Nayef Alshammari, Wael Alshuwaiee and NourElhuda Aleissa

DOI: https://doi.org/10.6000/1929-7092.2019.08.91

Published: 16 December 2019

Abstract: This study identifies the relative impact of “good” governance on comparative economic growth performance for a large sample of countries classified based on their relative income distributions, namely; low income countries, middle income countries, and high income countries. The data set covers 100 countries throughout the period for 1996 to 2018. The empirical model is estimated with econometric pooled Ordinary Least Squares (OLS), random effects, fixed effects techniques and using the Hausman Test. According to the appropriate fixed effects estimated model, findings suggest that “good” governance generally has a positive and statistically significant effect on economic growth across all countries in the sample. However, results confirm that the impact of “good” governance differs according to conditional income distributions among countries. Indicators of “good” governance for low income countries are more likely to affect economic growth than those for middle and high income countries. Specifically, findings show that the dominant governance indicators for economic growth in low income countries include government effectiveness, political stability, regulatory quality, rule of law, and voice and accountability. Findings also show that control of corruption seems not to influence economic growth for high and low income countries. There are some policy implications that can be drawn for countries to develop a variety of policies toward the role of governance in the economy according to their income distributions.

Keywords: Good governance, economic growth, panel data, income distribution.

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Aswin Rivai, Joned Ceilendra Saksana and Kusnadi

DOI: https://doi.org/10.6000/1929-7092.2019.08.92

Published: 17 December 2019

Abstract: The motivation of the studies is to investigate the impact of foreign shareholding originated from developed and developing countries on the efficiency of acquired local banks in Indonesia during 2007-2017 by including Corporate Governance as a moderating variable.

Methodology: Using the secondary aggregate data of 29 commercial banks acquired by foreign shareholders, a panel regression model using econometrics methods of GLS, and DEA was applied to examine the effects of percentage of foreign shareholdings on efficiency of the acquired local banks. The main findings; First, percentage of foreign shareholdings positively affecting efficiency of acquired local banks only if the foreign shareholders is originated from developed countries. Second, the level of economic advancement of the country of origin of foreign shareholders has significant effects on the efficiency of the acquired local banks. Third, the increase in the size of the Board of Directors tends to decrease the efficiency of the acquired local banks and fourth, the presence of Foreign Director has a positive moderating effect on strengthening the effect of percentage of foreign shareholdings on the efficiency of the acquired local banks. Overall, the originality of this studies is that the percentage of foreign shareholdings and its country of origin are two combined factors that cannot be separated in affecting the level of efficiency of its acquired local bank and the fact of significant positive moderating effect of Foreign Director. As policy consideration, monetary authority need to perform strict due diligence on prospective foreign shareholders specifically originated from developing countries, advise banks to maintain the existence of Foreign Director and to encourage small local banks to be merged prior to the acquisition by foreign shareholders.

Keywords: Efficiency, foreign shareholdings, corporate governance, agency theory, resource-based theory.

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