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A Model of Governance and Accounting Systems in Africa PhD Proposal

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This research, which is motivated by the desire to understand the implications of the ongoing World Bank reforms, examines the role of accounting systems in governance improvements in Africa. The overall objective is to develop a model that will help explain the relationship between accounting systems and governance systems in Africa. The specific objectives of the study are to:

Develop a universally acceptable definition and measurement of governance

Evaluate the extent to which the World Bank reforms in Africa are primarily meant to improve governance,

Analyse the role of role accounting systems in governance improvements in Africa.

Conceptualize the association between accounting systems and governance into theoretical framework that could be used in policy formulation.


Despite the importance of governance in the World Bank developmental agenda, its conceptualisation and measurement have remained debateable. For example, there is no uniform and acceptable definition of governance (Al-Marhubi, 2004). Furthermore, there is disagreement on the elements and components of governance. While having good accounting and financial systems is likely to contribute to governance development, the available measures of governance produced by the World Bank and other bodies (such as the Mo Ibrahim Foundations) which are used to inform most lending decisions place limited emphasis on accounting systems. There was no specific mention of accounting systems in the variables used to construct these governance indicators. Moreover, no research has investigated directly the relationship between accounting systems and governance systems of a country.

The very few accounting studies that have developmental focus have been on the relationship between the adoption of the International Accounting Standards (IASs) and economic development (Larson & Kenny, 1995; Zeghal & Mhedhbi, 2006). These studies have generally recognised the positive impacts of the adoption of IASs (either directly or indirectly) on economic growth. Chamisa (2000) noted that one of the key benefits of IASs is that it induces private sector development by making the investment climate attractive to international investors. As pointed out by Kaufmann et al. (1999) the private sector is an important element of governance quality. It contributes to sustained growth and poverty reduction. In addition to inducing foreign direct investments growth, a high quality accounting system can contribute to a better assessment and collection of tax in developing countries, providing governments with more resources (World Bank, 2004).

This research argues that accounting has a potential role to play in governance improvements and economic development but has been marginalised as very few accounting researchers are interested in developmental issues. This research is designed to address this gap in the literature. The following research questions are addressed in order to understand the relationship between accounting and governance in developmental agendas:

How do we conceptualise and measure governance?

What is the role of governance in the World Bank developmental agendas in Africa?

What role does accounting systems play in governance improvements in Africa?


The relationship between governance and economic development has been the subject of debates for decades (Gradstein, 2003; Kaufmann & Kraay, 2003). It has been generally argued that governance quality is mostly accountable for the success and the economic development of countries through improvement in living standards (Knack, 2002) and reduction in the potential for nation-state failure (Rotberg, 2004). Evidence suggests that countries with better governance have achieved superior development outcomes (Knack & Keefer, 1997; Kaufmann et al., 1999; Gradstein, 2003; Kaufmann & Kraay, 2003; Khan, 2007).

Knack & Keefer (1997) argue that the ability of developing countries to achieve sustained development is largely dependent on the quality of the institutional environment in which economic activity is conducted. Kaufmann et al. (1999) find that an improvement of one standard deviation in governance is associated with an increase of between two and a half and four fold in per capita income. Furthermore, one standard deviation increase in governance can lead to literacy improvement by from 15 to 25%.

In terms of Sub-Saharan Africa, poor governance has been identified as one of the major causes of the high poverty and underdevelopment in the region (Sachs et al., 2004; United Nations Development Programme, 2005; Economic Commission for Africa, 2005a). The former UN Secretary General, Kofi Annan in an address in 2005 reiterated the need for good governance in Africa as: “Without good governance – without the rule of law, predictable administration, legitimate power and responsive regulation – no amount of funding, no amount of charity will set us on the path to prosperity” (Economic Commission for Africa, 2005b, pII).

The United Nations (UN) (online) notes that ‘”governance” means: the process of decision-making and the process by which decisions are implemented (or not implemented)’. The UN suggests that the focus should be put on the actors involved in the process of decision-making and implementing when analysing governance. In an analysis of governance, Kaufmann et al. (2008, p7) observe that:

“…traditions and institutions by which authority in a country is exercised. This includes the process by which governments are selected, monitored and replaced; the capacity of the government to effectively formulate and implement sound policies; and the respect of citizens and the state for the institutions that govern economic and social interactions among them”_

In terms of this definition the quality of governance is important not only for formulating and implementing sound policies, but also for respecting the citizens of the concerned nation. Wood (2005) argues that good policies are crucial but are not sustainable in a poor governance climate that limits accountability, sets perverse rules and cannot sustain reforms. Good governance is mostly used to refer to the state of governance where formulating and implementing good policies are coupled with respect of citizens, accountability and sustained reforms.

