Ghana Stock Exchange

The study investigated the challenges and prospects of the Ghana Stock Exchange. It also sought to ascertain the level of public awareness of the Stock Exchange and discover the availability of prospects on the Stock Exchange. The study design was cross sectional. Stratified and simple random, sampling methods were used for the study. Four set of questionnaire were used to collect data from listed companies, unlisted companies, Staff of Ghana Stock Exchange and individual investors. Descriptive and inferential analysis was carried out. The result revealed that the stakeholders expected higher performance compared to the actual performance of the Exchange. Also key challenges confronting the Ghana Stock Exchange (GSE) are liquidity challenges, low patronage by Ghanaian firms, low earnings, strict regulations and low media attention. The prospects include safe and sound political environment for investment and favourable tax policies. Thus the government need to take real pragmatic measures to boost the market in order to increase investors’ confidence. Also the media should be seen reporting more on Stock trading activities as well as including Stock market and trading activities into the Ghanaian educational curriculum so that before student gets into senior secondary school, the awareness would have been created.

It was revealed from the research that listed banks on the Ghana Stock Exchange were not performing quite well with a mean ROA of 3%. The standard deviation associated with the ROA was 0.01414. It implied that there was a relatively low risk of deviation away from the mean ROA. The ROA had a minimum return of about 0.68% and a maximum of 6.96%. With regards to ROE, the results indicated the mean annual ROE as 0.2496, implying that on the average, listed banks were generating a return of approximately 25% on equity investments of shareholders. The standard deviation of the ROE was also 0.11251 which indicated a relatively low disparity. The minimum ROE was 7% with a maximum return of 50%. This implied that, all other things being equal, equity holders can get at least 7% and a maximum of 50% on their equity investments. Again, the result for the average Earnings per Share (EPS) for the banks was 0.4754, indicating that on the average, equity holders earn 47% on each share of their equity investments. The standard deviation of the EPS was 0.92855 while the minimum EPS was 0.1% and the maximum 397%. From the profitability indicators, EPS gave the highest mean to investors and but with also the highest standard deviation. However, ROA and ROE indicators gave standard deviation just above 10% making them less risky.

The ninth research question (R9) asked: Does the Altman Z-Score Model and Zmijewski Score Model contradict each other in exploring the good financial health and bankruptcy rate in twoyears’ time of the listed companies on the Ghana Stock Exchange? The results found by R1, R2, R3 and R4 as discussed earlier showed that the results of the Altman Z-Score Model predicted greater amount the of the listed companies to be in the bankruptcy zone and few amount of listed companies to be in the non-bankruptcy zone for the period 2009 - 2015 but, the results of the Zmijewski Score Model predicted greater percentage the of the listed companies to be in the non-bankruptcy zone and few percentage of listed companies to be in the bankruptcy zone for the period 2009 – 2015. The results imply that the two models provide different views on the financial health and bankruptcy rate of the listed companies as the two models move in the opposite direction. The results of the Altman Z-Score Model were significantly influenced by the sales, working capital, retain earnings, the market value of equity and earnings before interest and tax data which resulted in the significant difference between the two models (Sinarti and Sembiring, 2015). Hence, the two models contradict each other in predicting the good financial health and bankruptcy rate of listed companies on the Ghana Stock Exchange which was similar to the findings of Sinarti and Sembiring (2015).

The Ghana Stock Market been the primary stock exchange in Ghana was incorporated in July 1989 and started its trading in 1990 with twelve listed companies and government. Securities on the GSE include equities, corporate and government bonds. Currently there are thirty six (36) listed companies on the GSE, one with preferred stock i.e. Standard Chartered Bank and two corporate bonds. The market capitalization for the first two years of its commencement was GH¢ 4.2 billion in 1992 and GH¢47.35 billion in 2011. The GSE All share index and the Databank Stock Index are the primary indices for the stock exchange. In addition to these indices, Strategic African Securities Limited has also published SAS Index, SAS manufacturing Index and SAS financial Index for the exchange. There are several key sectors of the economy listed on the Stock exchange. These include oil, banking, manufacturing firms, mining and brewing in the Ghana Stock Exchange annual report. Due to the GSE’ s vibrant role in raising domestic and international capital for economic development, recent reforms have focused on enhancing institutional development (Frimpong, 2008).

