KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY

COLLEGE OF ARTS AND SOCIAL SCIENCES

DEPARTMENT OF ACCOUNTING AND FINANCE

A COMPARATIVE STUDY OF THE PERFORMANCE OF MANUFACTURING

COMPANIES AND BANKING INSTITUTIONS LISTED ON THE

STOCK EXCHANGE.

BY

AGYEKUM FRANCIS

(B.ED ACCOUNTING)

NOVEMBER, 2015

i

A COMPARATIVE STUDY OF THE PERFORMANCE OF MANUFACTURING

COMPANIES AND BANKING INSTITUTIONS LISTED ON THE GHANA

STOCK EXCHANGE.

BY

AGYEKUM FRANCIS

(B.ED ACCOUNTING)

A THESIS SUBMITTED TO THE DEPARTMENT OF ACCOUNTING AND

FINANCE, KWAME NKRUMAH UNIVERSITY OF SCIENCE AND

TECHNOLOGY IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR

THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

COLLEGE OF ARTS AND SOCIAL SCIENCES

NOVEMBER, 2015

ii

DECLARATION

I hereby declare that this dissertation is the outcome of my original research carried in the KNUST School of Business under the supervision of Mr. Edward Yeboah.

However, references cited in this work have been duly acknowledged. I therefore take the responsibility of any error(s) that may be found in this work.

iii

CERTIFICATION

The undersigned certify that we have read through and recommended to the KNUST

School of Business for Acceptance of a dissertation entitled;

Comparative Studies of the Performance of Manufacturing Companies and Banking

Institutions Listed on the in partial fulfillment of the requirements for the award of Master of Business Administration Degree in Accounting.

AGYEKUM FRANCIS …………………….. ……………………

STUDENT SIGNATURE DATE

Certified by:

Mr. EDWARD YEBOAH …………………….. ……………………

SUPERVISOR SIGNATURE DATE

Certified by:

DR.K.O. APPIAH …………………….. ……………………

HEAD OF DEPARTMENT SIGNATURE DATE

iv

ACKNOWLEDGEMENT

The researcher wishes to register his appreciation and thanks to the omnipresent Father who has been with him throughout the entire research.

The researcher is again highly indebted to his supervisor Mr. Edward Yeboah, lecturer,

KNUST School of Business who meticulously supervised the entire write-up. His comments, constructive criticisms, suggestions, and professional guidance contributed tremendously to shaping this work.

I further express my profound gratitude to the Ghana Stock Exchange and the companies which has been used for the study for their maximum co-operation.

My sincere thanks also go to my parents, brothers and sisters and Marian Frimpomaa for their encouragement and moral support .May the Almighty God bless them all.

v

ABSTRACT

The objective of every business is to grow and make profit for its owners. Companies have the potential for expansion but lack funds. IMF Working Paper in 2007 on Stock

Market Development in Sub-Saharan Africa stated that corporate financing patterns in

Ghana suggest that the stock market financed about 12 percent of total asset growth of listed companies between 1995-2002, Suggesting stock market as the single most important source of long-term external finance. In Ghana, a huge gap exists in literature on how firms performed before and after listed on the Ghana Stock Exchange. This study therefore sought to do comparative studies of the performance of manufacturing companies and banking institutions before and after listed on the Ghana Stock Exchange.

The study was a multiple case study based on primary data collected through interview and secondary data obtained from Ghana Stock Exchange. The researcher made personal contact with the head offices of the various companies. The data was organized and represented in tabular form to show percentages of the results. One of the finding findings was that manufacturing companies performed better after listing on the stock exchange. Secondly, the banking institutions performed better when not listed.

Additionally, the study identified macro-economic instability, low level of capital facing

GSE, high cost of listing and stringent listing requirement as the major problems hindering listing in Ghana. It is recommended that the use of alternative market option as a means of raising equity. Additionally, banking institutions should strengthen risk management and internal control system. Furthermore, there should be improvement in production operations of manufacturing companies. Also, there should be assurance of macro-economic stability.

vi

TABLE OF CONTENT

DECLARATION ...... iii CERTIFICATION ...... iv ACKNOWLEDGEMENT ...... v ABSTRACT...... vi TABLE OF CONTENT ...... vii LIST OF TABLES ...... x

CHAPTER ONE ...... 1 INTRODUCTION ...... 1 1.1 BACKGROUND OF THE STUDY ...... 1 1.1 STATEMENT OF THE PROBLEM ...... 2 1.2 THE RESEARCH OBJECTIVES ...... 3 1.3 SPECIFIC OBJECTIVES ...... 3 1.4 RESEARCH QUESTIONS ...... 4 1.5 SIGNIFICANCE OF THE STUDY ...... 4 1.6 SCOPE OF THE STUDY ...... 5 1.7 LIMITATIONS OF THE STUDY ...... 5 1.8 ORGANISATION OF THE STUDY ...... 5

