Basados en Estructura

As discussed in 5.5.4, dual listing can serve as a bonding structure used by corporate managers to gain the trust of investors and show investors they are committed to sound CG disclosure practices which may increase market valuation (Siegel, 2009). In addition, dual-listed firms are argued to have more CG transparency owing to high scrutiny (Ntim, 2012b, Ntim et al., 2012). To ascertain whether dual-listed firms are more likely to comply with CG provisions in respective countries, the sample was split between dual-listed and non-dual-listed firms.

Panel A in table 8 and figure four (Fig.4) below show the levels of compliance between dual-listed firms and non-dual-listed firms based on the pooled mean. Firm- level compliance with the Nigerian Corporate Governance Index (NICGI) for dual- listed-firms displays an average of 82.04% (i.e. 62 out of 75), with a maximum of 98.67% (i.e. 74 out of 75) and a minimum of 42.67% (i.e. 32 out of 75), with a standard deviation of 7.58%. However, non-dual-listed firms on average comply with

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NICGI at 69.12% (i.e. 52 out of 75), with the most compliant firm scoring 96% (i.e. 72 out of 75) and the least compliant score of 16% (i.e. 12 out of 75), with a variation of 16.45%. Similarly, on average, dual-listed South African firms comply with 88.74% (i.e. 75 out of 84) of the King III CG provisions, with a high of 98% (i.e. 82 out of 84), a low of 69% (i.e. 58 out of 84) and a variation of 4.96%. In contrast, non- dual-listed South African firms on average comply with 85.5% (i.e. 72 out of 84) of SACGI, with a minimum of 52% (i.e. 44 out of 84), a maximum of 98% (i.e. 82 out of 84) and a variation of 8.25%. These results suggest cross-listed firms in both countries comply with country-level CG requirements more than non-dual-listed firms. These results support the bonding hypothesis argument that dual listing subjects firms to more rigorous CG requirements, which enhances their ability to comply with country- level CG practices, especially for firms from weak institutional environments ( see, Charitou et al., 2007, Coffee Jr, 2002, Lel and Miller, 2008).

Fig. 4: Compliance level between dual-listed and non-dual-listed firms

However, comparatively, there is considerable heterogeneity between South Africa and Nigeria regarding compliance by dual-listed firms. For example, the mean difference in compliance between dual- and non-dual-listed firms is significant at 1% in both countries, but there is a higher variation in Nigeria (12.914***) than in South

0 10 20 30 40 50 60 70 80 90 100

South Africa (SACGI) Nigeria (NICGI) South Africa (Shareholder-SACGI) Nigeria (Shareholder-NICGI) South Africa (Stakeholder-SACGI) Nigeria (Stakeholder-NICGI) Compliance Level Co mp lian ce In d ex South Africa (SACGI) Nigeria (NICGI) South Africa (Shareholder- SACGI) Nigeria (Shareholder- NICGI) South Africa (Stakeholder- SACGI) Nigeria (Stakeholder- NICGI) Non-Dual Listed 85.50 69.12 86.74 71.02 79.14 60.87 Dual Listed 88.74 82.04 90.38 80.70 80.84 87.86

Compliance Levels Between Dual-listed

and Non-dual-listed Firms

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Africa (3.242***). This suggests more symmetry in compliance between cross-listed and non-cross-listed South African firms whereas there is more dispersion between these groupings in Nigerian. The low level of compliance heterogeneity between non- dual-listed and dual-listed firms in South Africa can be attributed to the fact that South African firms have been accustomed to CG regulations since 1994. Accordingly, irrespective of dual listing, most firms have attained some level of maturity and are accustomed to CG compliance as it has become a culture embedded with firm CG practices irrespective of cross-listing status. However, the high variation between cross-listed Nigerian firms and non-cross-listed firms can be attributed to limited exposure to good CG practices, since firms were exposed to CG regulations only in 2003 and as such may be getting used to the compliance process.

