Opting Out of Good Governance

From an interesting paper by Foley et al. 

Cross-listing on a U.S. exchange does not bond foreign firms to follow the corporate governance rules of that exchange. Hand-collected data show that 80% of cross-listed firms opt out of at least one exchange governance rule, instead committing to observe the rules of their home country. Relative to firms that comply, firms that opt out have weaker governance practices in that they have a smaller share of independent directors. The decision to opt out reflects the relative costs and benefits of doing so. Cross-listed firms opt out more when coming from countries with weak corporate governance rules, but if firms based in such countries are growing and have a need for external finance, they are more likely to comply. Finally, opting out affects the value of cash holdings. For cross-listed firms based in countries with weak governance rules, a dollar of cash held inside the firm is worth $1.52 if the firm fully complies with U.S. exchange rules but just $0.32 if it is non-compliant.

Alas, I did not find an ungated version. Another interesting paper by C. Fritz Foley is "Ethnic Innovation and U.S. Multinational Firm Activity." His webpage.

What Can Experiments Tell Us About How to Improve Governance?

This study by Rachel M. Gisselquist & Miguel Angel Niño-Zarazúa 

. . . identified 139 relevant papers grouped into three major types of policy interventions that aim to: (1) improve supply-side capabilities of governments; (2) change individual behaviour through various devices, notably incentives, and (3) improve informational asymmetries. We find that randomized controlled trials can be useful in studying the effects of some policy interventions in the governance area, but they are limited in significant ways: they are ill-equipped to study broader governance issues associated with macro-structural shifts, national level variation in institutions and political culture, and leadership. Randomized controlled trials are best for studying targeted interventions, particularly in areas of public goods provision, voting behaviour, and specific measures to address corruption and improve accountability; however, they can provide little traction on whether the intervention is transferable and ‘could work’ (and why) in other contexts, and in the longer run.

To be sure, the authors discuss relevant papers, for example

Banerjee et al. (2012) test the impact of four low-cost reforms across police stations in eleven districts in Rajasthan. Results suggest that two of these reforms – freezing staff transfers between police stations and providing in-service training in investigation skills and ‘soft’ skills like communication and leadership – were effective in improving police effectiveness and public satisfaction, while the other two reforms – placing community observers in police stations and a weekly duty rotation – were not effective. P. 10. 

Other relevant studies, like this one, are not cited. 

Grading Government Efficiency (by mailing letters)

We mailed letters to non-existent business addresses in 159 countries (10 per country), and measured whether they come back to the return address in the US and how long it takes. About 60% of the letters were returned, taking over 6 months, on average. The results provide new objective indicators of government efficiency across countries, based on a simple and universal service, and allow us to shed light on its determinants. The evidence suggests that both technology and management quality influence the quality of government.

The authors explain:

All countries subscribe to an international postal convention requiring them to return the letters posted to an incorrect address. We measured the fraction of letters that were actually returned, and how long it took the letters to come back from the date they were posted from Cambridge, MA. We stopped keeping track of returns one year after the final postings that took place on Feb 4, 2011. We do not believe this procedure aroused any concerns or delays at the US post offices. We use the data to construct the share of letters we got back, and how long it took to get them back, in each of 159 countries, and then to analyze a variety of correlates of these measures of postal efficiency.

Source.
Top and bottom countries (El Salvador is top 2):

  

Global trends in Governance 1800 - 2010

Source