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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.

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.

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.

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.

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.

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.

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.

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.

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.

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).

The study uses the system generalized method of moments and uses data spanning from 1989 to 2020 from 26 SSA countries.

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.

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.

This study attempts to assess the role that institutional quality (IQ) plays in influencing inflows and outflows of Foreign Direct Investment (FDI) for BRICS nations as burgeoning FDI is flowing into and out of these countries. Moreover, this paper explores the impact of individual governance indicators separately on the FDI flows.

The study analyses this nexus for these emerging economies for the period 1996–2019 using autoregressive distributed lag technique.

The study indicates a significant and positive coefficient for IQ in India and South Africa, suggesting that improving IQ would enhance the IFDI. However, for outward FDI (OFDI)–IQ linkage, the results show a negatively significant impact of IQ on OFDI for Brazil and Russia. Additionally, the authors observe control of corruption as a significant institutional component for attracting inward FDI for Brazil, India and South Africa, whereas it is an insignificant factor for Russia and China. Further, the authors notably find that upgrading the governance indicators will decrease the level of OFDI for Brazil, Russia, China and South Africa. On the contrary, findings suggest that improving the IQ will foster the OFDI for India.

This study uses time-series analysis instead of cross-country analysis (used extensively in literature), avoiding heterogeneity. Further, this study explores the IFDI–IQ link for BRICS nations, which are captivating a significant chunk of IFDI, and still not given much attention in the extant literature. Moreover, the authors identify the impact of IQ on the OFDI, neglected by the existing studies.

In this research, we explore the adverse impact of foreign ownership on operational security, a critical operational implication of the liability of foreignness (LOF).

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.

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.

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.

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.

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.

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.

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.

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.

The operation mode of enterprises will affect its resource commitment in the host country, involving different costs and time, as well as risks. Yet, the current state of knowledge about how the institutional environment affects the operation mode change of international construction enterprises is equivocal. This study aims to explore the impact of a host country's institutional environment on the operation mode change of international construction enterprises.

First, this study proposes a model on the impact of the institutional environment on the operation mode change of international construction enterprises. Second, this study used the Worldwide Governance Indicators (WGI) published by the World Bank and a questionnaire survey to collect data. Finally, the study employs a multiple regression methodology to test the hypothesis and discusses the results.

Results highlight that the important impact of the institutional environment on the operation mode change of international construction enterprises. The results showed that enterprises are more willing to increase resource commitments under the condition of stable institutional environment. In addition, enterprises' market-specific experience and general international experience, as moderating variables, weaken the impact of the institutional environment on the operation mode change. However, general international experience has no significant moderating effect.

The findings of this study provide practical implications for the investment risk assessment of international construction enterprises. Enterprises need to consider the change in institutional quality and institutional instability of the host country, as well as their own international experience when changing operation mode.

This study extends internationalization theory to the international construction field and provided theoretical guidance for the mechanism of operation mode change of international construction enterprises.

This paper aims to assess the short- and long-run effects of the interaction between institutional quality and financial development (FD) on the competitiveness of the WAEMU economy over the period 2007–2018.

The methodology consisted of cross-referencing a synthetic indicator of FD with indicators of institutional quality and then estimating an auto regressive distributed lag model.

The results of the pooled mean group and dynamic fixed effect estimation show a positive and significant impact of this interaction on the competitiveness of the economy in the long run. In the short run, the results are quite similar to those in the long run for the direct effects but different for the crosses. Also, the analysis of country specificity shows that the results are similar to those in the short run since the interaction between FD and institutional quality (political stability and government effectiveness) negatively affects the competitiveness of Burkina Faso, Ivory Coast and Mali, and positively affects the competitiveness of Benin and Senegal.

These results suggest the need for effective policies to improve the quality of institutions to enhance the mobilization of financial resources through FD to ensure the competitiveness of economies. Improving the quality of the political and institutional environment is a prerequisite for economic competitiveness.

The paper is in line with the New Institutional Economics that developed in the 1970s. This referential framework is a heterogeneous body of work that encompasses works whose common point is the determination of the role of institutions in economic coordination. Unlike previous studies, which have focused on the contribution of the interaction between institutional quality variables and FD on economic growth, this paper analyzes the effects of this interaction on economic competitiveness. It, therefore, constitutes a contribution to this literature and aims primarily to fill this gap.

The main purpose of this research is to examine the impact of institutional quality and sectoral employment on environmental degradation in developing countries. This paper also re-examined the validity of the Environmental Kuznets Curve (EKC) hypothesis and estimated the long run impact of explanatory variables on CO₂ emissions.

In this paper, the balanced panel data for the period 2002–2016 was used based on data availability and applied two-step SYS-GMM estimators.

The results showed that institutional quality such as government effectiveness (GE) and the rule of law (RL) reduce CO₂ emissions and promote environmental quality in developing countries. Interestingly, the authors found new evidence that employment in agriculture and industry has a positive impact on pollution, while employment in the service sector was negatively associated with CO₂ emissions, and the validity of the EKC hypothesis was confirmed. In addition, the research suggests that strong institutional frameworks and their effective implementation are the most important panacea and should be treated as a top priority to counteract environmental degradation and achieve the UN Sustainable Development Goals.

This is the first study to examine the short run and long run effects of institutional quality and sectoral employment on environmental degradation using the balanced panel data for a large sample of developing countries. This paper also used a special technique of Driscoll and Kraay standard error approach to confirm the robustness results and showed the different roles of sectoral employment on environmental quality.

This study investigates the relationship between bank capital and liquidity creation and further examines the effect that institutional quality has on this relationship in Sub-Saharan Africa (SSA).

The data comprise 41 universal banks in nine SSA countries from 2010 to 2022. The study employs the two-step system generalized methods of moments and further uses alternative estimators such as the fixed-effect and two-stage least squares methods.

The empirical results show that bank capital has a direct positive and significant effect on liquidity creation. In addition, the positive effect of bank capital on liquidity creation is enhanced, particularly in a strong institutional environment. The results imply that nonconstraining capital regulatory policies bolster bank solvency, improve risk-absorption capacity and increase liquidity creation.

This study has several policy implications. First, it provides empirical evidence on the position of banks in SSA on the financial fragility and risk-absorption hypothesis of bank capital and liquidity creation debates. This study shows that the effect of bank capital on liquidity creation in SSA countries is positive and supports the risk-absorption hypothesis. Second, this study highlights that a country's quality institutions can complement bank capital to increase liquidity creation. In addition, this study highlights that nonconstraining capital regulatory policies will bolster bank solvency, improve risk-absorption capacity and increase liquidity creation.

The novelty of this study is that it introduces the country's quality institutional environment into bank capital and liquidity creation links for the first time in SSA.