The Role of Country Governance on the Relationship between Firm Governance and Firm Performance: Evidence from Emerging Countries Evidence from emerging countries

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Soong Yu Qing Hooy Chee Wooi Abdul Hadi Zulkafli

Abstract

This study examines the moderating effect of country governance on the relationship between firm governance and firm performance in emerging countries. We employ a panel regression model on 21 emerging countries over the period 2007 to 2016. We find that poor firm governance is negatively linked to Tobin’s Q, but positively linked to return on assets (ROA) and return on equity (ROE), while country governance has a consistent positive moderating effect on all three performance variables. Specific country governance dimensions include voice and accountability, government effectiveness, regulatory quality, the rule of law and control of corruption also have significant positive
moderating effects. We further find that only a strong legal environment can compensate for the ineffectiveness of firm governance but not in a weak legal environment and only countries with strong country governance can positively affect firm value.

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How to Cite
YU QING, Soong; CHEE WOOI, Hooy; ZULKAFLI, Abdul Hadi. The Role of Country Governance on the Relationship between Firm Governance and Firm Performance: Evidence from Emerging Countries. Institutions and Economies, [S.l.], p. 35-68, dec. 2020. ISSN 2232-1349. Available at: <https://ijie.um.edu.my/article/view/17044>. Date accessed: 27 jan. 2021.
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