Corporate Governance and the Likelihood of State Capture in South African State-Owned Enterprises
Résumé
Purpose/Objectives: Drawing on agency, stakeholder, legitimacy, and public choice perspectives, this study examines how board and committee governance characteristics, alongside selected financial conditions, are associated with the likelihood of state capture among Schedule 2 state-owned enterprises (SOEs) in South Africa. Design/Methodology/Approach: The study employs a longitudinal panel design (2011–2022), covering 18 Schedule 2 SOEs (216 firm-year observations). A firm-year state capture indicator is constructed from official public inquiries and documentary evidence, with capture coded to the relevant financial year. Binary logistic regression models are estimated, with probit specifications used for robustness. Findings: Board independence and ethnic diversity are associated with significantly lower capture odds, while a higher frequency of board meetings is associated with higher odds—likely reflecting governance stress rather than direct failure. Financially, higher leverage and liquidity are positively associated with capture, whereas engagement with a Big Four auditor is associated with a lower likelihood. At the committee level, greater risk committee independence and the existence of a social and ethics committee are protective; however, greater independence on the social and ethics committee is positively associated with capture and should be interpreted cautiously as possible symbolic governance. Practical Implications: The findings support reforms that strengthen substantive board independence, improve risk oversight composition, and institutionalise ethics governance. Repeated board activity, leveraged pressure, and unusually high liquidity should be treated as early-warning indicators, not causal proof. Originality/Value: The study provides rare firm-level, panel-based evidence on state capture risk in an African SOE context and advances a transparent, replicable operationalisation of state capture using public inquiry evidence.
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