Messages, Money, and Messengers : Do Migrant Remittances Strengthen Corporate Governance in Developing Countries?

Research has long acknowledged the salutary impact of foreign capital on business practices, including corporate governance practices, in developing countries. But past research has tended to assume that the relevant change agents were foreign organizations, such as multinational corporations. In the 2000s, remittances to developing countries from migrants living abroad rival or surpass the dollar value of other foreign capital inflows, yet there is neither theory nor broad-sample evidence to guide understanding about whether and when these transnational individuals might affect business practices back home. In response, we develop and test hypotheses from a “naturalistic agency” theory of transnational institutional change, highlighting both the base influential weight of many small remittance transactions and an enhancement when those remittances come from better-informed and better-positioned migrant agents. We develop and test hypotheses concerning the effects of migrant remittances on corporate governance practices in 46 developing countries from 2006 to 2013. We find that remittances positively affect the strength of home-country corporate governance when they come from better-educated migrant elites living in host countries where there exist stronger corporate governance practices. We conclude that under certain conditions, remittances strengthen underlying corporate governance practices vital to longer-term, business-led economic growth and poverty alleviation