The strong influence of sound corporate governance on economic Growth: evidence from Zimbabwe

  • Received June 1, 2017;
    Accepted June 22, 2017;
    Published September 1, 2017
  • Author(s)
    Alexander Maune
  • DOI
    http://dx.doi.org/10.21511/ppm.15(2-2).2017.13
  • Article Info
    Volume 15 2017, Issue #2 (cont. 2), pp. 445-455
  • TO CITE АНОТАЦІЯ
  • Cited by
    5 articles
  • 1213 Views
  • 611 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

The study examined the impact of sound corporate governance on economic growth in Zimbabwe using an econometric model. A multiple linear regression analysis was employed to examine the relationship. Secondary data for the period 1968 to 2015 was collected from World Bank’s Worldwide Governance and World Development Indicators databases. It was found that sound corporate governance is significantly correlated to economic growth in Zimbabwe in a positive and negative manner with a p-value of 0.000023235 at 5% level of confidence. On one hand, control of corruption is negatively significantly related to economic growth and, on the other hand, political stability and absence of violence/terrorism positively significantly related to economic growth. Government effectiveness, regulatory quality, rule of law and voice and accountability are insignificant in influencing economic growth in Zimbabwe at 5% level of significance. The findings from this article will assist policy formulation, policy implementation and future research. This article, however, is of great importance to government, private sector and the academia.

