IDEAS home Printed from https://ideas.repec.org/a/tei/journl/v15y2022i1p16-26.html
   My bibliography  Save this article

Corporate governance as the driver of economic growth in Sub-Saharan African Countries

Author

Listed:
  • Martha Matashu

    (School of Commerce and Social Studies Education, North West University, South Africa)

  • Wedzerai S Musvoto

    (Business School, North West University, South Africa)

Abstract

Purpose:Corporate governance in essence is designed to lead to economic growth. Nevertheless, despite placing great emphasis on promoting corporate governance practices over the years, countries in Sub-Saharan Africa (SSA) have so far achieved insignificant or no economic growth. This, however, is inconsistent to the findings observed in developed countries. Design/methodology/approach: The study examined connections between corporate governance, macroeconomic fundamentals, the institutional environment and economic growth in Sub Saharan African countries. Panel Vector Autoregression (PVAR) models and impulse response functions were applied to analyse sets of panel data from 29 countries in Sub Saharan Africa for 7 years from 2008. Findings: The findings suggest that disaggregated variables of corporate governance, macroeconomic fundamentals and the institutional environment have a positive but insignificant relationship with economic growth. It was also found that aggregated composite; corporate governance, macroeconomic fundamentals and the institutional environment have a statistically strong significant relationship with economic growth. The results of the impulse response functions predict that, there will be a 0.01 per cent growth in the economies of Sub-Saharan African countries if there is a continued interaction between aggregated variables under the present conditions observed during the period of the investigation. The PVAR results showed that the future outcome of economic growth can be predicted from the past behaviour of aggregated composite corporate governance. The impulse response and variance deposition. The findings lead to the conclusion that aggregated corporate governance within both a given year and that of previous periods are major determinants of economic growth. Research limitations/implications: The implications of the findings for countries within Sub Saharan Africa is that promoting corporate governance only might be insufficient to stimulate growth of economies, rather it must be enhanced concurrently with macroeconomic fundamentals and the institutional environment. If past behaviour is a contributing factor of the future performance of corporate governance then, a reflection on the past governance behaviour can help to develop effective corporate governance practices that affect the present and future economic growth. Originality/value: This study contributes to literature by testing application the theoretical relevance of corporate governance theories to the context of Sub-Saharan African countries economies. The findings suggest that sound corporate governance on its owned is insufficient to stimulate and sustain to economic growth within countries under investigation. As, adduced by evidence corporate governance affect economic growth is context dependent. More attention can be paid to examining the link corporate governance linkages to economic growth in different contexts in future studies.

Suggested Citation

  • Martha Matashu & Wedzerai S Musvoto, 2022. "Corporate governance as the driver of economic growth in Sub-Saharan African Countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 15(1), pages 16-26, July.
    • Handle: RePEc:tei:journl:v:15:y:2022:i:1:p:16-26
    as

