Corporate Governance and Access to Finance - ESBG

5.2. Corporate Governance and Access to Financeat WSBI – member levelTo evaluate the existence of a link between Corporate Governance andAccess to Finance for WSBI members, we analyzed the relationshipbetween several specific indicators of Access to Finance for theseinstitutions (instead of the country-level Honohan index) and assess theircorrelation with a Corporate Governance index which incorporatesinstitution-specific components.We have considered the standard indicators of Access to Finance, asexplained in section 4: i) average deposit size 27 (the lower this indicator,the higher the outreach), ii) average loan size (the same logic as in theprevious case), and iii) number of deposits per 1.000 adults (the higherthe indicator, the higher the outreach).For the Corporate Governance Index we have constructed a syntheticindicator which combines the countrywide Corporate Governance indexexplained in the previous section and an institution-specific component.Nevertheless, we should always bear in mind that the contribution ofa given WSBI member to Access to Finance in its country depends interalia on its relative size in the local banking system.Our synthetic Corporate Governance Index (CGI) has been constructed bymultiplying the country level Corporate Government index by the specificindex of the WSBI member institution. The rationale, as explained inchapter 3 and consistently with the empirical literature presented inAnnex 1, is that the Corporate Governance environment impacts theinstitution. In other words, a fairly good Corporate Governance for anindividual institution could be seriously undermined by a weak legal andinstitutional environment (and conversely, a poor Corporate Governancein a given institution could be enhanced by sound country-level practices,rules and regulation).27 The “average deposit size” has been standardized among countries by their respectiveGDP per capita. It is equal to the average deposit size (in Euro) reported by the WSBImember, divided by the WSBI member country’s GDP per capita. It ranges between 0 and1.2 for this particular sample (a value of one implies that that the average deposit of thatparticular institution equals the GDP per capita of the country in which it is located).80