Decades-long debates over the quality, quantity and purpose of development aid have led to a renewed emphasis on whether, and under what circumstances, aid is effective in achieving development outcomes. There is significant policy consensus that aid is most effective in environments with “good” governance, which the United Nations defines as processes of decision making and implementation that are effective and efficient, equitable and inclusive, and accountable and transparent. Aid donors fund numerous projects aimed at strengthening good governance in recipient countries, often through reforms of political institutions. Yet many aid donors fail to theorize about the process or mechanism through which good governance aid drives institutional change, and in doing so often ignore the impact that other drivers of change may have on the implicitly assumed direct causal relationship between aid and improved governance in political institutions. This thesis explores the role of aid in shifting institutions toward the ideal of good governance through an analysis that embeds this aid within a larger context that takes into account the role of other drivers of change. It compares good governance-related changes within Peru’s judicial institutions and Comptroller (Auditor) General over a 30-year period, from 1980-2010, examining the main actors and factors that drove or influenced changes in institutional accountability, transparency, effectiveness and efficiency, asking how they drove these changes and overcame resistance to reforms. Building upon this within-case analysis, this thesis then compares across cases to develop conclusions about the necessary and sufficient conditions that resulted in positive good governance-related changes. It concludes with a discussion of the opportunities for, and limitations of, good governance aid as a driver of change in political institutions.