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The Role of Institutions in the Migration of Corporate Governance Practice into Emerging Economies – The Case of Africa

Author

Listed:
  • Hearn, Bruce

    () (University of Sussex, UK)

  • Oxelheim, Lars

    () (Research Institute of Industrial Economics (IFN))

  • Randøy, Trond

    () (University of Agder, Norway)

Abstract

This study examines the role of institutional environment in influencing the migration of corporate governance best practice into 22 emerging African economies. Using a unique and comprehensive sample hand-collected sample of 202 IPO firms from across the continent we adopt a novel institutional logics perspective in studying the diffusion of CEO salary disclosure – a central element of corporate transparency. Our findings reveal that the adoption of CEO salary disclosure by firms is more likely in more homogenous informal institutional contexts. Complementarities arising from disclosure originating from an Anglo-American shareholder value governance framework and indigenous formal institutions adhering to English common law infer disclosure is more likely than in contrasting civil code law contexts. Finally firms with higher proportions of their boards of directors being drawn from indigenous social elites are less likely to disclose CEO salary – where this is reversed in the context of elevated institutional quality. Our findings are important for regulatory authorities, investors and policy makers alike who are involved in institutional improvements in emerging economies.

Suggested Citation

  • Hearn, Bruce & Oxelheim, Lars & Randøy, Trond, 2016. "The Role of Institutions in the Migration of Corporate Governance Practice into Emerging Economies – The Case of Africa," Working Paper Series 1122, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:1122
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    References listed on IDEAS

    as
    1. Nathan Nunn, 2008. "The Long-term Effects of Africa's Slave Trades," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 139-176.
    2. Paul R. Milgrom & Douglass C. North & Barry R. Weingast*, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, March.
    3. Eng, L. L. & Mak, Y. T., 2003. "Corporate governance and voluntary disclosure," Journal of Accounting and Public Policy, Elsevier, vol. 22(4), pages 325-345.
    4. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    5. repec:bla:joares:v:38:y:2000:i::p:91-124 is not listed on IDEAS
    6. Nunn, Nathan, 2007. "Historical legacies: A model linking Africa's past to its current underdevelopment," Journal of Development Economics, Elsevier, vol. 83(1), pages 157-175, May.
    7. repec:hrv:faseco:30728041 is not listed on IDEAS
    8. Leuz, C & Verrecchia, RE, 2000. "The economic consequences of increased disclosure," Journal of Accounting Research, Wiley Blackwell, vol. 38, pages 91-124.
    9. Liu, Xiaohui & Lu, Jiangyong & Chizema, Amon, 2014. "Top executive compensation, regional institutions and Chinese OFDI," Journal of World Business, Elsevier, vol. 49(1), pages 143-155.
    10. Fabrizio Ferri & David A. Maber, 2013. "Say on Pay Votes and CEO Compensation: Evidence from the UK," Review of Finance, European Finance Association, vol. 17(2), pages 527-563.
    11. Douglass C. North & Robert Paul Thomas, 1970. "An Economic Theory of the Growth of the Western World," Economic History Review, Economic History Society, vol. 23(1), pages 1-17, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Disclosure; CEO Salary; Institutional Theory; Africa; Emerging Economies; IPO;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M16 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - International Business Administration

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