Measuring the Impact of Country-level Governance on Corporate Investment: A New Panel Data Evidence

Abstract

Governance plays a key role in determining industrial investment. In addition, it has a dynamic impact on multiple business decisions. Given that, this study measures the role of country-level governance in protecting industrial investment. Using the 10-year (2007–2016) panel data from 12 Asian economies, we employ panel estimated generalized least square (EGLS), fully modified ordinary least square (FMOLS) and two-step system generalized method of moments (GMM) models to establish the relationship between defined variables. The empirical findings suggest that the countries with good governance situations subsequently enjoy a positive industrial investment. Following investors and property rights protection, a country with a good governance situation may have a voluminous industrial investment stemming from minimum default risk. The empirical findings of the current analysis highlight the significance of a good governance system in boosting industrial investment. A piece of important policy advice for corporate managers is to consider the governance condition while making an industrial investment. In addition, government officials should focus more on shaping better governance to ensure industrial growth. This study provides innovative insights into how country governance shapes corporate investment decisions specifically in Asian economies.