Firms In Sub-Saharan Africa Research Articles

Investigating the mediating role of national governance bundles and institutional ownership on the relationship between risk governance disclosure and market valuation: evidence from Sub-Saharan Africa

Purpose The paper aims to comparatively examine the impact of risk governance disclosure (RGD) on the market valuation of firms in Sub-Saharan Africa (SSA) and the mediating role of institutional investment and national governance bundles (NGB). Design/methodology/approach Using a dynamic system generalized method of moments estimation to control for endogeneity, the data for this research is manually collected from the annual reports of small and large firms in Nigeria (80 firms) and South Africa (100 firms) for the period 2012–2017 (900 firm years). Findings The authors find that firm RGD directly impacts firm valuation positively, but this association is significantly mediated by national governance practices (bundles) and institutional investment. The authors also develop a conceptual framework that shows the direct and indirect impact of RGD on firm market valuation. Originality/value The paper contributes to the comparative corporate governance literature in three ways. First, the authors show that differences in country-level RGD are explained by the maturation of governance regulations and institutions in each country. Second, despite the differences in the level of maturity of governance institutions across countries, stock markets value risk governance information. Finally, the study develops a conceptual framework that addresses prior inconsistent findings by showing that firm-level NGB and institutional investment significantly mediate the association between RGD and market valuation.

Impact of Board Committee Characteristics on Social Sustainability Reporting in Sub-Saharan Africa: The Moderating Role of Institutional Ownership

The corporate strategic planning of businesses in sub-Saharan Africa (SSA) largely focuses on immediate financial performance with minimal credence to social sustainability. Thus, studies on the linkage between corporate governance (CG) and sustainability reporting have focused on developed economies. This study therefore investigated the role of institutional ownership in the impact of board committee characteristics on social sustainability reporting. This study involved strongly balanced panel data with 1969 observations of 275 publicly listed non-financial firms in SSA within the timeframe of 2012 to 2021. Data were analyzed using STATA 14.1. The hypotheses were tested using the two-step system of the generalized method of moment (GMM) using the Arellano–Bond dynamic panel data estimation method. The rate of social sustainability reporting was 39.4%. Relatively, Mauritian and South African firms had the most effective board committee characteristics and higher levels of social sustainability reporting. Although institutional ownership had no significant effect on social sustainability reporting, it moderated the effect of sustainability committee independence and sustainability committee gender diversity on social sustainability reporting. This paper presents a new perspective on the corporate governance and social sustainability literature by examining the effect of institutional ownership on board committee characteristics and social sustainability reporting in SSA. In terms of policy implication, there is the need for mandatory regulatory and legal CG framework that is regularly updated at national and regional levels in SSA to motivate listed firms to establish sustainability committees with efficient characteristics to promote social sustainability reporting.

Effect of corporate governance mechanisms on corporate strategy for listed firms in Sub-Saharan Africa (SSA)

Effect of corporate governance mechanisms on corporate strategy for listed firms in Sub-Saharan Africa (SSA)

Financial reporting quality and the performance of firms in Sub-Sahara Africa: The mediating role of firms’ characteristics

The purpose of this study is to test the validity of the mediating role of firms’ characteristics and its consequences on the financial reporting quality and performance of publicly quoted firms in sub-Saharan Africa. The study employed a quantitative approach and tested an existing theory by formulating relevant hypotheses. Measures of firms’ characteristics include the statistic factor (size) and dynamic factors (return on assets and return on equity as dependent variables; and discretionary cash flow from operating activities less net profit as an independent variable). The sample size consists of one hundred and twelve (112) public firms quoted on stock exchanges in three (3) sub-Saharan African countries from 2012 to 2022. Data obtained were analyzed using fixed effect and random effect panel data regression and structural equation modeling. The results revealed that financial reporting quality positively and insignificantly affects performance. However, financial reporting quality and firms’ performance were found to be positively and significantly affected when firms’ characteristics (size) were introduced. The implication of these results is that financial reporting quality alone cannot lead to an increase in firms’ performance. The size of the firm should be given due consideration to guarantee increased firm performance via high-quality financial reporting. Moreover, the results of this study are expected to offer information to the management of firms, enabling them to fulfill the condition of quality financial reporting so that investors and analysts of capital markets can benefit from determining informed investment decisions.

