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

Areneke, Geofry; Adegbite, Emmanuel; Tunyi, Abongeh

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Authors

Geofry Areneke

EMMANUEL ADEGBITE EMMANUEL.ADEGBITE@NOTTINGHAM.AC.UK
Professor in Accounting and Corporate Governance

Abongeh Tunyi



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.

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
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

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