Developing a Corporate Governance Index to Drive Efficiency in Asian Emerging Economies

Abstract This study investigates the relationship between corporate governance mechanisms and firm efficiency in emerging Asian economies, using a robust governance index tailored to the unique socio-economic and regulatory landscapes of these markets. Technical efficiency is captured as a superior proxy for firm performance by employing stochastic frontier analysis on a panel dataset spanning 2005 to 2022, overcoming the limitations of traditional financial metrics. The findings show that governance provisions, such as board independence, shareholder protection, effectiveness of the audit committee, CSR commitments, and sustainability initiatives, significantly enhance firm efficiency. Importantly, R&D investments are positively correlated with efficiency highlighting their role in driving innovation and long-term value creation. The findings of this study offer policymakers, investors, and firms’ actionable frameworks for improving governance practices and fostering sustainable economic growth in dynamic emerging markets.