Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1360: The Impact of Business Group Affiliation and Country-Level Institutions on Corporate Governance of Emerging Market Firms

Bruce Hearn, Lars Oxelheim () and Trond Randoy
Additional contact information
Bruce Hearn: University of Bradford, Postal: UK
Lars Oxelheim: Research Institute of Industrial Economics (IFN), Postal: Stockholm, Sweden, and School of Business and Law, University of Agder, Norway
Trond Randoy: School of Business and Law, Postal: University of Agder, Norway

Abstract: This study outlines how the corporate governance of emerging market firms is influenced by corporate affiliation and institutional embeddedness. We argue that the stronger the business group affiliation, the less likely is the emerging market firm to adopt shareholder value-enhancing corporate governance and that this relationship is moderated by institutional quality and tribalism. Based on189 initial public offerings (IPOs) from 22 African countries between 2000 and 2016, we find a significant negative relationship between business group ownership and IPO firms’ quality of corporate governance. We also find this relationship to be significantly negatively moderated by country-level institutional quality and positively by indigenous tribalism. The result adds to the understanding of barriers toa convergence towards one uniform global corporate governance model.

Keywords: Corporate Governance Practice; Africa; Emerging Economies; IPO; Business Groups

JEL-codes: G23; G38; M12; M14; M16

62 pages, September 30, 2020

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