Social strategies of emerging market multinationals in developing countries: The case of Polish firms in Sub-Saharan Africa

Social strategies of emerging market multinationals in developing countries: The case of Polish firms in Sub-Saharan Africa

The Impact of Ethics on the Audit Quality of Firms in Sub-Sahara Africa

Sub-Saharan Africa (SSA) is a region characterised by unique challenges related to weak governance structures, inadequate regulatory frameworks, and limited resources. These challenges pose significant risks to audit quality, as they can compromise the independence, objectivity, and professional judgment of auditors. Moreover, the ethical values of the region can also have a significant impact on audit quality, as they shape the behaviour and attitudes of auditors and the firms they audit. The aim of this study was to investigate the impact of ethics on audit quality among firms in SSA. The study uses a sample of 323 firms from 12 sub-Saharan African countries, covering the period from 2012 to 2021. The research design is quantitative, employing a panel data approach and regression analysis. The econometric model used to estimate the impact of ethics on audit quality was based on variables such as audit quality, ethical values, tenure, audit size, auditor reputation, firm size, return on assets, ownership structure and board independence. The data was collected from the World Economic Forum, Bloomberg Database and other sources. Regression results demonstrated a negative and insignificant impact of ethical values on audit quality. However, the tenure of auditors had a positive impact on audit quality. The results of this study suggest the importance of promoting ethical behaboiur and strengthening ethial standards in auditing profession in SSA.

Firm-specific characteristics and environmental disclosure of energy firms in Sub-Saharan Africa

Purpose: This study investigated the relationship between firm-specific characteristics and environmental disclosure practices of energy firms in sub-Saharan Africa. It examines how profitability, size, and liquidity influence the environmental disclosure index (EDI) of listed energy firms in the region. Research methodology: A quantitative approach was adopted, utilizing secondary data from the annual reports of energy firms listed in Nigeria, South Africa, and Kenya. Regression analysis was employed to assess the impact of firm-specific characteristics on EDI using waste management data based on the Global Reporting Initiative (GRI) 306 guidelines. Results: The findings indicated that Profitability positively affected EDI, indicating greater transparency in reporting environmental initiatives for more profitable firms. Conversely, firm size is negatively correlated with environmental disclosure, suggesting challenges for larger firms in effectively communicating their environmental efforts. However, firm liquidity did not significantly affect EDI. Limitations: One limitation of the study is its focus on energy firms in only three countries, limiting the generalizability of the findings to other sub-Saharan African nations. Contribution: This research contributes to the literature by addressing environmental disclosure practices within sub-Saharan Africa's energy sector, offering stakeholders, policymakers, and regulators insights to promote transparency and sustainability in the industry. Novelty: The novelty of this study lies in its examination of firm-specific characteristics and their influence on environmental disclosure practices in the energy sector of Sub-Saharan Africa. Using waste management data as a proxy for disclosure offers a fresh perspective on the reporting practices of energy firms in the region.

Impact of firm-level innovation on productivity of manufacturing and service firms in Sub-Saharan Africa

ABSTRACT This study investigates the impact of firm-level research and innovation on the productivity of Sub-Saharan African firms in 2014–2018. This study utilizes World Bank Enterprise Surveys on 2,867 manufacturing and service firms conducted in SSA in 2018/19. Endogenous Switching Regression (ESR) was used as the primary estimation methodology. The results indicated that Research and Development spending positively and significantly impacts manufacturing firms’ productivity. In addition, service innovation has a positive and significant effect on the productivity of service firms. In contrast, product innovation is insignificant to manufacturing firms’ productivity. Lastly, process innovation is significant only to the manufacturing firms and not the service firms. These results suggest that Sub-Saharan African firms did not realize maximum innovation productivity gains during the study period. Nonetheless, the results imply that other than the conventional factor-driven production, Sub-Saharan African firms have the potential to drive their productivity through semi-endogenous firm-level innovation.

Do Chinese firms in Africa pay lower wages? A comparative analysis of manufacturing and construction firms in Angola and Ethiopia

This paper analyses wage differences between Chinese and non-Chinese firms in Angola and Ethiopia. The growing engagement of Chinese firms in sub-Saharan Africa has generated debates about the working conditions offered to African workers. However, the evidence for many of the claims made about wages in Chinese firms operating in sub-Saharan Africa is unconvincing. In this paper the authors identify problems with the existing literature and provide new comparative evidence on wages in Chinese, other foreign and domestic firms in Angola and Ethiopia. Drawing on over 1,400 worker-level interviews the authors find that Chinese firms do not consistently pay less than comparable firms. Using a multi-scalar labour regime framework the authors show that a combination individual worker characteristics, sector specificities, and firm attributes are necessary to explain variations in wages in both countries. The national origin of firms by itself cannot explain the observed differences in wages.

