Flying safe: The impact of corporate governance on aviation safety

Abstract

This study examines the impact of various measures of corporate governance on airline safety, addressing a significant gap in the literature that explores safety performance within the aviation industry. Using data from seventy countries spanning the period from 1990 to 2016, we investigate the relationship between corporate governance quality indicators and airline accident rates while controlling for airlines’ financial health. Our findings suggest that airlines with less qualified and busier directors, as well as those experiencing higher degrees of director succession, are more prone to accidents. Conversely, longer CEO tenure is associated with a lower accident rate. Furthermore, our findings highlight the importance of a well-developed regulatory environment and transportation infrastructure: airlines based in countries with more stringent legal regulations, robust law enforcement, and superior air transport infrastructure exhibit better safety performance. Our research underscores the critical role of corporate governance in ensuring airline safety and emphasizes the significance of regulatory frameworks and infrastructure investments in shaping safety outcomes in the aviation industry. These results carry significant policy implications for aviation safety regulators responsible for developing, overseeing, and implementing policies aimed at improving aviation safety.