The effect of the strength of auditing and reporting standards on infrastructure quality in Africa: do ethical behaviour of firms and judicial independence matter?

Abstract

Purpose This paper aims to investigate the impact of the strength of auditing and reporting standards (SARS, hereafter) on the quality of infrastructure in African countries and tests whether the ethical behaviour of firms and judicial independence affect this relationship. Design/methodology/approach The sample consists of 108 country-year observations spanning from of 2014–2017. Data concerning the main variables in this study (the quality of infrastructure, SARS, ethical behaviour of firms and judicial independence) are gathered from the Global Competitiveness Reports for 2014, 2015, 2016 and 2017. Findings The findings of this study suggest that the SARS is positively related to the quality of infrastructure. Similarly, the ethical behaviour of firms has a positive and significant effect on the same variable. When testing for the moderating effects of ethical behaviour of firms and judicial independence, the association between SARS and the quality of infrastructure remains positive and significant for high ethical behaviour and high judicial independence sub-samples, while it is insignificant for settings characterised by low ethical behaviour of firms or low judicial independence. Originality/value The results of this study highlight the importance of the SARS in combination with business ethics and judicial independence in improving the quality of infrastructure in African countries. These results may have policy implications for African governments aiming to improve the quality of their infrastructures by strengthening auditing and reporting standards, enforcing laws obliging firms to act ethically and giving importance to the role played by judicial independence in imposing strict sanctions on all violations that can affect the quality of infrastructure in one country.