Analysis of the determinants of corporate governance quality: evidence from sub-Saharan Africa

This paper investigates the level of corporate governance quality (CGQ) of firms in sub-Saharan Africa and the factors that determine this CGQ as a build-up of the study of Waweru (Waweru, Managerial Auditing Journal 29:455–485, 2014). The study’s sample comprises 104 companies listed on the respective stock markets of nine sub-Saharan African countries. The data are collected from annual reports from 2007 to 2019, a total of 1108 firm-year observations. Both static and dynamic panel data models are used in the analyses. The study established that the CGQ of firms in Sub-Saharan African capital markets is weak thus disputing the findings of Waweru (Waweru, Managerial Auditing Journal 29:455–485, 2014). The study also concludes that IFRS adoption, asset tangibility, ownership concentration, audit quality, firm size and national regulatory quality are the most consistent predictors of CGQ of firms in sub-Saharan Africa. The other determinants of CGQ include listing tenure, business operating tenure, leverage, firm growth opportunities and macroeconomic misery index. The novelty of this study stems from its consideration of a larger cross-country panel dataset from sub-Saharan Africa to extend the work of Waweru (Waweru, Managerial Auditing Journal 29:455–485, 2014). Again, the study’s introduction of the economic misery index and regulatory quality variables as determinants of CGQ extends the agency theory by demonstrating how macroeconomic factors and the quality of the national regulatory environment can influence governance at the firm level.