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.
AhmedJ., & FarooqU. (2020). Financial development and trade credit: Moderating role of corruption. City University Research Journal, 10(3), 343–360.
2.
Al-GamrhB., smailK. I., AhsanT., & AlquhaifA. (2020). Investment opportunities, corporate governance quality, and firm performance in the UAE. Journal of Accounting in Emerging Economies, 10(2), 261–276.
3.
AroraA., & SharmaC. (2016). Corporate governance and firm performance in developing countries: Evidence from India. Corporate Governance, 16(2), 420–436.
4.
BernardD., BlackburneT., & ThornockJ. (2020). Information flows among rivals and corporate investment. Journal of Financial Economics, 136(3), 760–779.
5.
CalcagniniG., GiombiniG., & TravagliniG. (2019). A theoretical model of imperfect markets and investment. Structural Change and Economic Dynamics, 50(September), 237–244.
6.
CastañerX., & KavadisN. (2013). Does good governance prevent bad strategy? A study of corporate governance, financial diversification, and value creation by French corporations, 2000–2006. Strategic Management Journal, 34(7), 863–876.
7.
ChenP. F., LeeC. C., & ZengJ. H. (2019). Economic policy uncertainty and firm investment: Evidence from the U.S. market. Journal of Apllied Economics, 51, 3423–3435.
8.
ChenN., SungH. C., & YangJ. (2017). Ownership structure, corporate governance and investment efficiency of Chinese listed firms. Pacific Accounting Review, 29(3), 266–282.
9.
CiżkowiczP., & RzońcaA. (2012). Does inflation harm corporate investment? Empirical evidence from OECD countries. Economics, 1–33. http://www.economics-ejournal.org/economics/discussionpapers/2012-63
10.
DanielS. J., CieslewiczJ. K., & PourjalaliH. (2012). The impact of national economic culture and country-level institutional environment on corporate governance practices. Management International Review, 52, 365–394. https://doi.org/10.1007/s11575-011-0108-x
11.
DuJ., LiW., LinB., & WangY. (2018). Government integrity and corporate investment effiency. China Journal of Accounting Research, 11(3), 213–232.
12.
FarooqU., AhmedJ., & KhanS. (2021). Do the macroeconomic factors influence the firm’s investment decisions? A generalized method of moments (GMM) approach. International Journal of Finance and Economics, 26(1), 790–801.
13.
FuQ., & LiuX. (2015). Monetary policy and dynamic adjustment of corporate investment: A policy transmission channel perspective. China Journal of Accounting Research, 8(2), 91–109.
14.
GaoS., WangL., LiuN., & ZhangM. (2019). Fiscal decentralization and corporate investment: Empirical evidence from China. Journal of Economic Policy Reform, 22(1), 51–68.
15.
GrazziM., JacobyN., & TreibichT. (2016). Dynamics of investment and firm performance: Comparative evidence from manufacturing industries. Empirical Economics, 51(1), 125–179. https://doi.org/10.1007/s00181-015-0991-2
16.
GrilichesZ., & HausmanJ. A. (1986). Errors in variables in panel data. Journal of Econometrics, 31(1), 93–118.
17.
GuanJ. C., & YamR. C. (2015). Effects of government financial incentives on firms’ innovation performance in China: Evidences from Beijing in the 1990s. Research Policy, 44(1), 273–282.
18.
GuptaG., & MahakudJ. (2019). Alternative measure of financial development and investment-cash flow sensitivity: Evidence from an emerging economy. Financial Innovation, 5(1), 1–28. https://doi.org/10.1186/s40854-018-0118-9
19.
ImranZ. A., EjazA., SpulbarC., BirauR., & NethravathiP. S. (2020). Measuring the impact of governance quality on stock market performance in developed countries. Economic Research [Ekonomska Istraživanja], 33(1), 3406–3426.
20.
JensC. E. (2017). Political uncertainty and investment: Causal evidence from U.S. Gubernatorial elections. Journal of Financial Economics, 124(3), 563–579.
21.
