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

Abstract

It has been widely argued that governance structures have roles in the predominance of foreign ownership in Sub-Saharan African countries. Our paper sought to challenge this conventional wisdom by investigating the ways in which country-level governance structures influenced the predominance of foreign holdings in Sub-Saharan African countries for the period 2010–2015. The study used panel sampling annual data from thirty countries in Sub-Saharan Africa, with Ordinary Least Squares (OLS) and Feasible Generalized Least Squares (FGLS) as our discussion estimators. Our statistical results reveal that there is a significant positive relationship between government effectiveness and the predominance of foreign ownership in Sub-Saharan African countries. Furthermore, foreign ownership predominates in Sub-Saharan African economies that have sound political stability and embrace effective and efficient regulations. Moreover, the relationship between corruption and the prevalence of foreign ownership is negative but significant. However, the rule of law, and voice and accountability, are insignificant to the predominance of foreign ownership in Sub-Saharan Africa. Our results suggest that governments in Sub-Saharan Africa should adopt robust and efficacious measures, strengthen their policies and institutions to promote the control of corruption, provide quality regulations, and minimize political violence.