Disclosure, Corporate Governance and Foreign Share Ownership on the Zimbabwe Stock Exchange

33 Pages Posted: 1 Jun 2007

See all articles by Musa Mangena

Musa Mangena

University of Nottingham Business School

Venancio Tauringana

Bournemouth University - Accounting and Finance

Abstract

We investigate the association of foreign share ownership with firm-level disclosure and corporate governance structures in Zimbabwe, a developing country in Southern Africa. Our motivation for the study derives from the literature, which suggests that foreign investors: (1) generally have a preference for companies in which they are well informed and where their investments are more likely to be protected, and (2) avoid companies in developing countries because of weak corporate governance structures and low disclosure. Using data drawn from companies listed on the Zimbabwe Stock Exchange, we examine the effect of disclosure and corporate governance on foreign share ownership. We find that disclosure, proportion of non-executive directors, institutional share ownership and audit committee independence are all positively and significantly associated with foreign share ownership. Our results also demonstrate that market capitalization, return on equity and liquidity ratios are significantly associated with foreign share ownership. These results are consistent with the notion that foreign investors have a preference for companies with effective corporate governance structures, companies with less information asymmetry, as well as companies with healthy cash positions. The results have implications for policy-makers in developing countries in their endeavour to improve liquidity on stock markets through the participation of foreign investors. The results are also useful to managers in developing countries who are keen to increase the market value of their company, thereby reducing their cost of capital.

Suggested Citation

Mangena, Musa and Tauringana, Venancio, Disclosure, Corporate Governance and Foreign Share Ownership on the Zimbabwe Stock Exchange. Journal of International Financial Management & Accounting, Vol. 18, No. 2, pp. 53-85, Summer 2007, Available at SSRN: https://ssrn.com/abstract=990122 or http://dx.doi.org/10.1111/j.1467-646X.2007.01008.x

Musa Mangena (Contact Author)

University of Nottingham Business School ( email )

United Kingdom

Venancio Tauringana

Bournemouth University - Accounting and Finance ( email )

Centre for Corporate Governance and Regulation
Fern Barrow
Poole BH12 5BB, Dorset
United Kingdom

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
28
Abstract Views
3,829
PlumX Metrics