The data for this study was obtained from the annual financial reports of commercial banks listed on the Ghana Stock Exchange (GSE) (www.gse.com.gh). All the financial reports have been fully audited and approved by the GSE. An initial review and analysis of the financial statements of the listed banks indicated that whereas some banks used financial derivatives throughout the study period (2007 – 2014) others used the derivatives only in certain years. Overall, seven(7) banks out of twenty-seven(27) commercial banks operating in Ghana were selected for the study. The selection was based on the following criteria: (1) the banks are listed on the Ghana stock exchange ;( 2) there is available, accurate and verifiable data on the banks within the study period; and (3) the banks have prior knowledge of trading in financial assets and or financial derivatives (i.e. by listing on GSE).

This paper examines the profitability, liquidity and solvency and probability of failure of listed pharmaceutical companies on the Ghana Stock exchange. The findings from the activities ratios indicated efficiency of Arytons management in utilizing the asset of the firms in day-to-day basis is declining in recent years whiles that of Starwin is improving even though Aryton Drug Ltd is generally more efficient than Starwin Ltd. The Average cash conversing cycles of Aryton and Starwin were found to be 196 and 282 respectively which are relatively higher than the bench mark in Germany, UK and US of 145 days, 127 days and 142days respectively. The liquidity ratio metric indicated that Aryton Drug Ltd manages it liquidity and is very good position to meet it long term obligation as well, as oppose to Starwin Ltd which has very limited cash to cover its short term debt and is less solvent. Starwin’s is more geared which has exposed the firm to higher interest expense. The study also discovered from the DuPont analysis that operating income- to- revenue and revenue- to- total assets ratios significantly influence ROE positively. Measurement of profitability, proxy by ROE and ROA, shows that Aryton generates more returns on it asset and on equity than Starwin Ltd, although lower than industrial bench marks in UK and US of 54.9% and 32.5% respectively, however Starwin Ltd is seen to be posting good returns in recent years which is almost at par with Aryton’s. Starwin’s COGS growth rate has been generally greater than its revenue growth rate which is note the case for Aryton Ltd. A test of financial soundness and stability with Altman’s Z-score revealed that Aryton is not financially distress but Starwin is in financial distress and likely to be bankrupt in the near future, exposing investors to serious risk. Thus Starwin Ltd should consider takeover offer or merger for reorganization of the firm.

This study seeks to examine the factors that influence the profitability of manufacturing Firms in Ghana. The study was limited to manufacturing companies that are listed on the Ghana Stock Exchange and which were in operation during the period 2005-2015. The regression results revealed that the predictor variables (i.e. leverage, interest rate, liquidity, firm size, tangibility, GDP and inflation) explained 56.6% of the variation in the dependent variable. The empirical findings of this study suggest that leverage and interest rate have a negative significance with profitability while liquidity and firm size have a significant positive relationship with profitability. Moreover, tangibility and GDP have shown an insignificant relationship with profitability. While the study is limited to a sample of selected manufacturing companies listed on the Ghana stock exchange, the finding of this research could be generalized to companies of similar characteristics.

The GSE’s bullish runs in recent years could be one of the explanations to this finding. For instance reports registered in the Strategic African Securities Ltd (SAS) Investment Research document ( SAS Investment Research, January 2008) indicated that the market capitalization of GSE crossed the GH¢12 billion mark in 2007. Actually in that year the size of the equities component of the Ghana capital market increased by 21.40%, resulting in a total market capitalization of GH¢12,362.11 million. The Ghana Stock Exchange (G5E) All Share Index closed at a record high of 6599.81 points, the highest since November 12, 1990, as a result of the strong Ghanaian economy and a solid performance of the financial firms. Activity in financial equities is dominating market activity in recent times and is dominated by Non-Resident foreigners. Overseas investors have continued to actively purchase Ghanaian stocks. In 2007 the total value traded by Non Resident Foreigners (NRF) was GH¢422.85 million which represented about 80% of total volume traded. The trend totally confirms our finding of a weakly inefficient market which implies market predictability that provides profitable arbitrage opportunities. Investors (especially foreign ones) are therefore attracted to diversify or totally shift from investing in other financial instruments or markets to invest on the GSE bourse in order to increase their returns.