The Sociocultural and Institutional factors influencing Tax Avoidance in sub-Sahara Africa

Businesses find ways to reduce their tax while the government also establishes laws and policies to prevent tax avoidance. These conflicting objectives and strategies have heightened the interest in establishing the factors that influence firms’ level of tax avoidance. The study examined a country’s institutional and sociocultural elements that influence tax avoidance practices by firms in sub-Saharan Africa (SSA). The study involved one hundred seventy-three (173) listed companies from eight sub-Saharan African countries. The study used a multiple regression analysis technique to estimate the results. The results showed that a country’s institutional settings and particular sociocultural practices impact its firms’ tax avoidance practices. The findings demonstrated that the degree of tax avoidance activities of firms in SSA is influenced by management quality, regulatory quality, auditing quality, culture, and ethics of a country. This result has several policy implications. First, the management of firms can use their resources to lower the tax paid to the government. Governments can also use institutional frameworks to stop businesses from using aggressive tax avoidance strategies. As a result, the study adds to the body of research on the factors influencing tax evasion in emerging markets. The findings align with the institutional theory’s assertions that institutions, laws, and regulations can impact how businesses behave through coercive and normative isomorphism, which can affect how they avoid paying taxes.

What Explains the Firm Size Distribution in Sub-Saharan Africa and Why Does It Matter?

AbstractIn this issue of the Journal of African Economies we publish two papers concerned with the firm size distribution of manufacturing firms in Sub-Saharan Africa (SSA). One paper examines the changes in the firm size distribution for Ghana, Teal (this issue), the other for Ethiopia, Azmete et al. (this issue). This note is intended to introduce, and compare, the findings of these two papers and to place those findings in the wider policy debate as to what explains the performance of the manufacturing sector in SSA.

Impact of COVID 19 on Digital Marketing: A Systematic Study on Sub Saharan African

The spread of the COVID-19 pandemic has had massive impacts on digital marketing, notably in Sub-Saharan Africa, which had been the preferred method of marketing in recent years. The term "Sub-Saharan Africa" is used to describe the African countries south of the Sahara Desert. This includes the eco-region of the Sahel, which lies between the Sahara and the African tropical and forest savannah zones, and the island states off Africa's western and eastern borders. South Africa, Sudan, Nigeria, Kenya, and Angola are just a few of the 48 countries that make up Sub-Saharan Africa. This study seeks to determine the impact of COVID 19 on digital marketing in Sub-Saharan Africa. Utilizing systematic review and, especially, the quick review approach, this objective was accomplished. The study concluded that COVID 19 had both positive and negative impacts on digital marketing in Sub-Saharan Africa. Sales, advertising, and promotion via digital channels have increased, which is a positive development. As a result of the lockdown and the corona virus epidemic, people are more likely to conduct business on the internet. Enhanced internet marketing has helped firms in Sub-Saharan Africa expand their clientele, revenue, and profits.
 Unfortunately, many digital marketing firms' reputations were damaged because some users abused their access to various online services by engaging in fraudulent activities during the epidemic. Ad, marketing, promotional, and media spending have all been adjusted as a result of the global COVID-19 epidemic. The study concluded and suggested that Sub-Saharan businesses and government institutions must be courteous, employ digital marketing, and respond to consumers during cultural events like the COVID-19 pandemic. To keep consumers, brands must fix the problem while being positive. Adjusting marketing campaign and content timings, advertising language and visuals, and being aware of customers' growing concern may do this. Under the global pandemic, Sub-Saharan African (SSA) firms must rely more on digital sales or e-commerce to flourish.

Corporate governance mechanisms and earnings management: The moderating role of female directors

The current study investigates how board gender diversity moderates the relationship between corporate governance mechanisms (CG) and earnings management (EM) practices of firms in sub-Saharan Africa. The study samples annual reports and financial statements of 52 firms from nine sub-Saharan African countries over a period of 2007 to 2019 giving a total of 676 observations. Panel data models are used in the analyses. The study finds that, board gender diversity matters and significantly moderates the relationship between CG and EM practices of firms in sub-Saharan Africa. The findings of the study support the agency theory proposition that the constraining effect of firms’ EM practices may be contingent on CG systems, particularly board gender diversity. The current study is the first African multi-cross-country study to introduce gender diversity as a moderating variable in the CG—EM nexus, thus extending the agency theory. It further contributes to the emergent advocacy for competent female representation on corporate boards so as to benefit from their essential characteristics and skills that drive their superior monitoring abilities, including EM monitoring.

Women on boards, firm earnings management (EM) and performance nexus: does gender diversity moderate the EM–performance relationship?

PurposeThis paper aims to shed light on an essential role that “female directors” on boards of companies in sub-Saharan Africa play towards corporate financial performance enhancement. The study observes how board gender diversity moderates the relationship between earnings management (EM) and financial performance of firms in sub-Saharan Africa from a dynamic perspective.Design/methodology/approachThe study’s sample comprises 105 companies listed on the respective stock markets of nine sub-Saharan African countries. The data are collected from annual reports over the period 2007–2019, a total of 1,166 firm-year observations. Panel data models are used in the analyses.FindingsThe study finds that the performance effect of EM is contingent on board diversity and this finding persists even after controlling for dynamic endogeneity, simultaneity and unobserved time-invariant heterogeneity inherent in the EM and performance relationship.Research limitations/implicationsThe findings should be understood within the context that, only available annual reports and audited financial statements that were filed with respective capital markets of the nine surveyed countries are used as source of information.Originality/valueThe current study is unique, in that, it is the first panel multi-cross-country investigation within Africa to introduce gender diversity in the study of the relationship between EM and firm performance. It therefore extends the agency theory by using gender diversity as a moderating variable in the EM–firm performance nexus.

