Abstract
Corporate governance is often split between rule-based and principle-based approaches to regulation in different institutional contexts. This split is often informed by the types of institutional configurations, their strengths, and the complementarities within them. This approach to corporate governance regulation is mostly discussed in the context of developed economies and their regulatory demands. However, in developing and weak market economies, such as in Sub-Saharan Africa, there is no such explicit split and the debates on such contexts in the comparative corporate governance literature has been meagre. Nonetheless, there are sparks of good corporate governance practices in the region. Drawing from institutional theory and a case study of Nigeria – Africa’s largest economy – we explore the appropriateness or suitability of corporate governance regulatory frameworks in Sub-Saharan Africa. Our findings suggest that Nigeria needs an integrated system that combines elements of both rule-based and principle-based regulation, supported by a multi-stakeholder co-regulation strategy. This paper departs from the mainstream rule-based and principle-based categorisations by forging ahead new perspectives on corporate governance regulation, especially in weak market economies.
Highlights
The suitability of corporate governance systems in different countries is mainly linked to the robustness of their underlying regulatory mechanisms (Shrives and Brennan 2015)
We present a model of regulation for corporate governance in developing economies which share economic and institutional characteristics similar to those of Nigeria
Our data show that corporate governance regulation in Nigeria is fraught with inter-related challenges at both micro and macro levels, in line with institutional theoretical framework analysis
Summary
The suitability of corporate governance systems in different countries is mainly linked to the robustness of their underlying regulatory mechanisms (Shrives and Brennan 2015). Corporate governance systems are often assessed on either principle-based or rule-based perspectives (Sama and Shoaf 2005; Arjoon 2006; Black 2008). Principle-based corporate governance codes are voluntary/ non-binding set of recommendations, standards, and best practices, issued by a collective body, in relation to the governance of corporations within a country (Chizema 2008; Osemeke and Adegbite 2016). The literature on principle-based and rule-based regulations have mainly focused on understanding which of the regulatory approaches are better in different conditions (see Arjoon 2006; Benston et al 2006). While Arjoon (2006) highlights the drawbacks of an excessive reliance on rule-based regulatory approach, Black (2008) explained that the global economic crisis of 2008 has exposed the failings of a principle-based regulatory approach
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