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


  • We would like to express our sincere gratitude to Mr. Richard Mashava of the Zimbabwe Stock Exchange for providing data on foreign share ownership in Zimbabwean listed companies. We are also grateful to Dr. Mohammad Hudaib, Professor Richard Pike, Professor Richard Levich (the editor) and the anonymous reviewers for their helpful and insightful comments and suggestions. However, we remain solely and entirely responsible for any errors and omissions.


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.