Ownership structure dynamics and firm governance quality: Panel regression evidence from Sub-Saharan Africa

Abstract

This study investigates the relationship between diverse ownership structures and the quality of governance in firms within the context of Sub-Saharan Africa (SSA) as a follow-up to the work of Munisi (2020). The study sources annual report data on 104 firms from 2007 through 2019 from African financials and Machameratios databases for its analysis via both panel linear and non-linear regression models. The study finds that institutional ownership and foreign ownership structures enhance governance. On the other hand, block, family, management, and government ownership structures tend to have adverse effects on the quality of governance of firms in SSA. However, these adverse effects tend to be attenuated by the financial reporting regulatory framework for these firms. The current study extends the work of Munisi (2020) by providing fresh empirical evidence of the nuanced effects of several concentrated ownership structures on governance quality within SSA firms. It also provides novel theoretical insights using Foucault’s panopticon metaphor. The findings imply that governance reform efforts should consider diverse firm characteristics, particularly ownership structure, when formulating policies to improve governance in firms.