Analyzing the corporate governance and firm performance nexus: the interaction effect of fiscal and monetary policies of selected SSA countries

Abstract

Purpose The Sub-Saharan Africa region is characterized by volatile and uncertain macroeconomic conditions, which can significantly impact business operations and overall economic stability. It is, thus, essential to understand how fiscal and monetary policies interact and influence the governance structures and performance of firms in the region. This paper aims to examine the interaction effect of these policies on the nexus between corporate governance and firm performance. Design/methodology/approach This study used a panel research design with a sample size of 309 firms observed over seven years, from 2016 to 2022. The study used the Huber M-estimation Robust Least Squares (HMRLS) regression technique to analyze the results. Findings The authors’ results show that corporate governance in the SSA region exerts a positive and significant effect on firm performance. Further analysis indicates that the impact of corporate governance on improving firm performance is not independent, but rather, it is also affected by the existing macroeconomic policy environment where firms operate. Research limitations/implications The findings of this research are specific to selected Anglophone SSA countries and cannot be extended to Francophone and other developing countries. Also, the current study relies on the corporate governance information disclosed in publicly available annual reports to construct its corporate governance index. Originality/value To the best of the authors’ knowledge, this study is unique as it appears to be the first of its kind in SSA. It addresses a research gap by investigating the moderating effect of fiscal and monetary policies on corporate governance and firm performance nexus.