Corporate governance, financial markets, and economic growth: Does corporate governance moderate the finance-growth nexus?

Kilinc Mustafa () and Ulussever Talat ()
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Kilinc Mustafa: Central Bank of the Republic of Türkiye, İstiklal Caddesi, No: 10, Altindag, Ankara, Türkiye, TR-06050
Ulussever Talat: Bogazici University, Natuk Birkan Building, Bebek, Istanbul, Türkiye, TR-34342

Economics and Business Review, 2025, vol. 11, issue 3, 39-64

Abstract: This paper examines whether corporate governance plays a moderating role in the impact of financial development on economic growth. The dataset consists of 39 advanced and developing countries for the 2006–2020 period. The empirical results show that the credit-to-GDP ratio is negatively associated with economic growth, and this finding is consistent with the literature, showing the relevance of “too much finance”. The main findings indicate that the negative growth impact of credits is attenuated by corporate governance as measured by minority investor protection and disclosure extent. This moderating effect is economically significant and holds for different country groups and horizons. Hence, the paper argues that corporate governance measures the quality of financial markets, while the credit ratio measures its quantitative dimension. Therefore, it shows that both quality and quantity dimensions need to be taken into account to understand the finance-growth nexus properly.

Keywords: corporate governance; financial markets; economic growth; credits; finance-growth nexus (search for similar items in EconPapers)
JEL-codes: E44 F43 G30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:11:y:2025:i:3:p:39-64:n:1003

DOI: 10.18559/ebr.2025.3.2058

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