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Institutions and gravity model: the role of political economy and corporate governance

Author

Listed:
  • Mehmet Huseyin Bilgin

    (Istanbul Medeniyet University)

  • Giray Gozgor

    (Istanbul Medeniyet University)

  • Chi Keung Marco Lau

    (Northumbria University)

Abstract

Using panel data on 166 countries, this paper analyzes the effects of corporate governance, employment protection, investor protection, and political environments on the exporting performance. Our gravity model predicts that stronger democratic political institutions encourage exports. We also find that stronger rule-based corporate governance imposes positive impact on the export performance. We also note that stronger employee protection, and therefore, rigid labor regulations can distort the exporting decision of firms. In addition, a stronger shareholder protection tends to be associated with lower exports, probably attributed to lower innovative activity. We interpret these results as an indication that (i) countries with a higher quality of institution suffer from less formal and informal trade barriers, which make international trade relations easier, and (ii) both the employee protection and the shareholder protection, on the other hand, trivialize the country’s export.

Suggested Citation

  • Mehmet Huseyin Bilgin & Giray Gozgor & Chi Keung Marco Lau, 2017. "Institutions and gravity model: the role of political economy and corporate governance," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 7(3), pages 421-436, December.
    • Handle: RePEc:spr:eurasi:v:7:y:2017:i:3:d:10.1007_s40821-016-0069-x
    DOI: 10.1007/s40821-016-0069-x
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    2. Sangeeta Khorana & Inmaculada Martínez‐Zarzoso, 2020. "Twenty‐First‐Century Trade Governance: Findings From The Commonwealth Countries," Contemporary Economic Policy, Western Economic Association International, vol. 38(2), pages 380-396, April.
    3. José María Díez-Esteban & Jorge Bento Farinha & Conrado Diego García-Gómez, 2019. "How does national culture affect corporate risk-taking?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(1), pages 49-68, March.
    4. Ibrahim Yousef & Hanada Almoumani & Ihssan Samara, 2020. "The Impact of Internationalization of the Boardroom on Capital Structure," JRFM, MDPI, vol. 13(12), pages 1-15, December.
    5. Ender Demir & Giray Gozgor & Sudharshan Reddy Paramati, 2019. "Do geopolitical risks matter for inbound tourism?," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 9(2), pages 183-191, June.
    6. Sarela Enriquez-Perales & Conrado Diego García-Gómez & José María Díez-Esteban & Edmundo R. Lizarzaburu Bolaños, 2023. "Formal institutions, ICSID arbitration and firm performance: evidence from Latin America," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(2), pages 429-464, June.
    7. Fang, Jianchun & Gozgor, Giray & Lau, Chi-Keung Marco & Wu, Wanshan & Yan, Cheng, 2020. "Listed zombie firms and top executive gender: Evidence from an emerging market," Pacific-Basin Finance Journal, Elsevier, vol. 62(C).
    8. Andrada-Ioana Sabău (Popa) & Codruța Mare & Ioana Lavinia Safta, 2021. "A Statistical Model of Fraud Risk in Financial Statements. Case for Romania Companies," Risks, MDPI, vol. 9(6), pages 1-15, June.
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    More about this item

    Keywords

    Exports; Trade flows; Gravity model; Political institutions; Employee protection; Shareholder protection;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K20 - Law and Economics - - Regulation and Business Law - - - General

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