Corporate Governance and Safety in the Aviation Industry

Abstract

This study examines the impact of corporate governance on airline safety. Using data from seventy countries during the period 1990 to 2016, we observe a negative relationship between indicators of quality of corporate governance and the accident rate of an airline. Specifically, our results suggest that airlines with less qualified and busier directors, as well as airlines with a higher degree of director succession, are subject to more frequent accidents. Alternatively, the longer the tenure of the CEO, the lower the number of accidents. As might be expected, the results also show that airlines based in countries with more stringent legal regulations, stronger law enforcement, and better air transport infrastructure have better safety performance.

Keywords: Corporate governance, Airline accidents, Aviation safety, Government Policy and Regulation

JEL Classification: G30 G38 G34