view full abstract hide full abstract
    • Figure 1. Investor Protection Indices for selected countries as of 2016
    • Table 1. Zimbabwe’s National Code of Corporate Governance structure
    • Table 2. Investor Protection Indicators
    • Table 3. Investor Protection Indices for selected countries as of 2016
    • Table 4. Explanations of variables used in the regression model
    • Table 5. Regression analysis, influence of sound corporate governance on economic growth in Zimbabwe
    • Table 6. Regression analysis, factor analysis – principal component extraction
    • Table 7. Stepwise regression analysis
    • African Development Bank (2011). Private Sector Development as an Engine of Africa’s Economic Development: African Development Report, AFDB, Tunis.
    • Aggarwal, R., Erel, I., Stulz, R., & Williamson, R. (2009). Differences in Governance Practice between U.S. and Foreign Firms: Measurement, Causes, and Consequences. Review of Financial Studies, 22, 3131-3169.
    • Ammann, M., Oesch, D., & Schmid, M. (2011). Corporate Governance and Firm Value: International Evidence. Journal of Empirical Finance, 18(1), 36-55.
    • Arora, R. U. (2014). Access to Finance: An Empirical Analysis. European Journal of Development Research, 26, 798-814.
    • Asker, J., Farre-Mensa, J., & Ljungqvist, A. (2015). Corporate Investment and Stock Market Listing: A Puzzle? Review of Financial Studies, 28(2), 342-90.
    • Ates, A., Gurarda, S., & Ozsoz, E. (2014). Ownership Structure and Corporate Governance in the Case of Turkey. MPRA Paper 58293.
    • Bebchuk, L. (2013). The Myth that Insulating Boards Serves Long- Term Value. Columbia Law Review, 113(6), 1637-1694.
    • Bebchuk, L., Kraakman, R., & Triantis, G. (1999). Stock Pyramids, Cross-Ownership and Dual Class Equity: The Creation and Agency Costs of Separating Control from Cash Flow Rights. Discussion Paper 249, Harvard Law School, Cambridge, MA.
    • Black, B. (2001). The Corporate Governance Behavior and Market Value of Russian Firms. Emerging Markets Review, 2, 89-108.
    • Black, B., Hasung J., & Woochan, K. (2006). Does Corporate Governance Affect Firms’ Market Values? Evidence from Korea. Journal of Law, Economics and Organization, 22, 366-413.
    • Brown, L., & Caylor, M. (2004). Corporate governance study links bad boards to higher risks and increased volatility. A Study Commissioned by ISS, February 4.
    • Brown, L., & Caylor, M. (2009). Corporate Governance and Firm Operating Performance. Review of Quantitative Finance and Accounting, 32(2), 129-144.
    • Charreaux, G. (1997). La creation de valeur de l’entreprise. Economica, Paris, France, 10.
    • Claessens, S. (2003). Corporate Governance and Development. Global Corporate Governance Forum 1, World Bank, Washington, D.C.: USA.
    • Claessens, S. (2006). Corporate Governance and Development. The World Bank Research Observer, 21(1), 91-122.
    • Cornett, M. M., McNutt, J. J., & Tehranian, H. (2009). The Financial Crisis: Did Corporate Governance affect the performance of publicly-traded U.S. Bank Holding companies? Journal of Corporate Finance, 15, 412-430.
    • De Paula, G. M. (2003). Governanca Corporativa no Brasil e Mexico: Estrutura Patrimonial. Praticas e PoliticasPublicas, Santiago do Chile, Cepal, 7-8.
    • Denis, D., & Serrano, J. (1996). Active Investors and Management Turnover Following Unsuccessful Control Contests. Journal of Financial Economics, 40(2), 239.
    • Dyck, A., & Zingales, L. (2004). Private Benefits of Control: An International Comparison. Journal of Finance, 59(2), 537-600.
    • Eisenberg, M. (1993). An Overview of the Principles of Corporate Governance. Business Lawyer, 48, 1271.
    • Gompers, P., Ishii, J., & Metrick, A. (2003). Corporate governance and equity prices. The Quarterly Journal of Economics, 118, 107-155.
    • Grossman, S., & Hart, O. (1982). Corporate Financial Structure and Managerial Incentive. In The Economics of Information and Uncertainty (pp. 107-140). Chicago: University of Chicago Press.
    • Holderness, C. (2003). A Survey of Blockholders and Corporate Control. Economic Policy Review, Federal Reserve Bank of New York, 9(1) Special Issue, 51-63.
    • Johnson, S., Boone, P., Breach, A., & Friedman, E. (2000). Corporate governance in the Asian financial crisis. Journal of Financial Economics, 58, 141-186.
    • Kaufmann, D., Kraay, A., & Mastruzzi, M. (2007). Growth and Governance: A Reply/Rejoinder. Journal of Politics, 69(2), 555-562.
    • Kaufmann, D., Kraay, A., & Mastruzzi, M. (2009). The Worldwide Governance Indicators: Methodology and Analytical Issues. World Bank Draft Policy Research Working Paper, Washington, D.C.
    • Kaufmann, D., Kraay, A., & Zoido-Lobaton, P. (1999). Aggregating Governance Indicators. World Bank Policy Research Working Paper, 2195, Washington, D.C.
    • Klapper, L., & Love, I. (2004). Corporate Governance, Investor Protection, and Performance in Emerging Markets. Journal of Corporate Finance, 10(5), 703-728.
    • Kutan, A. M. (2015). Finance, Development, and Corporate Governance. Emerging Economies, Emerging Markets Finance and Trade, 51(1).
    • La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1996). Law and Finance. Harvard Institute of Economic Research Working Paper 1768, Harvard University Institute of Economic Research, Cambridge, MA.
    • La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor Protection and Corporate Governance. Journal of Financial Economics, 58(1-2), 3-27.
    • Lan, L., & Varottil, U. (2015). Shareholder Empowerment in Controlled Companies: The Case of Singapore. In The Research Handbook of Shareholder Power, edited by Randall Thomas and Jennifer Hill, Cheltenham: Edward Elgar.
    • Lemmon, M. L., & Lins, K. V. (2003). Ownership structure, corporate governance, and firm value: evidence from the East Asian Financial crisis. Journal of Finance, 58(4), 1445-1468.
    • Liljeblom, E., & Maury, B. (2015). Shareholder Protection, Ownership, and Dividends: Russian Evidence. Emerging Markets Finance and Trade.
    • Maune, A. (2014). Corporate Governance in Zimbabwe: An Overview of its Current State. Journal of Asian Economic and Financial Review, 5(1), 167-178.
    • Maune, A. (in progress). Corporate Governance and Economic Growth in sub-Saharan Africa: An analysis. Journal of Panoeconomicus, Forthcoming.
    • Mitton, T. (2002). A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. Journal of Financial Economics, 64, 215-241.
    • Okpara, J. (2011). Corporate Governance in a Developing Economy: Barriers, Issues, and Implications for Firms. The International Journal of Business in Society, 11(2), 184-199.
    • Pass, C. (2004). The revised combined code and corporate governance: an empirical survey of 50 large UK companies. Managerial Law, 48, 467-478.
    • Posner, R. (1983). The Economics of Justice. Cambridge: Harvard University Press.
    • Rupeika-Apoga, R. (2014). Access to Finance: Baltic Financial Markets. Procedia Economics and Finance, 9, 181-92.
    • Shleifer, A., & Vishny, R. (1986). Large Shareholders and Corporate Control. Journal of Political Economy, 94(3), 461-488.
    • Tiwari, A. K. (2010). ‘Corporate Governance and Economic Growth. Economics Bulletin, 30(4), 2825-2841.
    • Weimer, J., & Pape, J. C. (1999). A taxonomy of system of Corporate Governance. Corporate Governance, 7, 152-166.
    • World Bank (2017). Doing Business 2017: Equal Opportunity for All. Washington, D. C.: World Bank.
Related Articles

