Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors

Areneke, Geofry; Adegbite, Emmanuel; Tunyi, Abongeh

Abstract

We advance the practice transfer theorising of corporate governance (CG) by developing a framework that uncovers how foreign institutional investors (FIIs) improve on CG practices of firms in weak institutional environments. Using hand-collected data for 85 listed Nigerian firms covering the 2011–2016 period, we show that FIIs bypass the weak regulatory environment in emerging markets by transferring good CG standards to host countries. Furthermore, FIIs’ ability to enhance the CG quality of firms in such environments is moderated by their home country's legal system, with FIIs from countries with strong legal enforcement having an enhanced ability to improve CG practices of firms in weak institutional environments. However, cultural differences between the FIIs’ home and host countries negatively moderate this relationship. Our results are robust to the choice of estimation technique and various sources of endogeneity.

Citation

Areneke, G., Adegbite, E., & Tunyi, A. (2022). Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors. International Business Review, 31(5), Article 101978. https://doi.org/10.1016/j.ibusrev.2022.101978

• Journal Article Type: Article
• Acceptance Date: Feb 6, 2022
• Online Publication Date: Feb 15, 2022
• Publication Date: 2022-10
• Deposit Date: Feb 9, 2022
• Publicly Available Date: Aug 16, 2023
• Journal: International Business Review
• Print ISSN: 0969-5931
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 31
• Issue: 5
• Article Number: 101978
• DOI: https://doi.org/10.1016/j.ibusrev.2022.101978
• Keywords: Corporate governance; foreign institutional investors; cultural distance; legal system; practice transfer; emerging markets; Nigeria
• Public URL: https://nottingham-repository.worktribe.com/output/7412631
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0969593122000063