Institutional Influences on Board Composition of International Joint Venture Firms Listing on Emerging Stock Exchanges: Evidence From Africa

Abstract

The attraction of blue-chip listings in emerging stock markets is a major policy initiative common across much of the developing world. In many cases however, local blue-chip firms are the result of foreign Multinational Enterprise (MNE) firms engaging with local indigenous partners to form an international joint venture (IJV). These are unique with bilateral governance structures underscoring co-ownership between partners of residual cash flows and assets of the IJV. Using a unique and comprehensive sample of 202 IPO firms from across the emerging African region evidence of both a pronounced internal as well as external role for IJV boards was found. While the internal role underscores significantly smaller board sizes with these being populated by higher proportions of foreign directors from parent and related investors, the external role involves markedly higher proportions of nonexecutives from military and university social elite backgrounds. Finally evidence that IJV firms are more likely under conditions of weaker state-level corruption control was found.

Keywords: IPO; Board of Directors; Foreign Joint Ventures; Institutions; Africa