  • Impact on poverty and income inequality in Malaysia’s economic growth

    Rabiul IslamORCID Researcher ID, Ahmad Bashawir Abdul Ghani , Irwanshah Zainal Abidin , Jeya Malar Rayaiappan doi: http://dx.doi.org/10.21511/ppm.15(1).2017.05
    Problems and Perspectives in Management Volume 15, 2017         Issue #1         pp. 55-62 Views: 12038 Downloads: 5746 TO CITE АНОТАЦІЯ

    Poverty and income inequality are extreme issues that still exist in Malaysia. Any rise in poverty and income inequality definitely affect economic growth. There are many great efforts taken by the government of Malaysia to eradicate poverty and to reduce the gap of income inequality which occurs since 1970’s. The incidence of poverty and income inequality is higher in rural areas compared to urban areas. This paper is mainly to study the level of poverty and income inequality in Malaysia together with government intervention to develop Malaysia’s economic growth. The research is focused among the working people at Ipoh, Perak. In this paper, questionnaire forms are being distributed to get information regarding the issue of poverty and income inequality. It also looks into the strategies taken by the government of Malaysia to eradicate poverty and income inequality. Few recommendations are given in terms of education policy, financial aid and assistance from government and non-government organization (NGO) to upgrade the standard and quality of living among the poor and lower-income group of people.

  • Impact of inflation on economic growth: evidence from Nigeria

    Anthony Olugbenga AdaramolaORCID , Oluwabunmi Dada doi: http://dx.doi.org/10.21511/imfi.17(2).2020.01
    Investment Management and Financial Innovations Volume 17, 2020         Issue #2         pp. 1-13 Views: 9348 Downloads: 5625 TO CITE АНОТАЦІЯ

    In an attempt to examine the influence of inflation on the growth prospects of the Nigerian economy, the study employs the autoregressive distributed lag on the selected variables, i.e. real gross domestic product (GDP), inflation rate, interest rate, exchange rate, degree of economy`s openness, money supply, and government consumption expenditures for the period 1980–2018. The study findings indicate that inflation and real exchange rate exert a significant negative impact on economic growth, while interest rate and money supply indicate a positive and significant impact on economic growth. Other variables in the model depict no influence on the economic growth of Nigeria. The causality result shows the unidirectional relationships between interest rate, exchange rate, government consumption expenditures and gross domestic product. However, inflation and the degree of openness show no causal relationship with gross domestic product. As a result, the study recommends that a more pragmatic effort is needed by the monetary authorities to target the inflation vigorously to prevent its adverse effect by ensuring a tolerable rate that would stimulate the economic growth of Nigeria.

  • Formalization of the impact of imbalances in the movement of financial resources on economic growth of countries in Central and Eastern Europe

    Serhiy KozmenkoORCID , Maxim KorneyevORCID Researcher ID doi: http://dx.doi.org/10.21511/afc.01(1).2017.06
    Accounting and Financial Control Volume 1, 2017         Issue #1         pp. 48-58 Views: 7973 Downloads: 1381 TO CITE

    The article deals with the impact of financialization on economic growth in countries of Central and Eastern Europe. It determinesthe impact of imbalances in the movement of financial resources caused by financialization on economic growth of these countries. It proves that the implementation of measures aimed at increasing the openness of the economy and maintaining solvent demand have a positive impact on economic growth of the surveyed countries in the long run. It also proves the importance of developing a set of measures of strategic nature regulating imbalances in the movement of financial resources caused by financialization.

Download Preview
Close
Problems and Perspectives in Management
Problems and Perspectives in Management