Effects of rule of law on firm performance in South Africa

Roxas, Banjo and Chadee, Doren and Erwee, Ronel (2012) Effects of rule of law on firm performance in South Africa. European Business Review, 24 (5). pp. 478-492. ISSN 0955-534X

Abstract

Purpose – South Africa (SA) has undertaken significant institutional reforms since the change in its political regime in 1994. During the same period, SA has also experienced rapid economic growth. Although it is widely accepted that institutional reform generally has positive impacts on firm competitiveness and economic growth, the extent to which institutional reforms in SA have been of benefit to businesses is not well understood. The purpose of this paper is to focus specifically on the rule of law and assesses the extent to which the rule of law affects business performance. Design/methodology/approach – The study uses multinomial logistic regression techniques and data, from a large-scale firm level survey (n=751) of SA businesses undertaken by the World Bank in 2007, to estimate the effects of various elements of the rule of law on firm performance. Findings – Crime and theft were found to have the largest impact on business performance, followed by corruption and tax administration. Political instability and the effectiveness of the court system were not perceived to affect business performance significantly. Research limitations/implications – Ongoing institutional reforms aimed at improving business performance and competitiveness in SA should pay particular attention to the design of effective policies to address crime, theft, corruption and tax administration issues faced by businesses. Originality/value – The study is one of the first to provide empirical evidence based on a large-scale survey of the extent to which crime and theft, corruption and tax effectiveness inhibit business growth in SA.


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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Permanent restricted access to published version due to publisher copyright policy.
Depositing User: Prof. Ronel Erwee
Faculty / Department / School: Historic - Faculty of Business and Law - School of Management and Marketing
Date Deposited: 01 Nov 2012 11:47
Last Modified: 22 Jul 2014 03:15
Uncontrolled Keywords: rule of law; institutions; Republic of South Africa; firm performance; performance management; crimes; theft
Fields of Research (FOR2008): 22 Philosophy and Religious Studies > 2201 Applied Ethics > 220102 Business Ethics
15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150303 Corporate Governance and Stakeholder Engagement
17 Psychology and Cognitive Sciences > 1701 Psychology > 170107 Industrial and Organisational Psychology
Socio-Economic Objective (SEO2008): B Economic Development > 91 Economic Framework > 9104 Management and Productivity > 910402 Management
Identification Number or DOI: doi: 10.1108/09555341211254544
URI: http://eprints.usq.edu.au/id/eprint/21898

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