Good Governance and Sustainable Investment: The Effects of Governance Indicators on Stock Market Returns


  • Susilo Nur Aji Cokro Darsono Universitas Muhammadiyah Yogyakarta Corresponding Author
  • Wing-Keung Wong Asia University Taiwan Author
  • Tran Thai Ha Nguyen Saigon University, Vietnam Author
  • Hafsah Fajar Jati Universitas Muhammadiyah Yogyakarta Author
  • Diah Setyawati Dewanti Universitas Muhammadiyah Yogyakarta Author



Sustainable Investment, Market Returns, World Governance Indicators, Asian Market


Purpose: This research studies the impacts of the six Worldwide Governance Indicators (WGI) on sustainable investment returns in the Asian region.


Design/methodology/approach: This research uses the WGI data as proxied of good governance and employs The Fixed Effect Model (FEM) and Random Effect Model (REM) on the panel data from the sustainable stock market returns of six Asian countries to examine the relationship among variables. Further, the Feasible Generalized Least Squares (FGLS) Regression panel regression was conducted to achieve robust findings.


Findings: Our empirical analysis found that political stability and absence of violence (PSA) and regulatory quality (REQ) positively influence sustainable investment returns in the Asian region. While control of corruption (COC) exhibits a significant negative impact on sustainable investment returns. These findings imply that more excellent political stability and reasonable regulations contribute to higher stock market returns. Conversely, contradictory with the Control of Corruption leads to downward stock market returns as the growth of the COC index increases.


Research limitations/implications: This research has several limitations, including the lack of comprehensive sustainable stock market data in the Asian region and a short transaction period. Consequently, future research could categorize the market as developed or emerging, classify the sample based on the efficient market category, expand the sample size and include data from outside the Asian region.


Practical implications: This research has several crucial policy implications for sustainable investors concerning the country-level governance index to create profitable and sustainable portfolio strategies. Moreover, policymakers should strengthen the implementation of anti-corruption to increase the sustainable investors in the Asian region.


Originality/value: This research contributes to the recent literature presenting causal relations of quality country-level governance on sustainable investment returns in the Asian region.


JEL Classifications: C33; E44; G15; O16


Keywords: Sustainable Investment; Market Returns; World Governance Indicators; Asian Market; FGLS


Paper Type: Research Article

Author Biographies

  • Wing-Keung Wong, Asia University Taiwan

    3Department of Finance, Fintech Center, and Big Data Research Center, Asia University 

    4Department of Medical Research, China Medical University Hospital, Taiwan 

    5Department of Economics and Finance, The Hang Seng University of Hong Kong, Hongkong

  • Tran Thai Ha Nguyen, Saigon University, Vietnam

    1Department of Business Administration, College of Management, Asia University, Taichung, Taiwan

    6Faculty of Finance and Accounting, Saigon University, Ho Chi Minh City, Vietnam
  • Hafsah Fajar Jati, Universitas Muhammadiyah Yogyakarta

    2Department of Economics, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Yogyakarta, Indonesia

  • Diah Setyawati Dewanti, Universitas Muhammadiyah Yogyakarta

    2Department of Economics, Faculty of Economics and Business, Universitas Muhammadiyah Yogyakarta, Yogyakarta, Indonesia


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How to Cite

Darsono, S. N. A. C., Wong, W.-K., Nguyen, T. T. H., Jati, H. F., & Dewanti, D. S. (2022). Good Governance and Sustainable Investment: The Effects of Governance Indicators on Stock Market Returns. Advances in Decision Sciences, 26(1), 69-101.