    Download full text from publisher

    File URL: https://ijbesar.af.duth.gr/docs/volume15_issue1/15_01_02.pdf
    Download Restriction: no
    File URL: https://ijbesar.af.duth.gr/volume15_issue1.php
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
    2. Franklin Nakpodia, 2018. "Corporate Governance in the Nigerian Banking Sector: A Bounded Rationality Conundrum," CSR, Sustainability, Ethics & Governance, in: Belén Díaz Díaz & Samuel O. Idowu & Philip Molyneux (ed.), Corporate Governance in Banking and Investor Protection, chapter 0, pages 271-285, Springer.
    3. Ali M. Gerged & Ahmed Agwili, 2020. "How corporate governance affect firm value and profitability? Evidence from Saudi financial and non-financial listed firms," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 14(2), pages 144-165.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Stijn Claessens, 2006. "Corporate Governance and Development," The World Bank Research Observer, World Bank, vol. 21(1), pages 91-122.
    6. Zagorchev, Andrey & Gao, Lei, 2015. "Corporate governance and performance of financial institutions," Journal of Economics and Business, Elsevier, vol. 82(C), pages 17-41.
    7. Wintoki, M. Babajide & Linck, James S. & Netter, Jeffry M., 2012. "Endogeneity and the dynamics of internal corporate governance," Journal of Financial Economics, Elsevier, vol. 105(3), pages 581-606.
    8. Claessens, Stijn & Yurtoglu, B. Burcin, 2013. "Corporate governance in emerging markets: A survey," Emerging Markets Review, Elsevier, vol. 15(C), pages 1-33.
    9. Alexander Maune, 2021. "Corporate governance and economic growth in Sub-Saharan Africa," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 11(3), pages 309-336.
    10. Adegbite, Emmanuel & Amaeshi, Kenneth & Nakajima, Chizu, 2013. "Multiple influences on corporate governance practice in Nigeria: Agents, strategies and implications," International Business Review, Elsevier, vol. 22(3), pages 524-538.
    11. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2010. "The worldwide governance indicators : methodology and analytical issues," Policy Research Working Paper Series 5430, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gibson Hosea Munisi & Roy Mersland, 2016. "Ownership, Board Compensation and Company Performance in Sub-Saharan African Countries," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 15(2), pages 191-224, August.
    2. Chiu-Hui Wu, 2021. "On the Moderating Effects of Country Governance on the Relationships between Corporate Governance and Firm Performance," JRFM, MDPI, vol. 14(3), pages 1-13, March.
    3. Caixe, Daniel Ferreira, 2022. "Corporate governance and investment sensitivity to policy uncertainty in Brazil," Emerging Markets Review, Elsevier, vol. 51(PB).
    4. Akisik, Orhan, 2020. "The impact of financial development, IFRS, and rule of LAW on foreign investments: A cross-country analysis," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 815-838.
    5. D'Souza, Juliet & Nash, Robert, 2017. "Private benefits of public control: Evidence of political and economic benefits of state ownership," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 232-247.
    6. Nguyen, Tuan & Locke, Stuart & Reddy, Krishna, 2015. "Does boardroom gender diversity matter? Evidence from a transitional economy," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 184-202.
    7. Acquaah, Moses, 2015. "Determinants of corporate listings on stock markets in Sub-Saharan Africa: Evidence from Ghana," Emerging Markets Review, Elsevier, vol. 22(C), pages 154-175.
    8. Almaskati, Nawaf & Bird, Ron & Lu, Yue, 2020. "Corporate governance, institutions, markets, and social factors," Research in International Business and Finance, Elsevier, vol. 51(C).
    9. Araniyar C. Isukul & John J. Chizea, 2017. "Corporate Governance Disclosure in Developing Countries: A Comparative Analysis in Nigerian and South African Banks," SAGE Open, , vol. 7(3), pages 21582440177, July.
    10. Wang, Boya, 2018. "Ownership, institutions and firm value: Cross-provincial evidence from China," Research in International Business and Finance, Elsevier, vol. 44(C), pages 547-565.
    11. Giorgio Caselli & Catarina Figueira, 2023. "Monetary policy, ownership structure, and risk‐taking at financial intermediaries," The Financial Review, Eastern Finance Association, vol. 58(1), pages 167-191, February.
    12. Chen, Naiwei & Yu, Min-Teh, 2024. "Less is more: Evidence from firms with low cash and debt," Research in International Business and Finance, Elsevier, vol. 69(C).
    13. Chacko Jacob & Jijo Lukose P.J., 2018. "Institutional Ownership and Dividend Payout in Emerging Markets: Evidence from India," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1_suppl), pages 54-82, April.
    14. Ozili, Peterson K, 2020. "Corporate governance research in Nigeria: a review," MPRA Paper 98217, University Library of Munich, Germany.
    15. Nguyen Van Tuan & Nguyen Anh Tuan, 2016. "Corporate Governance Structures And Performance Of Firms In Asian Markets: A Comparative Analysis Between Singapore And Vietnam," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 7(2).
    16. Kimani, Danson & Ullah, Subhan & Kodwani, Devendra & Akhtar, Pervaiz, 2021. "Analysing corporate governance and accountability practices from an African neo-patrimonialism perspective: Insights from Kenya," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 78(C).
    17. Anh Tho To & Quoc Tuan Tran & Thi Siem Tran & Kim Phong Thai & Thi Thu Hong Ho, 2020. "The Monitoring Role Of Non-Executive Directors In Vietnam From A Return-Volatility Perspective," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 29-52, January –.
    18. Sikarwar, Ekta, 2022. "Board attributes, hedging activities and exchange rate risk: Multi-country firm-level evidence," Economic Modelling, Elsevier, vol. 110(C).
    19. Shakri, Irfan Haider & Yong, Jaime & Xiang, Erwei, 2022. "Does compliance with corporate governance increase profitability? Evidence from an emerging economy: Pakistan," Global Finance Journal, Elsevier, vol. 53(C).
    20. Bowo Setiyono & Amine Tarazi, 2014. "Does the presence of institutional investors in family banks affect profitability and risk? Evidence from an emerging market," Working Papers hal-01077118, HAL.

    More about this item

    Keywords

    Corporate governance; Legal system; Good governance; Financial development; Macroeconomic fundamentals; economic growth; panel vector autoregression; impulse response functions;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tei:journl:v:15:y:2022:i:1:p:16-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kostas Stergidis (email available below). General contact details of provider: https://edirc.repec.org/data/dbikagr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.