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Anti-corruption disclosure as a necessary evil: impact on profitability and stability of extractive firms in Africa

Emmanuel Tetteh Asare (Department of Accounting, Business School, University of Ghana, Accra, Ghana)
King Carl Tornam Duho (IMANI Centre for Policy and Education, Accra, Ghana, and Dataking Consulting, Accra, Ghana)
Cletus Agyenim-Boateng (Department of Accounting, Business School, University of Ghana, Accra, Ghana)
Joseph Mensah Onumah (Department of Accounting, Business School, University of Ghana, Accra, Ghana)
Samuel Nana Yaw Simpson (Department of Accounting, Business School, University of Ghana, Accra, Ghana)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 25 January 2021

Issue publication date: 4 June 2021

571

Abstract

Purpose

This study aims to examine the effect of anti-corruption disclosure on the profitability and financial stability of extractive firms in Africa. It also tests the convergence of profitability and financial stability.

Design/methodology/approach

The study uses an unbalanced panel data of 27 firms operating in five African countries covering the period 2006–2018. Anti-corruption assessment is done in line with GRI 205: Anti-Corruption. Profitability is measured using the return on asset and return on equity, whereas the z-score measures financial stability. The study uses the panel-corrected error regression technique for estimation.

Findings

There is evidence that corruption disclosure reduces the financial stability of firms. Disclosures on corruption analysis and corruption training are the main factors driving the reduction in financial stability. The effect on profitability is not significant except in the case of disclosure on corruption response, which also reduces profitability. There is strong statistical evidence to suggest that profitability and financial stability of extractive firms converge. This suggests that less-performing firms catch up with high performers.

Research limitations/implications

The study has relevant implications for practitioners, policymakers and the academic community. The study uses data that is skewed towards large extractive firms.

Originality/value

This study is premier in exploring the effect of anti-corruption disclosure on performance metrics among extractive firms in Africa. It is also unique in providing a test of both beta and sigma convergence of performance among the firms.

Keywords

Acknowledgements

The authors appreciate without implications, the support of the Editorial Team, including Professor Barry Rider OBE, Mrs May Li - Hong Xing and Ms Angela Futter. The authors wish to acknowledge the support of the Global Reporting Initiative (GRI), specifically Bianca Covlescu and Beatriz Fatio Vasconcelos for sharing some relevant datasets at the initial stages. We also thank Divine Mensah Duho and Wise Delight Duho for their support during data collection. This study is part of the academic thesis of the second author.

Funding: This research received no external funding.

Citation

Asare, E.T., Duho, K.C.T., Agyenim-Boateng, C., Onumah, J.M. and Simpson, S.N.Y. (2021), "Anti-corruption disclosure as a necessary evil: impact on profitability and stability of extractive firms in Africa", Journal of Financial Crime, Vol. 28 No. 2, pp. 531-547. https://doi.org/10.1108/JFC-09-2020-0173

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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