The governance implications from presence of long-term foreign investment partner in West African IPO firms

Hearn, Bruce (2012) The governance implications from presence of long-term foreign investment partner in West African IPO firms. Journal of Transnational Management, 17 (3), 169-188. (doi:10.1080/15475778.2012.706701).

Abstract

The attraction of blue-chip listings in emerging stock markets is a major policy initiative common across much of the developing world. However in many cases the local blue-chip entities are the result of foreign multinational enterprises (MNEs) firms engaging with local partners to form international joint ventures (IJVs) with the local IPO (initial public offerings) listing the result of the necessity to indigenize ownership as well as political pressures to boost fledgling emerging stock markets, thereby attracting investment. Using a unique hand-collected sample of 51 IPO firms from a West African region which is characterised by both an abundance of natural resources as well as considerable variation in state-level institutional quality evidence is revealed of limited protection of minority outsider property rights from the implementation of board governance mechanisms such as higher proportions of independent nonexecutives and independent committees. In the light of weak state-level institutional quality and lower levels of nonexecutives with sufficient ownership rights to effectively question decisions by executives and management the evidence suggests outsider investors are at risk from expropriation by insiders. These results underscore the importance of institutional development at state level as a mechanism of ensuring good governance at firm-level.

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Contributors

Author: Bruce Hearn

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