Corporate Governance Quality: Trends and Real Effects

43 Pages Posted: 12 Jan 2007

See all articles by Gianni De Nicolo

Gianni De Nicolo

Johns Hopkins University - Carey Business School; CESifo (Center for Economic Studies and Ifo Institute)

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Kenichi Ueda

University of Tokyo - Faculty of Economics

Date Written: January 2007

Abstract

This paper constructs a composite index of corporate governance quality, documents its evolution from 1994 through 2003 in selected emerging and developed economies, and assesses its impact on aggregate and corporate growth and productivity. Our investigation yields three main findings. First, corporate governance quality in most countries has overall improved, although to varying degrees and with a few notable exceptions. Second, the data exhibit cross-country convergence in corporate governance quality with countries that score poorly initially catching up with countries with high corporate governance scores. Third, the impact of improvements in corporate governance quality on traditional measures of real economic activity-GDP growth, productivity growth, and the ratio of investment to GDP - is positive, significant, and quantitatively relevant, and the growth effect is particularly pronounced for industries that are most dependent on external finance.

Keywords: Governance, Transparency, Economic growth, Gross domestic product, Productivity, Investment

JEL Classification: G30, G34

Suggested Citation

De Nicolo, Gianni and Laeven, Luc A. and Ueda, Kenichi, Corporate Governance Quality: Trends and Real Effects (January 2007). IMF Working Paper No. 06/293. Available at SSRN: https://ssrn.com/abstract=956757

Gianni De Nicolo

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States
(410) 234-4507 (Phone)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Luc A. Laeven (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Kenichi Ueda

University of Tokyo - Faculty of Economics ( email )

7-3-1 Hongo, Bunkyo-ku
Tokyo 113-0033
Japan

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