Challenges to compliance with corporate governance mechanisms and accountability in emerging markets: Evidence from Libyan listed companies

Abstract

This study aims to investigate the level of compliance with CG mechanisms and accountability in Libyan listed companies. It adopts a qualitative approach, using semi-structured interviews to collect the required data from two broad stakeholder groups: internal stakeholders (ISG) and external stakeholders (ESG). The findings of this study provide evidence that Libyan listed companies are to some extent committed to implementing CG mechanisms, but that CG and accountability practices are still at an early stage of development in the country and there are significant weaknesses in terms of practice. Listed companies’ commitment is most evident in their adherence to the BoD mechanism, but levels of disclosure and transparency are barely satisfactory; interviewees argued that at present, disclosure and transparency practices in Libya are designed only to meet local, not international, requirements. Listed companies have also taken practical steps towards meeting the LCGC’s requirements regarding the internal and external audit mechanisms, but the general view among ISG and ESG interviewees was that these mechanisms are currently not robust enough to ensure strong internal control systems. Finally, in terms of the shareholders’ rights mechanism, majority shareholders are seen to enjoy much greater protection, both legally and in practice, than minority shareholders. The results of the study reveal that the lack of knowledge and awareness about the concept of CG, the weakness of the Libyan legislative environment and the lack of accountability mechanisms are the most significant factors inhibiting the advance of CG in the Libyan environment. This study helps to enrich our understanding and knowledge of current CG and accountability practices by being the first to investigate CG mechanisms and accountability in Libyan listed companies.