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

Evidence from emerging countries

Authors

  • Soong Yu Qing School of Management, Universiti Sains Malaysia, 11800 Gelugor, Penang, Malaysia.
  • Hooy Chee Wooi School of Management, Universiti Sains Malaysia, 11800 Gelugor, Penang, Malaysia.
  • Abdul Hadi Zulkafli School of Management, Universiti Sains Malaysia, 11800 Gelugor, Penang, Malaysia.

DOI:

https://doi.org/10.22452/IJIE.vol13no1.2

Keywords:

Country governance, Emerging countries, Firm performance, Firm governance, Tobin’s Q

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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Published

2020-12-30

How to Cite

Yu Qing, S., Chee Wooi, H., & Zulkafli, A. H. (2020). The Role of Country Governance on the Relationship between Firm Governance and Firm Performance: Evidence from Emerging Countries: Evidence from emerging countries. Institutions and Economies, 13(1), 35–68. https://doi.org/10.22452/IJIE.vol13no1.2

Issue

Volume 13, Issue 1 (2021)

Section

Articles

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