Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors

Areneke, G., Adegbite, E., Tunyi, A. (2022) Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors'

73 Pages Posted: 19 Mar 2022

See all articles by Geofry Areneke

Geofry Areneke

Manchester Metropolitan University

Emmanuel Adegbite

University of Nottingham

Abongeh A. Tunyi

The University of Sheffield

Date Written: February 6, 2022

Abstract

We advance the practice transfer theorising of corporate governance (CG) by developing a framework that uncovers how foreign institutional investors (FIIs) improve on CG practices of firms in weak institutional environments. Using hand-collected data for 85 listed Nigerian firms covering the 2011-2016 period, we show that FIIs bypass the weak regulatory environment in emerging markets by transferring good CG standards to host countries. Furthermore, FIIs' ability to enhance the CG quality of firms in such environments is moderated by their home country's legal system, with FIIs from countries with strong legal enforcement having an enhanced ability to improve CG practices of firms in weak institutional environments. However, cultural differences between the FIIs' home and host countries negatively moderate this relationship. Our results are robust to the choice of estimation technique and various sources of endogeneity.

Keywords: Corporate governance, foreign institutional investors, cultural distance, legal system, practice transfer, emerging markets, Nigeria

Suggested Citation

Areneke, Geofry and Adegbite, Emmanuel and Tunyi, Abongeh A., Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors (February 6, 2022). Areneke, G., Adegbite, E., Tunyi, A. (2022) Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors', Available at SSRN: https://ssrn.com/abstract=4029776

Geofry Areneke (Contact Author)

Manchester Metropolitan University ( email )

All Saints
Manchester, M15 6BH
United Kingdom

Emmanuel Adegbite

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Abongeh A. Tunyi

The University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

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