The key challenge of corporate governance of firms: Empirical evidence from Sub-Saharan African anglophone (SSAA) countries

Abstract

Motivation:In the Sub-Saharan Africa countries there are several factors contributing to the collapse of firms. Most firms have failed due to poor corporate governance practices. The recent collapse of some firms in the financial and non-financial sectors in the Sub-region shows that there are challenges hindering effective corporate governance of firms in the Subregion. Consequently, this study uses empirical evidence to identify views about the important components of good corporate governance practice for listed firms: institutional characteristics; the board of directors; and the effects of external factors. Research question: The pertinent research question that this study addresses is the identification of the components that are essential for good corporate governance of firms in the Sub-region. This study tries to prioritise the components. Methodology: Data were collected by questionnaire administered to stakeholders of corporate governance of listed firms in Ghana, Nigeria and South Africa. Regression is used to estimate the relationship between institutional characteristic, responsibilities of the board of directors and external factors on corporate governance system. Main findings: 1. Enforcement, disclosure, transparency and regulatory frameworks may be necessary to improve corporate governance practice in all the countries in the Sub-region (SSAA). 2. There is evidence that commitment of board members to disclosure and communication may provide effective corporate governance practice. 3. Board duality (separation of role between chairman and CEO) is likely to hinder corporate governance practices. 4. We found that in all the countries in the Sub-region accounting system plays a major role to promote sound corporate governance practice. However, the political environment, societal and cultural factor, corruption, and economic factors such as macro-economic policies may hinder corporate governance practices.Policy recommendations: This study recommends that corporate governance stakeholders should adopt a whistle blowing method and also that institutional bodies should be more prudent in monitoring of rules and laws with stringent penalties. In addition, there should be adequate information and disclosure on the rights and obligation of the shareholder of firms in the sub-region region. There is need to increase the number and role of independent directors, increase the use of advisory vote by shareholders on executive compensation and facilitation of shareholders activism. Furthermore, there is a need to have autonomous regulatory bodies and supervisory agencies free from any political/ government interference in the implementation of the Code and Guideline of corporate governance. The regulatory bodies and the supervisory agencies should be manned or be under the leadership of people of goodwill, good character and trust. The Code or Guideline of corporate governance of Sub-Saharan Africa Anglophone countries should take cognisance of and be aligned with socio-cultural environment of the countries in the Sub-region.