
Abstract
Purpose
In this research, we explore the adverse impact of foreign ownership on operational security, a critical operational implication of the liability of foreignness (LOF).
Design/methodology/approach
The empirical analysis is based on a multi-country dataset from the World Bank Enterprises Survey, which contains detailed firm-level information from over 8,902 firms in 82 emerging market countries. We perform a series of robustness checks to further confirm our findings.
Findings
We find that a high ratio of foreign ownership is associated with an increased likelihood of security breaches and higher security costs. Our results also indicate that high levels of host countries’ institutional quality and firms’ local embeddedness can mitigate such vulnerability in operational security.
Originality/value
This study is one of the first to uncover the critical operational implication of the LOF, indicating that a high ratio of foreign ownership exposes firms to operational security challenges.
Details
Keywords
Factors of production (labour, land, capital), technology and technical progress are usually cited as the main sources of economic growth and development. However, there are a…
Abstract
Factors of production (labour, land, capital), technology and technical progress are usually cited as the main sources of economic growth and development. However, there are a number of other factors that have a significant impact on the possibilities and extent of their use or their further improvement and development. These factors undoubtedly include the institutional environment, within which corruption is also a consideration. In this chapter, attention will be focused on the various institutional variables that are used to assess the quality of a country's institutional environment, including corruption. A number of studies have shown that a quality institutional environment and low levels of corruption are prerequisites for long-term economic growth. Using an analysis of individual indicators of the Worldwide Governance Indicators (WGIs), published annually by the World Bank, supplemented by the Corruption Perception Index (published by Transparency International), we look at where Czechia has moved over the last decade or two in terms of institutional quality and corruption.
Details
Keywords
Sharadendu Sharma and Rahul Arora
Participation in global value chains (GVCs) is increasingly related to the economic growth of any country. The conceivable beneficial impact of GVCs on economic growth differs…
Abstract
Purpose
Participation in global value chains (GVCs) is increasingly related to the economic growth of any country. The conceivable beneficial impact of GVCs on economic growth differs across countries and could be modified with the countries' domestic institutional arrangements. However, ignoring the complementarity between the components of institutional quality led to ignorance of the institutional imbalance present in the country. Hence, the primary purpose of this study is to examine the role of institutional imbalance as a moderating variable between GVC participation and economic growth from 2000 to 2018.
Design/methodology/approach
To address the issue of endogeneity among the variables in the model, the study employs the generalized methods of moments (GMM) as an econometric analysis method.
Findings
The study finds that well-functioning domestic institutions facilitate the positive impact of GVC participation on economic growth. Conversely, an increased institutional imbalance harms the relationship between GVC participation and economic growth. These findings emphasize a balanced portfolio of institutional components. It advocates the holistic development of each component to reap greater benefits for GVC participation for any country. The study highlights that the weakness in one of the components must be addressed rather than substituted by increasing the strength of another component.
Research limitations/implications
The policies should be framed to improve the weakest component first, followed by other components of institutional quality. Simultaneous reforms involving all the dimensions of institutional quality would smoothen the path of transforming GVCs trade to the country's economic development. Additionally, the high institutional imbalance can provide a bird's eye view to policymakers to work on specific aspects of institutional quality more rigorously.
Originality/value
The existing literature has used a combined measure of institutional quality as a mediator variable while measuring the impact of GVC participation on economic growth. While using a combined measure, it ignores the complementarity among its components. Assuming substitutability among various components may lead to an incorrect estimation. Using the arguments proposed by Bolen and Sobel (2020), the present study considers the existence of complementarity among various components of institutional quality. It calculates the institutional imbalance used as a moderating variable while estimating the impact of GVC participation on economic growth.
Details