Economic complexity and corporate governance

ABSTRACT

Using dynamic panel data techniques, we find that a country’s corporate governance practices have a positive effect on the sophistication of its exported products. We also find that higher dispersion of governance across firms leads to lower economic complexity.

KEYWORDS:

• Economic complexity
• corporate governance
• panel data
• cross-country analysis

JEL CLASSIFICATION:

• O10
• O40
• G30
• G38

Acknowledgments

We thank Reena Aggarwal for generously sharing her data with us. We also thank an anonymous referee, Lucas Saurin, and Valdemar Pinho Neto for insightful comments. This study was financed in part by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior - Brasil (CAPES) - Finance Code 001.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ The data set is available at https://novafinance.pt/mferreira. This corporate governance index is computed using Bloomberg’s Environmental, Social and Governance (ESG) data and covers 9,612 companies globally.

² The corporate governance index presented in Aggarwal et al. (2011) is computed using RiskMetrics data and covers 11,890 companies, with 8,314 of them located in the US.

³ The results do not change qualitatively if we measure a country’s corporate governance as the median governance, or if we quantify governance dispersion using the standard deviation of governance across firms. These results, along with an additional description of our data, are in the supplementary material available at https://sites.google.com/site/luizbrotherhood/.

Additional information

Funding

This work was supported by the Coordenação de Aperfeiçoamento de Pessoal de Nível Superior [Finance Code 001].