Consequently, cross-listed firms that are exposed to CG regulations in more stringent stock markets comply more to the SEC 2011 CG than non-dual-listed firms.

Interestingly, there are non-cross-listed firms that comply with CG provisions more than some cross-listed firms in both countries. For example, the average compliance of non-cross-listed firms of 69.12% in Nigeria and 85.50% in South Africa compared to the minimum of 42.67% in Nigeria and 69% in South Africa for dual-listed firms suggests that some non-dual-listed firms comply with CG provisions more than some dual-listed firms.

Similar to compliance with respective country CG indices (NICGI and SACGI), the level of compliance with shareholder and stakeholder CG provisions in both countries is higher for dual-listed firms than non-dual-listed firms. However, the mean variation in compliance with stakeholder CG practices in Nigeria shows a higher statistical significance (1%) than in South Africa (10%). Interestingly, there is almost an equal level of compliance with South African contextual CG provisions between dual-listed firms (80.84%) and non-dual-listed firms (79.14%). More so, consistent with country CG index, the compliance with shareholder and stakeholder CG provisions is higher in South Africa than in Nigeria, indicating South African firms comply with

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6.6 Descriptive Statistics: Country-level Compliance Between Firms with Big 4 Auditors and Firms with Non-Big 4 Auditors

As noted earlier in subsection 5.5.6, extant CG literature suggests that the size of an audit firm matters in determining CG systems, quality of annual reports and firm valuation (Ntim et al., 2010, Ntim, 2013a, El Ghoul et al., 2016). Particularly, literature suggests that the extent of an auditor’s independence and audit quality is dependent on the size of the external audit firm. Literature suggests that audit firm size is positively correlated with audit fees (Francis, 1984; Alsaeed, 2006). This implies large firms are more likely to employ the big four audit firms, as they expect to have access to resources in addition to both local and international reputation. Consequently, firms who employ these large audit firms are seen to be willing to adhere to stringent CG standards and quality financial reporting which enhances firm valuation. Thus, it is expected that firms who employ the top four audit firms (i.e. PWC, Deloitte Touche Tohmatsu, KPMG and Ernst and Young) are more likely to comply with CG provisions.

External auditors in both the South African King III and Nigerian SEC 2011 CG are expected to certify the annual reports of firms to be of ‘true and fair’ value to the firms. In addition, audit firms in both countries are expected to comment on the level of existing CG systems in firms. Following from extant literature and the

recommendation of the respective country-level CG codes, the sample was split into firms with top big four auditors and those audited by non-top big four auditors.

Panel B on table 8 shows the distributional properties between firms audited by the big four auditors and those audited by non-big four auditors. The table shows that, on average, 87.15% (i.e. 73 out of 84) of firms audited by the big four auditors comply with King III CG provisions (SACGI), whereas firms with non-big four auditors comply at 84.39% (i.e. 71 out of 84). Similarly, in Nigeria, firms audited by the big four auditors comply with 75.92% of the SEC 2011 CG provisions (i.e. 56 out of 75) whereas firms audited by non-big four auditors comply with 62.57% (i.e. 47 out of 75) of the SEC 2011 CG provisions. There is a statistically significant mean

difference in compliance with respective country CG codes between firms audited by top four auditors and those not audited by top four auditors

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Table 8: Compliance Levels between Dual- and Non-Dual-Listed Firms (Panel A) and between Firms with Big 4 Auditors and Firms with Non-Big 4 Auditors (Panel B)

Panel A: Level of Compliance – Dual-Listed versus Non-Dual-Listed Firms

Nigeria (400 firm years, i.e. 2011–2015) South Africa (500 firm years, i.e. 2010–2014) Mean Comparison (T-Test) Dual-Listed Nigerian Firms (70 firm years) Dual-Listed South African Firms (85 firm years) Nigeria South Africa