Governance has become a central focus of the World Bank’s activity on how to achieve sustainable economic growth and poverty reduction in its member countries (Wood, 2005). In Africa in particular, the intervention of the Bank to improve institution effectiveness and accountability goes back to the 1980s and 1990s through the so-called ‘Structural Adjustment Programmes’. Many African countries were characterized by severe macroeconomic imbalances that were rooted in weak institutions and policy-induced distortions (Jaspersen & Shariff, 1990). Africa’s private sector is weak to make any significant contribution to its economic growth (Jaspersen & Shariff, 1990, OECD, 2004; World Bank, 2005). In addition, the rise of corruption in the mid-1990s has significantly undermined Africa’s developmental efforts (Wood, 2005).

To address these problems, the international financial community led by the World Bank initiated several reform programmes. The reforms are specifically aimed at “the transformation of weak public institutions and distorted governance mechanisms into effective and accountable public institutions and transparent government decision-making processes” (Wood, 2005, p3).


This research will be based on a triangulation approach: interview, analysis of documents and survey. State-executives, researchers and agencies involved in development and governance issues in African will be interviewed. The purpose of this approach is to assess the different factors and their relative importance that each group of actors use or take into account when addressing governance issues and specifically analyse how African policy makers and other stakeholders conceptualise governance.

Concerning the analysis of documents, it will be based on 6 countries (Anglophone, francophone or Portuguese). The IMF has evidenced that the colonial background has played a role in governance, especially budget management systems in British old colonies (Lienert & Sarraf, 2001). The analysis will consist of assessing the accounting systems in the sample countries and analysing the influence of politics (internal and external) on their development on the one hand, and their association with governance on the other. This part will also involve evaluating key reform programmes, their impact on governance, and accounting implication.

The research will also survey managers and other stakeholders in the private sector to understand their perception of governance and its association with accounting systems. Such analysis is important in evaluating the perception of investors (drivers of private sector) of the actual state of governance in these countries and the various ways through which governance improvements can occur.


Developing countries especially those in Sub-Saharan Africa are vigorously pursuing World Bank led reforms with governance improvements at the centre of these reforms. IASs have been recommended to these countries as it is believed that this will improve transparency and enhance the accounting systems of these countries. This research which examines the relationship between accounting systems and governance improvements will be of significant interest to donors, governments, other policy makers. This is particularly important as governance quality has been identified an important determinant of poverty reduction and economic growth (Knack, 2002; Rotberg, 2004). Through this study the World Bank and the other donors will obtain more insight into the elements and drivers of governance in individual recipient countries. Also, the governments of these countries, by knowing the elements and drivers of governance will be able to proactively develop measures to improve their governance systems.


I have conducted four research works during my studies. The first one was a Marketing related study in 2001 to complete my bachelor degree. The second and the third were Finance related to complete my Maitrise and Masters degree in 2004 and 2006 respectively. The last project which has just been completed was an exploratory study on the World Bank reforms, the adoption of IAS and governance in Sub-Saharan Africa. This latter study which relied mainly on secondary data will be used as the foundation for my PhD work.

This research also requires knowledge of statistics and strong analytical skills that I have got which I have demonstrated through the above research works. With a strong ability to learn quickly and independently, I am able to learn any tools, materials or additional skills that may be found necessary while conducting the study.




Months 1 – 8

Detailed literature review focusing on governance, reforms, accounting and development literature.

Months 9 – 12

Research design, development of research instrument, and development of
theoretical framework.

Months 13 – 20

Individual country studies. Detailed country accounting and auditing systems analysis: standards analysis, accounting practitioners interviewing, reform programmes analysis.

Months 21 – 27

Survey design and administration.

Months 28 – 32

Data analysis. SPSS and Excel will be used to analyze the data.

Months 33 – 36

Final thesis production. Draft copy will be produced first. After revising and finalizing, the final thesis will be submitted. Associated reports and research papers will also be produced and submitted.

The completion of each stage will lead to a report to be submitted to the research supervisor.


AlHashim, D. D., (1994), ‘International dimensions in accounting and implications for developing nations’, _Management International Review_, 34: 28

Al-Marhubi, F., (2004), ‘The Determinants of Governance: A Cross-Country Analysis’, _Contemporary Economic Policy_, 2, 3: 394-306

Annisette, M. & Neu, D., (2004) ‘Accounting and empire: an introduction’,
_Critical Perspectives on Accounting_, 15: 1-4

Burnside, C., & Dollar, D., (2000), ‘Aid, policies and growth’ _American Economic Review_, 90: 847-868

Chamisa, E. E., (2000), ‘The Relevance and Observance of the IASC Standards in Developing Countries and the Particular Case of Zimbabwe’, _The International Journal of Accounting,_ 35 (2): 267-286

