Relationship between corporate governance and capital formation using the financial development channel in the Middle East and OECD countries

Document Type : Original Article


1 PhD student of economic sciences of Islamic Azad University

2 Assistant Professor of Economics, Islamic Azad University, Tehran-West Branch

3 Associate Professor of Economics, Islamic Azad University, Science and Research branch



The purpose of this study is to examine the relationship between corporate governance and capital formation using the financial development channel. According to the investigations, it was found that the direct effect of corporate governance on capital formation is unclear, which depends on several factors. The analysis of the data showed that corporate governance through the channel of financial development can have an effect on capital formation, which, of course, is different among countries and the reason for that is the different level of development of the countries. In this study, the data of 30 countries including 12 countries in the Middle East region and 18 countries of the OECD during the years 2005-2020 have been used in the form of Panel-GMM method. The results of the research showed that corporate governance in Middle East countries, which have a lower level of corporate governance and development, has a positive and significant effect on capital formation, and improving corporate governance improves capital formation. But this relationship has not been significant for OECD countries. Also, financial development in both groups of countries had a positive and significant impact on capital formation, but its impact was greater in the Middle East countries. Also, the results of examining financial development in more detail showed that financial development from the perspective of market development improves capital formation in countries, but financial development from the perspective of institutional development has no effect on improving capital formation.


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