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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Kilinc Mustafa & Ulussever Talat, 2025. "Corporate governance, financial markets, and economic growth: Does corporate governance moderate the finance-growth nexus?," Economics and Business Review, Sciendo, vol. 11(3), pages 39-64.
    • Handle: 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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    References listed on IDEAS

    as
    1. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    2. Joshua Aizenman & Yothin Jinjarak & Donghyun Park, 2015. "Financial Development and Output Growth in Developing Asia and Latin America: A Comparative Sectoral Analysis," NBER Working Papers 20917, National Bureau of Economic Research, Inc.
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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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