The impact of indigenous culture and business group affiliation on corporate governance of African firms
The impact of indigenous culture and business group affiliation on corporate governance of African firms
Research Question/Issue
This is a study of the relationship between business group ownership and constituent firms' adoption of Anglo-American shareholder value governance in African firms at the undertaking of an initial public offering (IPO).
Research Findings/Insights
We find business group ownership to be associated with lower Anglo-American corporate governance adoption by constituent firms. However, this association is reversed in the institutional context of higher tribalism, while correspondingly being exacerbated in the context of lower tribalism.
Theoretical/Academic Implications
We theorize that the influence of business group ownership on firms' adoption of Anglo-American corporate governance is better understood when considering the institutional context. We highlight how informal cultural institutions are heterogeneous and thus shape the indigenous political economy and impact business groups. Specifically, we argue institutional contexts with higher tribalism are associated with more in-group favoritism and nepotism. This association makes it critical for business group constituent firms to escape the constraints of the political economy of tribalism when attracting outside funding, leading to a higher inclination to adopt Anglo-American governance. Contrastingly, in lower tribalism contexts, there is more universal trust across societies and an increased availability of domestic funding.
Practitioner/Policy Implications
Given the proliferation of business group ownership within economies worldwide, the study provides a useful framework with which to gauge the influence of business group ownership on a constituent firm's adoption of Anglo-American governance best practice. In particular, the study emphasizes that the interdependence of formal institutional architecture and tribalism—both fundamentally associated with the demographic shape and with the incentive structures embedded within the underlying national political economy—calls for careful considerations when making national corporate governance recommendations.
Africa, corporate governance, corporate governance rating/index, corporate governance theories, firm-level governance outcomes, governance environments, institutional theory
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Oxelheim, Lars
2779fed2-36f3-4c53-8419-629fffd61ffc
Randøy, Trond
5c347a43-8b02-4477-ad5c-18adc1098926
5 July 2023
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Oxelheim, Lars
2779fed2-36f3-4c53-8419-629fffd61ffc
Randøy, Trond
5c347a43-8b02-4477-ad5c-18adc1098926
Hearn, Bruce, Oxelheim, Lars and Randøy, Trond
(2023)
The impact of indigenous culture and business group affiliation on corporate governance of African firms.
Corporate Governance: An International Review.
(doi:10.1111/corg.12547).
Abstract
Research Question/Issue
This is a study of the relationship between business group ownership and constituent firms' adoption of Anglo-American shareholder value governance in African firms at the undertaking of an initial public offering (IPO).
Research Findings/Insights
We find business group ownership to be associated with lower Anglo-American corporate governance adoption by constituent firms. However, this association is reversed in the institutional context of higher tribalism, while correspondingly being exacerbated in the context of lower tribalism.
Theoretical/Academic Implications
We theorize that the influence of business group ownership on firms' adoption of Anglo-American corporate governance is better understood when considering the institutional context. We highlight how informal cultural institutions are heterogeneous and thus shape the indigenous political economy and impact business groups. Specifically, we argue institutional contexts with higher tribalism are associated with more in-group favoritism and nepotism. This association makes it critical for business group constituent firms to escape the constraints of the political economy of tribalism when attracting outside funding, leading to a higher inclination to adopt Anglo-American governance. Contrastingly, in lower tribalism contexts, there is more universal trust across societies and an increased availability of domestic funding.
Practitioner/Policy Implications
Given the proliferation of business group ownership within economies worldwide, the study provides a useful framework with which to gauge the influence of business group ownership on a constituent firm's adoption of Anglo-American governance best practice. In particular, the study emphasizes that the interdependence of formal institutional architecture and tribalism—both fundamentally associated with the demographic shape and with the incentive structures embedded within the underlying national political economy—calls for careful considerations when making national corporate governance recommendations.
Text
Corporate Governance - 2023 - Hearn
- Version of Record
More information
Accepted/In Press date: 5 June 2023
e-pub ahead of print date: 5 July 2023
Published date: 5 July 2023
Additional Information:
Publisher Copyright:
© 2023 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.
Keywords:
Africa, corporate governance, corporate governance rating/index, corporate governance theories, firm-level governance outcomes, governance environments, institutional theory
Identifiers
Local EPrints ID: 480500
URI: http://eprints.soton.ac.uk/id/eprint/480500
ISSN: 0964-8410
PURE UUID: 6c6efe44-84fc-46d5-8836-474f8cab266b
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Date deposited: 03 Aug 2023 16:41
Last modified: 06 Jun 2024 02:03
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Contributors
Author:
Lars Oxelheim
Author:
Trond Randøy
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