Variable Mean SD Min Max Mean SD Min Max

Corporate Governance Index (NICGI &

SACGI) 82.04 13.58 42.67 98.67 88.74 4.96 69.00 98.00 (12.914) *** (3.242) ***

Shareholder Corporate Governance Index 80.70 12.78 45.90 98.36 90.38 5.05 69.00 99.00 (9.684) *** (3.634) ***

Stakeholder Corporate Governance Index 87.86 19.66 28.57 100.00 80.84 9.91 54.00 100.00 (26.991) *** (1.698) *

Non-Dual-Listed Nigerian Firms (330 firm years)

Non-Dual-Listed South African Firms (315 firm years)

Corporate Governance Index (NICGI &

SACGI) 69.12 16.45 16.00 96.00 85.50 8.25 52.00 98.00

Shareholder Corporate Governance Index 71.02 15.45 18.03 95.08 86.74 8.62 54.00 100.00

Stakeholder Corporate Governance Index 60.87 25.23 0.00 100.00 79.14 10.15 23.00 100.00

Panel B: Level of Compliance – Firms with Big 4 Auditors versus Firms with Non-Big 4 Auditors Nigerian Firms with Big 4 Auditors (264 firm

years)

South African Firms with Big 4 Auditors (301 firm years)

Corporate Governance Index (NICGI &

SACGI) 75.92 14.78 22.67 98.67 87.15 6.36 65.00 98.00 (13.556)*** (2.762)***

Shareholder Corporate Governance Index 76.21 13.72 22.95 98.36 88.51 6.68 66.00 99.00 (10.287)*** (2.901)***

Stakeholder Corporate Governance Index 74.68 23.78 21.43 100.00 80.28 9.65 23.00 100.00 (26.7234)*** (2.135)**

Nigerian Firms with Non-Big 4 Auditors (136 firm years)

South African Firms with non-Big 4 Auditors (199 firm years)

Corporate Governance Index (NICGI &

SACGI) 62.57 16.75 16.00 94.67 84.39 9.51 52.00 98.00

Shareholder Corporate Governance Index 65.92 16.39 18.03 93.44 85.61 9.92 54.00 100.00

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This supports extant literature that the size of an audit firm is important in increasing CG compliance practices in both countries (Ntim et al., 2010, Ntim, 2013a, El Ghoul et al., 2016).

In addition, like dual listing, the variation between compliance by firms audited by the big four auditors is high in Nigeria compared to South Africa. The mean difference in South Africa is 2.762*** but 13.556*** in Nigeria. Again, this suggests that South African firms on average irrespective of auditor’s size have less heterogeneity in their CG compliance than Nigerian firms. In addition, South African firms audited by both the big four auditors and non-big four auditors on average comply with SACGI (South Africa) better than Nigerian firms comply with NICGI.

In addition, consistent with compliance with respective country compliance indices (NICGI and SACGI), compliance with shareholder and stakeholder CG requirements in Nigeria and South Africa is generally higher for firms with big four auditors than those with non-big four audit firms. The average variation in country-level

stakeholder and shareholder CG requirements in both countries is statistically significant. Nevertheless, like dual listing, the heterogeneity in compliance with stakeholder CG practices by firms with top four auditors and those with non-top four auditors is higher in Nigeria (26.72***) than in South Africa (2.14***). Like dual listing, there is almost an equal level of compliance with South African contextual CG provisions for firms with top four auditors (80.28%) and non-top four audit firms (78.14%). More so, analogous with dual listing, compliance with shareholder and stakeholder CG provisions is higher in South Africa than in Nigeria. Again, this suggests that, irrespective of audit firm size, South African firms comply with

stakeholder and stakeholder institutional CG expectations better than Nigerian firms.

Following the above discussions, figure five (Fig.5) below shows the distributional properties between firms with top four auditors and firms with non-big four auditors in South Africa and Nigeria.

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6.7 Descriptive Statistics: Country-level Compliance Between Large