The Impact of Corporate Governance Structures on Foreign Direct Investment: A Case Study of West African Countries

Abstract

A number of studies have been done to examine the factors that impact the level of foreign direct investment in African countries. However, most of them have not considered the effect corporate governance structures have on foreign direct investment (FDI) in their estimations. This research therefore pursued the investigation of the relationship between corporate governance structures at the national level and foreign direct investment concentrating mainly on West African economies for the period 2009–2018. The study constructed a panel, sampling annual data from 17 West African countries. The System generalized method of moments (GMM) was used in analyzing the panel data to attain the objective of the research. The results of the study reveal that countries characterized by greater protection of the interest of non-controlling parties are able to accumulate progressive FDIs. Economies with firms portraying high ethical values also generally generate increasing foreign direct investment, and the existence of effective boards also significantly improves the country’s FDI inflows. Finally, the findings report that the impact of regulations in securities and the stock exchange on FDI is insignificant. The study recommends that West African countries institute corporate governance structures purely independent of political influences in order to ensure effective utilization of foreign direct investment to mitigate poverty.

Impact of Tax Incentives on Foreign Direct Investment: Evidence from Africa

“…Lastly, our control variables, which include political stability and absence of violence coefficients, had a positive and statistically significant relationship with the inflows of foreign direct investment in African countries. This implies that greater political firmness and solidity in African economies affect foreign investors' decisions [5,10]. In addition, corruption and foreign direct investment had a negative but statistically significant relationship.…”

“…Several reasons have been established as to why foreign firms prefer certain countries. Most researchers have stressed that factors such as corruption, internal security, rule of law, quality of regulations, the effectiveness of government, voice and accountability, market size and infrastructure, among many others are the economic essentials for investment environment [1][2][3][4][5][6][7][8][9][10]. According to Appiah-Kubi et al [10], there have been several recommendations for Africa countries to lure remarkable inflows of foreign direct investment to enhance infrastructural development by the United Nations Sustainable Development Goals (UNSDG).…”

Foreign Ownership in Sub-Saharan Africa: Do Governance Structures Matter?

“…Finally, our control variables, which include the quality of roads, the quality of electricity supply, mobile telephone subscribers, and fixed telephone lines coefficients, had a positive and statistically significant relationship with the predominance of foreign ownership in Sub-Saharan African economies. This means that African countries with greater levels of collections of adequate infrastructures are more likely to influence foreign investors' decisions, since better quality infrastructures would aid their operations in reaching the optimal level of efficiency [56]. Real Gross Domestic Product (constant 2010 US$) also reported a positive and statically significant relationship in attracting foreign businesses to Sub-Saharan African countries.…”

Capital Structure of Property Sector in Malaysia

“…Also, this study concerns the long-standing issue of endogeneity that potentially leads to inconsistent estimates, incorrect inferences that eventually provide misleading conclusions and inappropriate theoretical explanations. Therefore, this study employs Generalised Method of Moments (GMM) to address the dynamic nature of capital structure as well as to address the issue of endogeneity in the estimation (Odhiambo, N. M, 2020;Appiah-Kubi, Malec, Maitah, Kutin, Pánková, Phiri, & Zaganjori, 2020).…”