This paper reviews extant empirical and theoretical literature on CG within LDCs in an attempt to provide a conceptual understanding about the applicability of Western-based CG codes within LDCs. Firstly, we have identified that the amount of work done on CG in LDCs is limited and focuses on a few countries, while existing output on Africa is even more negligible. Secondly, upon review of existing literature, we were convinced that there are five areas along which CG is practiced within LDCs and therefore systematically structured our literature review discussion into five themes, namely: (a) supervision and enforcement, (b) boards of directors, (c) shareholders rights, (d) stakeholder relations, (e) transparency and disclosure. We established that the Western-based CG codes in use within LDCs are founded along these five CG themes as pillars for their effectiveness. With this understanding, we developed a framework integrating the five themes together in an attempt to gain further understanding on how Western CG codes are implemented within LDCs. This framework
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provided us with a two-way view about the practice of Western CG codes within LDCs contexts. On one hand, the framework shows that there are exogenous forces perpetuated by external factors comprising of pressures from supranational bodies including the World Bank and IMF, which push LDCs to adopt Western-based codes of CG. The framework also captures additional exogenous forces on LDCs, which is wielded by foreign investors and international business partners who require firms in LDCs to adopt the Western CG codes.
On the other hand, the framework shows endogenous forces to which appear to be on a collision path with the exogenous forces discussed above. These endogenous forces emanate from what we argue as a robust local environment which prevails within the LDCs. These internal influences comprise of peculiarities of the LDCs socio-economic environment including: poverty and lack of resources, low literacy levels and poor training, and strong cultures and traditions. Tensions are therefore generated when the two conflicting forces put pressures on the CG processes within LDCs, which we believe to be the cause of ineffectiveness of the Western codes of CG adopted in those countries.
We hope that the framework proposed in this paper will allow other CG scholars within LDCs to investigate how CG is practiced in their own countries. To achieve this, we encourage them to test our construct in understanding the extent to which local country conditions are likely to play a role in neutralising the effectiveness of Western-based CG codes. The framework will permit scholars and policymakers to move beyond the determination of whether a CG code works effectively or not, as it can be further used to keep audit of the significant sources of weakness for a CG code. We are applying this framework in another developing paper focussing on Kenya. Our background reading informed that the country has a fragmented ethnic background with diverse and strong traditions and culture.
On the other hand, the country has adopted a Western CG code and set up necessary
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institutions to support CG development and which resemble those in the Western countries, thus offering an interesting avenue to test our framework.
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36 APPENDIX A Table 1: Corporate Governance Themes discussed by selected writers
Study & Year
CG themes
Supervision and Enforcement
Shareholders Rights Boards of Directors
Stakeholder Relations
Transparency and Disclosure
Barako et al. (2006) √ √ √
West (2006) √
Tsamenyi et al.
(2007)
√ √ √ √
Tauringana et al.
(2008)
√ √
Wanyama et al.
(2009)
√ √ √ √ √
37
Siddiqui (2010) √ √ √ √
Rashid (2011) √ √ √ √
Adegbite and Nakajima (2012)
√ √
Adegbite (2012) √ √
Samaha et al. (2012) √ √ √ √
38 APPENDIX B Table 2: Summary of key CG studies from LDCs
Study & Country Major findings
Tsamenyi et al. (2007) Ghana
a) Disclosure levels were found to be very low due to widespread concentrated ownership structure, which affected CG disclosure.
b) Notwithstanding, large firms disclose more information than small firms.
Adu-Amoah et al. (2008) Ghana
a) The process of board appointments is influenced by the local culture, subsequently affecting board independence and overall CG implementation.
Tauringana et al. (2008) Kenya
a) It took an average of 74.5 and 76.47 days to release annual reports for listed firms, in years 2005 and 2006 respectively.
b) Proportion of finance experts on audit committee, and frequency of board meetings were found to be negatively associated with time taken to release annual reports.
c) Firms that report in both English and Swahili languages were timelier in releasing their annual reports compared to those reporting only in English language.
39 Uddin and Choudhury (2008)
Bangladesh
a) Despite families being minority shareholders in most companies, they wholly control all company affairs including dividend policies and AGMs through their representative directors.
b) Other hindrances to CG development were found to include: political interference and powerful cultural traditions.
Angaye and Gwilliam (2009) Nigeria
a) Poor CG practices and ineffective regulatory framework continue to hamper CG progress in Nigeria.
Okpara (2011) Nigeria
a) Implementation of CG is hindered by institutional constraints including:
weak or non-existent law enforcement mechanisms
abuse of shareholders‟ rights
lack of commitment by boards of directors
weak enforcement and monitoring systems, and
poor of transparency and disclosure.
Wanyama et al. (2009) Uganda
a) Despite adoption of good CG codes in Uganda, their effectiveness has been severely hampered by contextual factors including corruption, inadequate regulatory institutions, and overwhelming traditional culture.
40 Adegbite and Nakajima (2012)
Nigeria
a) National codes of CG are embedded on the institutional environment.
b) Challenges the notion of universal codes of CG due to idiosyncrasies of individual countries institutional arrangements
Adegbite (2012) Nigeria
a) Codes of CG are influenced by individual country‟s institutional arrangements.
b) Institutional arrangements are inseparable constituents of every country.
Samaha et al. (2012) Egypt
a) CG disclosure was lower for companies with: (i) CEO-chair duality, and (ii) high ownership concentration.
b) On the other hand, CG disclosure increased with: (i) proportion of independent directors on the board, and (ii) firm size.
Adegbite et al. (2013) Nigeria
a) CG is a contested subject where different CG players attach varied meanings to CG practices.
b) Nigeria‟s peculiar institutional environment including corruption and weak regulation renders the shareholder model unworkable, thereby leaving the stakeholder model as the next best alternative.
Waweru (2014)
Kenya and South Africa
a) Audit quality and firm performance were reported as the main factors influencing the quality of CG in both countries.
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