Determinants of quality corporate governance in Sub-Saharan Africa

Abstract

Purpose– This study aims to examine the factors influencing the quality of corporate governance in South Africa (SA) and Kenya. Firm-level variables including performance, firm size, leverage, investment opportunities and audit quality were identified from the corporate governance literature.Design/methodology/approach– The study used panel data of 247-firm years obtained from the annual reports of the 50 largest companies listed on the Johannesburg Securities Exchange (JSE) of SA and 234-firm years obtained from the 49 companies listed on the Nairobi Stock Exchange (NSE). The author then used content analysis to extract the study variables from the annual reports and multiple regression analysis to determine their relationship.Findings– The study found audit quality and firm performance as the main factors influencing the quality of corporate governance in Kenya and SA. There are also differences in the quality of corporate governance between the two countries.Research limitations/implications– First the study sample consists of the 50 largest firms listed in the JSE of SA and another 49 companies listed in the NSE of Kenya. Since these are large companies, the results may not be generalized to other smaller firms operating in both SA and Kenya. Second, this study is constrained to SA and Kenya. Firms in other developing countries may differ from their SA and Kenyan counterparts.Originality/value– The results of this study are important to the King Committee and other corporate governance regulators in Sub-Saharan Africa, in their effort to improve corporate governance practices, minimize corporate failure and protect the well-being of the minority shareholders. Furthermore, the study contributes to the understanding of the variables affecting the quality of corporate governance in developing economies of Africa.