Foreign Ownership in Sub-Saharan Africa: Do Governance Structures Matter?

Seth Nana Kwame Appiah-Kubi,Karel Malec,Sandra Boatemaa Kutin,Mansoor Maitah,Sylvie Kobzev Kotásková,Michael Chanda Chiseni,Zdeňka Gebeltová,Kamil Maitah,Joseph Phiri

doi:10.3390/su12187698

Seth Nana Kwame Appiah-Kubi, Karel Malec + Show 7 more

Open Access

https://doi.org/10.3390/su12187698

Copy DOI

Abstract

It has been widely argued that governance structures have roles in the predominance of foreign ownership in Sub-Saharan African countries. Our paper sought to challenge this conventional wisdom by investigating the ways in which country-level governance structures influenced the predominance of foreign holdings in Sub-Saharan African countries for the period 2010–2015. The study used panel sampling annual data from thirty countries in Sub-Saharan Africa, with Ordinary Least Squares (OLS) and Feasible Generalized Least Squares (FGLS) as our discussion estimators. Our statistical results reveal that there is a significant positive relationship between government effectiveness and the predominance of foreign ownership in Sub-Saharan African countries. Furthermore, foreign ownership predominates in Sub-Saharan African economies that have sound political stability and embrace effective and efficient regulations. Moreover, the relationship between corruption and the prevalence of foreign ownership is negative but significant. However, the rule of law, and voice and accountability, are insignificant to the predominance of foreign ownership in Sub-Saharan Africa. Our results suggest that governments in Sub-Saharan Africa should adopt robust and efficacious measures, strengthen their policies and institutions to promote the control of corruption, provide quality regulations, and minimize political violence.

Highlights

The prevalence of the foreign ownership of firms has been anticipated to be one of the significant sources of the expansion and booming of economies in developing countries
The objective of our paper was to investigate the correlation between the predominance of foreign ownership and governance structures in Sub-Saharan Africa via the estimation of Robust Ordinary Least Squares (OLS) and Feasible Generalized Least Squares (FGLS) for our model
We carried out this research on thirty Sub-Saharan African countries from 2010–2015

Summary

Introduction

The prevalence of the foreign ownership of firms has been anticipated to be one of the significant sources of the expansion and booming of economies in developing countries. The chance for developing countries and economies in transition to copy the foreign style of management is a key rationale in luring investments from abroad [4]. There seems to be aggressive competition by domestic corporate companies in attracting foreign ownerships in a globalized economy, and foreign investors recognize good country-level corporate governance as an unambiguous influencing key factor [3,6,7,8]. Government establishments which consist of governance structures and enactments that are built on global laws and standards would enable developing economies to rationalize their corporate structures, which in turn could enhance the predominance of foreign ownership in their economies [9,10,11]. Several studies have investigated the inclinations of conventional investors and how they are influenced by these economic factors [3,12,13,14,15]

Objectives

Methods

Results

Conclusion