Business ethics disclosure and corporate governance in Sub-Saharan Africa (SSA)

• DOI: https://doi.org/10.1108/IJAIM-07-2019-0091
• Pages: 363-387
• Date: 04 March 2020
• Published date: 04 March 2020
• Author: Nelson Waweru
• Subject Matter: Accounting/accountancy,Accounting & Finance

Business ethics disclosure and

corporate governance in

Sub-Saharan Africa (SSA)

Nelson Waweru

School of Administrative Studies, York University, Toronto, Canada

Abstract

Purpose –The purpose of this paper is to examine the relationship between business ethics practices

disclosureand corporate governance characteristics in Sub-SaharanAfrica.

Design/methodology/approach –The study uses multiple regression to investigate the association

between business ethics disclosure (BED) and corporate governance characteristics in SAA. The study

sample is based on 573 non-f‌inancial corporations listed on the national stock exchanges of Ghana, Kenya,

Nigeria,South Africa and Zimbabwe as of 31 December 2015.

Findings –The f‌indings show that corporate governance characteristics (including the proportion of

government ownership, board independence and board gender diversity) are positively and signif‌icantly

related to BED.

Originality/value –The study contributes to the limited literatureby analyzing the relationship between

BED practices and corporate governance characteristics in the sub-Sahara African context, which is

signif‌icantlydifferent from the Anglo-Saxon world.

Keywords Disclosure, Sub-Saharan Africa, Corporate governance, Business ethics

Paper type Research paper

1. Introduction

Africa is the world’s second-largest and second most-populous continent (the f‌irst being

Asia) and had a population of about1.2 billion people as of 2016, accounting for about 16 per

cent of the world’s population. With a landmass three times the size of continental USA,

Africa boasts 54 sovereign countries, 44 of which are classif‌ied as Sub-Saharan countries.

This is a continent that some have described as “a rich mosaic of diversity”, with a

signif‌icant cultural and socioeconomic difference (Schraeder, 2004, p. 2). However, not very

much is known about the interaction of the cultural and social context with reporting,

beyond the extreme poverty imagesoften documented in media circles.

Extant literatureon business ethics practices is mainly focused on developed countriesof

the USA (Hite et al., 1988;Mooreand Dittenhofer, 1992;Driscoll et al., 1995 and Weaver et al.,

1999;Ryan, 2005) and Canada (Schwartz, 2001;Singh, 2006;Long and Driscoll, 2008 and

Labelle et al.,2010). A few studies have also investigated business ethics reporting in the

USA (Loughran et al.,2009;Huhmann and Conner, 2014) while Stittle (2002) investigated

business ethics reporting in the UK. In developing countries of Asia, Choi and Jung (2008)

investigated the relationship between business ethics and f‌irmperformance while Choi and

Pae (2011) investigated the relationship between business ethics and f‌inancial reporting

quality. However, business ethics studies in the African continent are almost non-existent.

To the best of our knowledge, the only available studies are those of Rossouw (2005) and

Khomba and Vermaak (2012), which analyzes the national corporate governance codes in

Africa to determine how the relationshipbetween corporate governance and business ethics

Business

ethics

disclosure

363

Received29 July 2019

Revised7 November 2019

Accepted10 December 2019

InternationalJournal of

Accounting& Information

Management

Vol.28 No. 2, 2020

pp. 363-387

© Emerald Publishing Limited

1834-7649

DOI 10.1108/IJAIM-07-2019-0091

The current issue and full text archive of this journal is available on Emerald Insight at:

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is being perceived. ElGammal et al. (2018) have also examined the mediating role of

corporate governance (CG) on the relationship between business ethics and corporate social

responsibility (CSR) in small and medium sizes enterprises operating in both Lebanon and

Egypt.

Previous studies (Ryan, 2005;Rossouw,2005;Gichure, 2005;ElGammal et al.,2018) have

argued that countries experiencing high levels of corruption are associated with low levels

of business ethics. Accordingto Hanson (2009), Africa is considered among the world’s most

corrupt places, while Transparency International (IT) (2015) reportsthat of the ten countries

considered most corruptin the world, six are in Sub-Saharan Africa. Furthermore,unlike the

Anglo-Saxon world, which has a highly individualistic culture, the African value system

stresses the importance of belonging and consensus-seeking discourse (Rossouw, 2005). We

also note, whereas African corporate governance codes only recommend companies to

establish codes of business ethics (Rossouw, 2005) this is a legal requirement in the USA

(Ryan, 2005).

Ho and Wong (2001) argue the studies in developed countries may not be applicable to

emerging economies, which have different regulatory and cultural environments.

Okeahalam (2004) and Mangena and Tauringana (2007) point to the role of corruption and

political interferencein corporate affairs and argued that they weaken corporategovernance

structures. The combination of weak regulatory frameworks and, the prevalent corrupt

practices and political interference may reduce incentives for companies to enhance

disclosure of information (Waweru et al., 2019). Therefore, our study contributes to the

limited literature by analyzing the relationship between business ethics disclosure (BED)

practices and corporategovernance characteristics in the Sub-SaharaAfrican context, which

is signif‌icantly differentfrom the Anglo-Saxon world.

2. Theoretical framework

According to Ntim (2016), although a number of theories (e.g. agency, institutional,

stakeholder and resource dependence theories) have been used by previous studies in

explaining why corporations may engage in voluntary disclosure, legitimacy theory

remains the most dominant (Deegan, 2002;Gray et al.,1995;Reverte, 2009). Therefore,

we draw from legitimacy theory to investigate business ethics reporting practices in the

Sub-Saharan Africa(SSA) context.

According to institutional theory (DiMaggio and Powell, 1983), pressures for legitimacy

may reside in the explicit demands of societal institutions such as government agencies,

community organizationsand the media or in the fact that certain forms of thought or action

become taken for granted, or infused with intrinsic value (Weaver et al.,1999). Legitimacy

theory suggests that a corporation’s right to exist is legitimized if its value system is

consistent with that of the larger social system of which it is part of but threatened when

potential/actualdifferences emerge between the two value systems (Long and Driscoll, 2008;

Ntim and Soobaroyen, 2013). Ntim and Soobaroyen (2013) and Reverte (2009) argue that

when the legitimacy of a company is threatened, it will adopt a number of legitimization

strategies to minimize/eliminate the threats by seeking to manipulate/change stakeholder

actions and perceptions. Therefore, within the SSA context, it can be argued that

corporations can legitimize their operations by disclosing business ethics information.

Suchman (1995) refers to the process of “strategic legitimacy”, where organizational

decision-makers effectively “scan”their environment and respond to legitimacy threats.

According to Suchman (1995), there are different dynamics by which organizational actors

can manage their legitimacy (pragmatic, moral and cognitive), which operate under the

common assumption that corporate activities “are desirable, proper or appropriate within

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