Farmers’ preference for digital credit: Does the delivery channel matter?

AbstractPrevious studies highlight the limited credit access for farmers compared to non-agricultural firms in sub-Saharan Africa. A new innovation that has the potential to serve the financing needs of farmers in sub-Saharan Africa is digital credit. However, empirical studies on farmers’ preferences for digital credit are limited. Formal financial institutions and mobile network operators are two different delivery channels for digital credit with different loan characteristics. We apply a discrete choice experiment to investigate smallholder farmers’ preferences for digital credit in Madagascar. Our results show that digital credit is more attractive for farmers if it offers a lower interest rate per month, longer loan duration, and flexible repayment conditions adapted to farmers’ production needs. Our results highlight the potential of digital credit for rural farmers if mobile network operators could provide digital credit with longer loan maturities, and formal financial institutions could offer digital credit with more flexible repayment conditions.

Corporate governance and firm innovation: Evidence from indigenous oil firms in Sub-Saharan Africa

Corporate governance and firm innovation: Evidence from indigenous oil firms in Sub-Saharan Africa

The effects of innovation on the quantity and quality of jobs: evidence from sub-Saharan Africa

ABSTRACT Technological innovation is widely considered a primary source of economic growth and policies to encourage firm-level innovation remain key, even though its impact on employment remains indeterminate. Using the World Bank Enterprise survey on a sample of enterprises across sub-Saharan Africa, specifically Ghana, Kenya and Zambia, this study investigates: first, the effect of innovation on employment; second, the relationship between innovation and quality of employment and lastly, whether the type of innovation is important in isolating the effect of innovation on employment in sub-Saharan Africa. The results indicate that innovation has employment-enhancing effects in the subregion. In addition, novelty in product innovation is a more important source of employment for the firms in sub-Saharan Africa. In terms of innovation and the quality of employment, this study finds that process innovation is associated with a change in the labour composition mix in favour of unskilled workers.

Chain upgrading, technology transfer, and legitimacy: The Schumpeterian character of China in the information and communication technology sector in SSA

Drawing on technical change and technology transfer theories, we explore the Schumpeterian character of China in the information and communications technology (ICT) value chain in sub-Saharan Africa (SSA). Using data collected from various online sources, including the International Telecommunication Union (ITU) and World Integrated Trade Solutions (WITS) databases, we establish three key findings. First, relative to the traditional Global North sources, China has become a major source of ICT in SSA. Second, over the past two decades, Chinese firms operating in SSA have adopted a Schumpeterian character to gain legitimacy in the communities in which they operate. Third, with the easier transfer of ICT from China, local ICT firms in SSA have upgraded their value chains from only delivering information services to becoming important players in the financial sector, including the provision of mobile money transfer services. We conclude that China's expansive size, coupled with its ability to produce technologies for low-income economies, is likely to ensure that it will remain the dominant source of ICT innovations for SSA.

Corporate governance and disclosure of financial information: a case of listed firms in Sub-Saharan Africa

Corporate governance and disclosure of financial information: a case of listed firms in Sub-Saharan Africa

Bank Competition and Credit Access: The Case of Informal Firms in Sub-Saharan Africa

Purpose of the study: This paper investigates the impact of bank competition on access to finance by informal firms in 14 sub-Saharan African countries, using World Bank enterprise survey data. Access to finance is one of the main factors identified as hindering the growth of opaque borrowers, who are generally characterised by poor financial transparency. Methodology: This study uses a discrete binary choice probit model to estimate the probability or likelihood of accessing finance, conditional on the level of bank competition and other firm-level characteristics. Findings: Results show that the impact depends on the competition measure used. The Lerner index shows a positive relationship supporting the information-based hypothesis, while the most robust competition indicator, the Boone index, is negative in line with the market power hypothesis. These results also show that reducing or minimising information asymmetry using public credit registries is good for enhancing financial access. Research implications: Improving the competitiveness of the banking sector by encouraging the entrance of more players should be promoted without compromising the soundness of the sector. Measures should be introduced to control anti-competitive behaviour in the banking industry. Originality: The informal sector contributes close to 50% to Africa’s GDP and 80% towards employment and, therefore, strategies aimed at eliminating the obstacles faced by these firms are important for livelihood protection. Many studies done on the African banking industry have generally found it to be less competitive and this affects financial access since banks tend to be risk averse in such settings. There are also few studies that have analysed the relationship between bank competition and credit access in the informal sector, mostly because publicly available data on these firms are scarce.