The study analyzed companies from the six different dominant sectors of Ghana’s capital market including: Finance and Insurance, paper converters and information Technology, Manufacturing and Trading, Agriculture and Agro processing, Metal and oil, and Pharmaceuticals and Beverages spanning from 2004 to 2008. Secondary data was used and were collected from audited financial statements as well as the fact book of Ghana stock Exchange. The study used time series data. Time series analysis identifies the nature of phenomenon represented by the sequence of observation and forecast the future and observes a trend. The time series data were analyzed using both qualitative and quantitative approach. Using qualitative approach, a pattern in the data set were ascertained. According to (Gujarati, 2004) every statistics to describe a data usually summarizes the content and display the mean indicators of the variables used in the study. For quantitative analysis, the study therefore conceptualized capital structure as a three dimensional construct and for empirical purposes; the linear regression model in estimating relationship between variables was used. Linear regression is the least squares estimator with explanatory variable(s). The basic regression equation was as shown below:

This study sought to find the ability of accounting information to explain stock price movement on the Ghana Stock Exchange (GSE) and the effect International Financial Reporting Standards (IFRS) in explaining stock price movements. Two multiple regression models were used to ascertain how accounting information was relevant in explaining stock prices as well as to test whether the adoption of International Financial Reporting Standards (IFRS) has an effect on value relevance. Four single regression models was used to explain how accounting variables contribute to explaining stock price. The study regressed the stock prices on accounting data as well as annual interest rate to determine their relationship. In general the study found that accounting information, specifically earnings, Price to earnings ratio and Return on Equity was relevant in explaining stock price movements in both in pre-adoption IFRS and post- adoption IFRS periods in Ghana. The study also found that the adoption of IFRS did not have any effect on the ability of accounting information to explain stock price movements.

Purpose: The concept of dividend policy has been widely researched by scholars, however, a consensus on the factors that determine dividend policies among firms has not been yet established as findings differ depending on the industry and sector. This study aims to contribute to the stock of literature already available by observing the major factors that affect dividend decisions of banks listed on the Ghana Stock Exchange (GSE). Methodology: The study employed secondary data extracted from published financial statements of the listed banks over a 10year period. Data was also extracted from the 2015 Ghana Banking Survey Report and the 2015 Bank of Ghana annual financial report. The study was conducted on seven banks which were listed on the GSE. The study used a panel data framework constructed from secondary data of the banks between the years 2006 – 2015 using Ordinary Least Squares model to estimate the regression equation. Findings: The findings of the study showed that Returns on Asset (ROA) which represents profitability ratio was significant and a positive predictor of dividend payment among listed banks on the GSE. Other significant determinant of dividend payments include free cash flow, the leverage level of the banks, the banks ratio of non-performing loans to total administered loans (NPL/TA), the average level of inflation and Bank of Ghana’s policy rate (BPR). Number of bank branches (BBR) was found to have no significant relationship with Dividend payment by banks.Study Contribution: The study revealed that NPL/TA and BPR has negative and strong influence on dividend payment among listed banks on the GSE. No relationship existed between BBR and DPS hence the number of branches owned by listed banks does not affect their dividend payments. Banks must therefore improve on their credit risk management techniques to improve profitability in order to maintain sustainable payment of dividends. Bank of Ghana must also maintain lower BPR since high BPR was found to negatively affect payment of dividend.Recommendations: The study recommends that, future studies should include more independent variables, more banks and as well increase the years for the time series data. Future studies can also consider and compare the determinants of dividend payments among banks in Africa.

