The impact of quality of institutions on firm performance: A global analysis

Chong-Chuo Chang

International Review of Economics & Finance, 2023, vol. 83, issue C, 694-716

Abstract: This study contributes to the literature as few studies discuss how different aspects of institutional quality influence firm performance. We use 133,945 observed values for 16,523 firms in 41 countries to examine whether better institutions can help increase corporate value by improving enterprises' total factor productivity (TFP). Empirical findings indicate that enhanced institutional quality can increase TFP and firm value, and political institutional quality has the highest positive impact on firm value and technological progress. Moreover, good institutional quality can promote firm value by improving enterprises’ TFP. To increase firm productivity and value, governments must build better institutions to help create a better investment environment, strengthen resource allocation efficiency, and reduce corruption.

Keywords: Legal institutional quality; Economic institutional quality; Political institutional quality; Technological progress; Firm value (search for similar items in EconPapers)
JEL-codes: G18 G28 G30 G32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:83:y:2023:i:c:p:694-716

DOI: 10.1016/j.iref.2022.10.002

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