Balancing rules and flexibility for growth | KPMG | NG

Balancing rules and flexibility for growth

Balancing rules and flexibility for growth

Studies have shown that investors are willing to pay a premium for companies with good governance, and this price premium is even higher in markets with weak legal protection.

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Balancing rules and flexibility for growth

The 2014 study conducted by KPMG in Singapore and ACCA, Balancing Rules and Flexibility, looked at 25 markets across three economic zones, and three geographic zones, encompassing both developing and developed nations. Our follow up study, Balancing Rules and Flexibility for Growth, focuses on 15 markets on the continent of Africa.

The reasons for a focus on Africa are compelling. According to World Bank data Africa had six out of the 12 fastest-growing economies between 2014 and 2016, and the continent’s population is set to more than double by 2060, with a corresponding increase in the urbanised and middle-class population. This growth story also illustrates the challenges of rapid economic growth in developing economies.

Against this background, the need for adequate and effective corporate governance frameworks becomes even more critical than previously. This growth requires investment and investors will only invest where they can see a strong and effective corporate governance infrastructure to protect their investment.

Studies have shown that investors are willing to pay a premium for companies with good governance, and this price premium is even higher in markets with weak legal protection.

Sophisticated and sound corporate governance practices can be helpful in obtaining new and much-welcomed investments in Africa, as good-quality corporate governance is especially important for investors. In 2015, Africa received only 3.1% of the world’s foreign investment.

While this study stands alone, the research framework is broadly consistent with that used in Phase 1, to allow a degree of comparison, albeit at a different point in time, and with a revised set of OECD principles from 2015 as a benchmark. As with Phase 1, the aim of this study is to raise awareness of corporate governance requirements and help markets continue to raise corporate governance standards.

© 2017 KPMG Professional Services in Nigeria, a limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (KPMG International), a Swiss entity. All rights reserved.

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