JensenM., & MecklingW. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305–360. https://doi.org/10.1016/0304-405X(76)90026-X
22.
JinX., & YuJ. (2018). Government governance, executive networks and corporate investment efficiency. China Finance Review International, 8(2), 122–139.
23.
KattiS., & RaithathaM. (2020). Impact of venture capital investment on firm performance: An Indian evidence. Global Business Review, 21(4), 1011–1024.
24.
KaufmannD., KraayA., & MastruzziM. (2010). The Worldwide governance indicators: Methodology and analytical issues (Working Paper No. 5430). World Bank Policy Research.
25.
LeeC.-C., WangC.-W., & HoS.-J. (2020). Country governance, corruption, and the likelihood of firms’ innovation. Economic Modelling, 92, 326–338.
26.
LeiQ., & ChenH. (2019). Corporate governance boundary, debt constraint, and investment efficiency. Emerging Markets Finance and Trade, 55(5), 1091–1108.
MiraR., & HammadacheA. (2017). Good governance and economic growth: A contribution to the institutional debate about state failure in Middle East and North Africa. Asian Journal of Middle Eastern and Islamic Studies, 11(3), 107–120.
29.
MondoshaM., & MajoniA. (2018). The impact of leverage on investment decisions for South African firms with different growth opportunities. Journal of Economics and Financial Sciences, 11(1), 1–7.
30.
OkaforG., EdeO., Chijoke-MgbameA. M., OhalehiP., & MgbameO. C. (2021). Ownership structure, corruption, and capital investment: Evidence from firms in selected sub-Saharan African countries. Thunderbird International Business Review, 63(4), 403–420.
31.
PanX., & TianG. G. (2020). Political connections and corporate investments: Evidence from the recent anti-corruption campaign in China. Journal of Banking & Finance, 119, 1–42. https://doi.org/10.1016/j.jbankfin.2017.03.005
32.
PaunovC. (2016). Corruption’s asymmetric impacts on firm innovation. Journal of Development Economics, 118, 216–231.
33.
PetersB. G. (2011). Governance as political theory. Critical Policy Studies, 5(1), 63–72.
34.
PfefferJ., & SalancikG. (1978). The external control of organizations: A resource dependence perspective. Harper & Row.
35.
PindadoJ., QueirozV. d., & TorreC. d. (2015). How do country-level governance characteristics impact the relationship between R&D and firm value?R&D Management, 45(5), 515–526.
36.
SaonaP., & MartínP. S. (2016). Country level governance variables and ownership concentration as determinants of firm value in Latin America. International Review of Law and Economics, 47(August), 84–95. https://doi.org/10.1016/j.irle.2016.06.004
37.
SeifertB., & GonencH. (2018). The effects of country and firm-level governance on cash management. Journal of International Financial Markets, Institutions & Money, 52, 1–16.
38.
SenerP., & SelcukE. A. (2020). Does governance affect corporate diversification behaviour in emerging markets?Applied Economics Letters, 27(15), 1238–1242.
39.
ShahidM. S., & AbbasM. (2019). Does corporate governance play any role in investor confidence, corporate investment decisions relationship? Evidence from Pakistan and India. Journal of Economics and Business, 105, 1–11.
40.
StiglitzJ. E. (1989). Markets, market failures, and development. The American Economic Review, 79(2), 197–203.
41.
SumanS., & SinghS. (2020). Corporate governance mechanisms and corporate investments: Evidence from India. International Journal of Productivity and Performance Management, 1–22. https://doi.org/10.1108/IJPPM-09-2019-0453
42.
TokuokaK. (2013). Does a better business environment stimulate corporate investment in India?Indian Growth and Development Review, 6(2), 289–305.
43.
VoX. V. (2019). Leverage and corporate investment—Evidence from Vietnam. Finance Research Letters, 28, 1–5. https://doi.org/10.1016/j.frl.2018.03.005
44.
WilliamsonO. E. (1979). Transaction-cost economics: The governance of contractual relations. The Journal of Law & Economics, 22(2), 233–261.
