Does good governance mean better corporate social performance? A comparative study of OECD countries

Abstract

Policymakers are increasingly concerned with enabling sustainable corporate behavior as part of the transition toward a more sustainable society. Yet, it remains unclear to what extent a country's governance quality impacts on the sustainable behavior of firms. Drawing on the good governance literature, we hypothesize that the quality of different governance dimensions at the nation-level affects corporate social performance (CSP). This reasoning is tested using a longitudinal data set that combines nation-level and firm-level observations. Different model specifications confirm that countries with a better governance quality have higher CSP. In particular, higher levels of voice and accountability, regulatory quality, rule of law, and control of corruption are positively associated with CSP across model specifications. We conclude with a discussion of the implications for research and practice.

E‐participation for combating corruption, increasing voice and accountability, and developing government effectiveness: A cross‐country data analysis

“…Different scholars have listed different criteria of public management to define better governance, which includes reduction of corruption, improvement of accountability, decentralisation of public management, well management of public resources, the introduction of proper laws and equality, restructuring civil services, and so on (Grindle, 2007). The World Bank researchers have listed and explained six indicators that define a government better (Kaufmann & Lafarre, 2021). These indicators are explained as follows:…”

“…Primarily, the notion of better governance has been conceptualised as better public management, which underpins better public engagement, better stewardship of public money, better organisational performance, and better public services (OECD, 2021). Kaufmann and Lafarre (2021) pointed to the term as a reform strategy of governance, where the strategy is particularly used to strengthen the public institutions with the objective of making government sufficiently accountable, transparent, effective, and participatory. Different scholars have listed different criteria of public management to define better governance, which includes reduction of corruption, improvement of accountability, decentralisation of public management, well management of public resources, the introduction of proper laws and equality, restructuring civil services, and so on (Grindle, 2007).…”

“…Different scholars have listed different criteria of public management to define better governance, which includes reduction of corruption, improvement of accountability, decentralisation of public management, well management of public resources, the introduction of proper laws and equality, restructuring civil services, and so on (Grindle, 2007). The World Bank researchers have listed and explained six indicators that define a government better (Kaufmann & Lafarre, 2021). These indicators are explained as follows: Voice and accountability: the extent to which citizens of a country can participate in the selection of governments and their decisions; Political stability/lack of violence: the likelihood that the government in power will be destabilised or overthrown by possibly unconstitutional and/or violent means; Government effectiveness: the quality of public service provision, the quality of the bureaucracy, the competence of civil servants, the independence of the civil service from political pressures, and the credibility of the government's commitment to policies; Regulatory burden: the incidence of market‐unfriendly policies such as price controls or inadequate bank supervision, and the burdens imposed by excessive regulation in areas such as foreign trade and business development; Control of corruption: the extent to which citizens’ power and administrative measures are used to prevent illegal private gain (corruption) by officials; Rule of law: the extent to which agents have confidence in and abide by the rules of the concerned society. …”

Does governance matter? Country-level determinants of operational risk

“…Even reporting on CSR reduces financing costs (Dhaliwal et al 2011). Kaufmann and Lafarre (2020) highlighted that firm-level and country-level governance are closely related; better country-level governance is associated with higher corporate social performance across EU countries.…”

Corporate Governance, Bank Performance and Value:-Evidence from Pakistan

“…The literature identifies poor corporate governance structure to be the contributing factor in the crises to some extent (Abid & Ahmed, 2015;Naeem-Ullah & Rizwan, 2018). A firm with good corporate governance practices shows outstanding performance due to the efficient utilization of financial and human resources (Kaufmann & Lafarre, 2020;Khushnood et al, 2020). In this way, investors become confident while injecting in the capital of such firms and believe that agency problems will be minimized which will tend to increase the equity price and hence enhanced firm value (Carter et al, 2003).…”