The regression results further suggest that, earning per share has a miniscule positive relationship on dividend per share. Thus, increases in earnings of the firms infinitesimally benefit shareholders. Moreover, profitability has a fect on dividend per share. This implies that, greater profitability enabled the firms to easily afford a higher amount for dividend payouts. Thus, firms which are profitable are more likely to pay dividend as compared to those that are not, sales growth also had an insignificant positive effect on dividend payouts as far as the pooled OLS and random effects estimators are concerned. As the Hausman specification test has already indicated that This study uses linear panel data regression methods to evaluate the factors that determine the dividend payout policy of some selected manufacturing firms listed on the Ghana Stock Exchange. The cross-section data includes 2006 were made. Due to the unavailability of all manufacturing firms’ data listed on the GSE to construct a balanced panel and for selected time e than 70% of the total manufacturing industries

The systematic work from [10] has shown that, most studies have empirically proven that, the returns on the Ghana Stock Exchange are predictable. Most of these studies which were on the Efficient Market Hypothesis (EMH) concluded that, the Ghana Stock Exchange (GSE) was weak- form inefficient. This makes the Market highly predictable and investors can make abnormal returns by studying past prices on the Market. [11] studied the returns on the GSE between 1993 to 1995 using serial correlation and found that, the market was not weak-form efficient. Also, [12] examined the Efficient Market Hypothesis on the Ghana Stock Exchange and other Stock Exchanges in Africa such as South Africa, Nigeria and Zimbabwe using PACF and White Test. The finding from the study was that, the Ghana Stock Exchange was weak-form inefficient.

The results and the discussions from the study indicate that SG-GH ranks first among the seven banks that were analyzed in terms of capital adequacy and the least ranked bank on this metric was UTB. The most efficient bank in terms of asset quality was CAL. The lowest ranked bank based on this measure was GCB. Three banks made up of CAL, GCB and SCB shared the top position in so far as management efficiency was concerned. The earnings ability parameter puts SCB on top spot, followed by EBG in second place. This is explained by its superior performance in return on assets and equity. HFC‟s poor performance, on the contrary, makes it the lowest ranked bank on this measure. On the basis of liquidity, SCB took the top position and the lowest position was occupied by UTB. The study found a stable performance for all the banks studied. However, it revealed some differences among the various ratios that were computed for each bank under all the five parameters; capital adequacy, assets quality, management efficiency, earnings ability and liquidity. The study recommends, based on the results from the analyses, that UTB improves its performance in both capital adequacy and liquidity. GCB should also work on improving its asset quality especially on its impairment allowance to gross loans and advances ratio. HFC also needs improvement in its liquidity to increase its overall performance. Future studies could use the CAMEL framework to analyze or evaluate commercial banks that are not listed on the Ghana stock exchange.

The impact of stock market behaviour on many economies especially in emerging markets of Africa, South America and Asia has become more recognized in recent years. Market performance in particular has attracted a lot of attention from traders, regulators, exchange officials as well as academics. However, existing literature and studies into this subject especially on predictive analysis is limited in these regimes. For example, mathematical models required to estimate and predict the behaviour of stocks prices and its dynamics on the Ghana Stock Exchange (GSE) are virtually nonexistent. Existing literature and models are mainly based on deterministic evaluation of market variables using mostly past data. It means that most investors trading on the exchange hardly have any means of forecasting the behaviour of stocks and predicting the returns on their investments. This paper will provide the necessary literature and mathematical background that will enable investors, academics and other interested parties to study and predict stock price behaviour on the exchange. The theoretical background would also provide a sufficient link of knowledge from mathematics to researchers, financial engineers and economist and develop

Studies on dividend initiation have not been given attention in Ghana over the years despite its importance in understanding stock price behavior. This has led to deficient literature in understanding stock market reaction to dividend initiation in Ghana. Though it is widely studied in the developed markets in Europe and the Americas (e.g Healy and Palepu (1988), Jin (2000), Asquith and Mullins (1983) and Schultz (2004)). The same cannot be said of Ghana. Previous studies that have attempted work on the stock market in Ghana include: Amidu and Abor (2006), Issahaku et al. (2013), Amidu (2007), Bokpin and Abor (2010). These did not focus on the market reaction to dividend initiation. Again, the data set used in the developed markets for the study of this topic cannot be used in explaining the investor behavior of the stock market in Ghana. This is because the variables used in those studies could have been influenced by factors unique to their environment. Hence a unique study to focus on Ghana Stock Exchange is warranted. The study has two objectives which include:

