The impact of quality of institutions on firm performance: A global analysis

This study contributes to the literature as few studies discuss how different aspects of institutional quality influence firm performance. We use 133,945 observed values for 16,523 firms in 41 countries to examine whether better institutions can help increase corporate value by improving enterprises' total factor productivity (TFP). Empirical findings indicate that enhanced institutional quality can increase TFP and firm value, and political institutional quality has the highest positive impact on firm value and technological progress. Moreover, good institutional quality can promote firm value by improving enterprises’ TFP. To increase firm productivity and value, governments must build better institutions to help create a better investment environment, strengthen resource allocation efficiency, and reduce corruption.