Dynamics of Governance Structure and Stock market performance

Abstract

This paper has aimed to identify the intricate relationships between governance structures, organizational performance stock market. We have utilized data from 80 countries over the period from 1990 to 2021, the study employs dynamic panel data models and the Generalized Method of Moments (GMM) to address time dynamics and endogeneity issues. The findings reveal significant correlations between internal governance mechanisms, such as the Business Disclosure Index and the Shareholder Suits Index, and stock market returns. Moreover, external governance factors like control of corruption, political stability, and rule of law are found to positively impact stock market performance. The study underscores the importance of robust disclosure policies and governance standards in fostering market efficiency and investor confidence. These insights are crucial for policymakers and market regulators aiming to enhance financial market stability and economic growth. Jel Codes: G30; E44; L22; L25