because they have more knowledge of the company operations than outside directors and are diligent as non- executive directors, because of their legal responsibility and their interest in company (Dalton and Dalton, 2005; Zhang and Wang, 2013). However, following all the above revelations little research has been done on the subject in developing countries, and even less in Ghana, some few people have, namely, (Tsamenyi, Enninful- Adu, & Onumah, 2007),(Bokpin & Arko, 2009) and a few others. Specifically, no study has yet been undertaken to examine the relationship that exit between board structure and the firm performance of non-financial listed companies on the Ghana stock exchange, in spite of the important contributions of the nonfinancial sector to the economy of Ghana. The importance of board of directors was spelt out by a study carried out by (Fama & Jensen, 1983)who considered it as one of the main elements of governance; it was further evidenced by (Limpaphayom & Connelly, 2006) who also stressed on the need and the effective characteristics of the role of the board of directors in overseeing management. Boards become very essential for smooth functioning of organizations. Boards are expected to perform different functions, which includes monitoring of management to mitigate agency costs ((Eisenhardt, 1989); (Shleifer & Vishny, 1997); (Roberts, McNulty, & Stiles, 2005), hiring and firing of management (Hermalin & Weisbach, 1998), provide and give access to resources (Hillman, Cannella, & Paetzold, 2000); (Hendry & Kiel, 2004), grooming CEO (Slocum, 2006) and providing strategic direction for the firm(Stieglitz & Heine, 2007). Boards also have a responsibility to initiate organizational changes and facilitate processes that support the organizational mission (Bart & Bontis, 2003).

GHANA STOCK EXCHANGE AND ECONOMIC GROWTH 20 Ayensu, Musah, Opare and Osafo (2012) also performed a similar study like Darkoh (2006). However, the authors employed annual time series data from 1993 to 2010. Market capitalisation ratio and GDP were the proxies for market performance and growth respectively. Yearly time series data from 1993 to 2010 was used in an Ordinary Least Square (OLS) regression analysis. Findings from the study suggests a very strong relationship between capital market development and economic growth. Since regression estimates are more accurate when the data points are large, the use of annual data in this study, resulted in only 18 data points, which may limit the potential robustness of the findings of the study.

Earning announcement information plays a very important role in the functioning of stock markets both at individual and institutional investor levels. Stock market reaction to earnings announcement has received significant attention in Finance. Price of a security reflects all available information in an efficient market. In an efficient market, share price is a good estimate of the value placed on the security by the market at any point in time and hence abnormal volatility resulting to abnormal gains cannot be witnessed. The ability of the emerging markets like Ghana Stock Exchange to impound financial information and incorporate it into prices to match the risk is in doubt, therefore the need to establish the effect of earnings announcements on share price changes for companies listed at the Ghana stock exchange. This study examined the effects of earnings announcement on share prices of companies listed on the Ghana Stock Exchange from period of 2014 to 2017. The population size was all listed companies on GSE. A sample of 10 listed companies were selected and 40 documented earnings announcements were collected from 2014 to 2017. The market model was employed in determining the abnormal returns within the 21days event window including 10days pre-event and 10days post-event after earnings announcement. The level of volatility was also tested around the announcement day. The results showed significant abnormal returns and cumulative abnormal returns around the announcement day at 95% confidence level and they are consistent with efficient market hypothesis. It suggests that Ghana stock market is efficient, and earnings announcement has effects on share price. The results also found evidence of high volatility level around the announcement day.

Investment activity is essential to the promotion of economic well-being; it is one of the most important economic activities that individuals, businesses and governments undertake. The commitment of resources in anticipation that an affirmative rate of return will be achieved is known as investment (Mensah, 2008). Major considerations when investing include what to invest in, how much to invest and the level of risk an investor is prepared to bear in order to achieve his/her investment goal. A portfolio is simply a collection of financial assets in- volving investment tools such as bonds, foreign exchange, stocks, gold, as- set-backed securities, real estate certificates and bank deposits which are held simultaneously by one person or a group of persons.