Easterly, W., (2005), ‘What did Structural Adjustment adjust? The association of policies and with repeated IMF and World Bank adjustment loans’, _Journal of Development Economics_, 76: 1- 22

Economic Commission for Africa, (2005), _African Governance Report_, Addis Ababa: Economic Commission for Africa

Economic Commission for Africa, (2005), _Striving for good governance in Africa_, Addis Ababa: Economic Commission for Africa

Edwards, F. R., (2004) ‘U.S. Corporate Governance: What went wrong and can it be fixed?’ ‘In Borio, C. E. V., Hunter,W. C., Kaufman, G. G. & Kostas Tsatsaronis, K., _Market Discipline Across Countries and Industries_, USA: MIT Press

Gradstein, M., (2003), _Governance and Economic Growth_, Washington, DC: The World Bank

Jaspersen, F., & Shariff, K., (1990), _The Macroeconomic Underpinnings the Adjustment Lending_ (Working Paper No. WPS 511), Washington DC, The World Bank

Kaufmann, D. & Kraay, A., (2003), _Governance and Growth: Causality which way? – Evidence for the World, in brief_, Washington, DC: The World Bank

Kaufmann, D., Kraay, A., & Zoido-LobatĂłn, P., (1999), _Governance Matters_,
Washington, DC: The World Bank

Kaufmann, D., Kraa, A. & Mastruzzi, M., (2008), _Governance Matters VII: Aggregate and Individual Governance Indicators 1996-2007_ (Policy Research Working Paper 4654), Washington DC: The World Bank

Khan, M., H., (2005), _Review of DFID’s governance target strategy paper_ (Commissioned paper submitted to DFID), London: Department for International Development

Khan, M. H., (2007), _Governance, Economic Growth and Development since the 1960s_ (DESA Working Paper No. 54), New York: UN Department of Economic and Social Affairs

Knack, S., (2002), _Governance and Growth: Measurement and Evidence_ (IRIS Discussion Paper No. 02/05), Maryland: Clifford Zinnes

Knack, S., & Keefer, P., (1997) Why don’t poor countries catch up? A cross-national test of an institutional explanation, _Economic Inquiry_, 35, 3: 590-602

Larson, R. K., & Kenny, S. Y., (1995), An Empirical Analysis of International Accounting Standards, Equity Markets, and Economic Growth in Developing Countries, _Journal of International Financial Management and Accounting_, 6, 2: 130-157

Noorbakhsh, F., & Paloni, A., (2007), ‘Learning from structural adjustment: why selectivity may not be the key to successful programmes in Africa?’ _Journal of International Development_, 19: 927-948

OECD, (2004), Accelerating Pro-Poor Growth through support for Private Sector Development, Available from: http://www.oecd.org/dataoecd/53/21/34055384.pdf [Accessed 29/06/2008]

Operations Evaluation Department, (1997), _Adjustment Lending in Sub-Saharan
Africa: An Update_, Washington DC, The World Bank

Prather-Kinsey, J., (2006), ‘Developing countries converging with developed-country accounting standards: Evidence from South Africa and Mexico’, _The International Journal of Accounting_, 41: 141-162

Rezaee, Z., (2002), Financial Statement Fraud – Prevention and Detection, New York: John Wiley & Sons, Inc.

Rotberg, R. I., (2004), ‘Strengthening Governance: Ranking Countries Would Help’, _The Washington Quarterly_, 28, 1: 71-81

Sachs, J., MCArthur, J. W., Schmidt-Traub, G., Kruk, M., Bahadur, C., Faye, F., & MCCord, G., (2004), ‘Ending Africa’s Poverty Trap’, _Brookings Papers on Economic Activity_, 1: 117-216

Tiscini, R. & Di Donato, F., (2006), _The relation between accounting frauds and corporate governance systems: an analysis of recent scandals_, Available from: SSRN: http://ssrn.com/abstract=1086624 [Accessed 28/09/2008]

Wood, A., (2005), _Demystifying ‘Good Governance’: an overview of World Bank Governance Reforms and Conditions_, Washington DC: The World Bank

World Bank, (2005), _World Development Report 2005_, Washington DC: The World Bank & Oxford University Press

Zeghal, D. & Mhedhbi, K., (2006), ‘An analysis of the factors affecting the adoption of international accounting standards by developing countries’, _The International Journal of Accounting_ , 41: 373-386


United Nation: http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp [Access: 25/03/2010]

_Details about writer: Mehmood is an experienced freelance academic writer. He has finished nearly 2000 research projects, essays, dissertations and thesis for clients from all over the world. For any comments or queries, contact Mehmood through email [email protected]_

 Assuming that the level of dependency between tax rules and accounting rules is high.

“http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp” http://www.unescap.org/pdd/prs/ProjectActivities/Ongoing/gg/governance.asp

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