CHAPTER TWO ...... 7 LITERATURE REVIEW ...... 7 2.0 INTRODUCTION ...... 7 2.1 HISTORY OF GHANA STOCK EXCHANGE ...... 8 2.2 FUNCTIONS OF STOCK EXCHANGE ...... 9 2.3 LEGAL FRAMEWORK OF GHANA STOCK EXCHANGE...... 10 2.4 STEPS IN LISTING ON THE GHANA STOCK EXCHANGE...... 11 2.4.1 DEFINITION OF ‗‘LISTED‘‘ ...... 11 2.4.2 ORIGINAL LISTING REQUIREMENTS...... 12 2.4.3 PUBLIC LIMITED LIABILITY STATUS ...... 12 2.4.4 MINIMUM STATED CAPITAL ...... 12 2.4.5 MINIMUM PUBLIC HOLDING ...... 12 2.4.6 FULLY PAID SHARES ...... 13

vii

2.4.7 THE SPREAD OF SHARES ...... 13 2.4.8 DEBT SECURITES...... 13 2.4.9 TRANSFERABILITY OF SECURITIES ...... 13 2.4.10 PERIOD OF EXISTENCE AND PROFITABILITY...... 13 2.4.11 MANAGEMENT ...... 14 2.4.12 AUDIT SUB-COMMITTEE ...... 14 2.4.13 PROSPECTUS ...... 14 2.5. MONEY MARKET AND CAPITAL MARKET ...... 15 2.6. THE ROLE OF CAPITAL MARKET IN THE ECONOMIC DEVELOPMENT OF DEVELOPING COUNTRIES ...... 16 2.7. PERFORMANCE OF COMPANIES LISTED ON THE GHANA STOCK EXCHANGE ...... 18 2.8. PERFORMANCE OF BANKING AND MANUFACTURING FIRMS ON GHANA GSE ...... 19 2.8.1 PROFITABILITY ANALYSIS ...... 21 2.8.2 COST EFFICIENCY ...... 24 2.8.3 LIQUIDITY ASSESSMENT ...... 25 2.9 PERFORMANCE OF STOCK MARKETS IN AFRICA...... 26 2.10 PERFORMANCE INDICATORS OF COMPANIES ...... 28 2.10.1 PROFITABILITY...... 28 2.10.2 LIQUIDITY ...... 28 2.10.3 VALUATION ...... 29 2.10.4 OTHER CONSIDERATIONS ...... 29 2.11 PROBLEMS COMPANIES FACE IN GETTING LISTED...... 30 2.12 EMPPIRICAL LITERATURE REVIEW ...... 32

CHAPTER THREE ...... 38 RESEARCH METHODOLOGY ...... 38 3.0 INTRODUCTION...... 38 3.1 RESEARCH DESIGN...... 38 3.2 SOURCES OF DATA...... 39 3.3 POPULATION OF THE STUDY...... 39 3.4 SAMPLE SIZE AND SAMPLE TECHNIQUES...... 39 3.5 DATA COLLECTION TECHNIQUES ...... 39

viii

3.6 DATA PRESENTATION AND ANALYSIS...... 40

CHAPTER FOUR ...... 41 DATA ANALYSIS AND DISCUSSION OF RESULTS ...... 41 4.0 INTRODUCTION ...... 41 4.1 PERFORMANCE OF LISTED MANUFACTURING COMPANIES ...... 41 4.1.1 GROSS PROFIT ANALSIS ...... 41 4.1.2 NET PROFIT ANALYSIS ...... 43 4.1.3 RETURN ON EQUITY ANALSIS ...... 45 4.1.4 RETURN ON ASSETS ANALYSIS ...... 46 4.2 PERFORMANCE OF LISTED BANKING INSTITUTIONS...... 48 4.2.1 RETURN ON EQUITY...... 49 4.2.2 ANALSIS OF RETURN ON ASSET...... 50 4.3 COMPARATIVE PERFORMANCE OF LISTED MANUFACTURING COMPANIES AND BANKING INSTITUIONS...... 51 4.3.1 ANALYSIS OF RETURN ON EQUITY ...... 51 4.3.2 ANALYSIS OF RETURN ON ASSETS ...... 53 4.4 FACTORS HINDERING LISTING...... 54 4.5 DISCUSSION OF RESULTS...... 57

CHAPTER FIVE ...... 59 SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS ..... 59 5.0 INTRODUCTION ...... 59 5. 1 SUMMARY OF MAJOR FINDINGS ...... 59 5.2 CONCLUSION...... 61 5.3 RECOMMENDATIONS ...... 61

REFERENCES ...... 65 APPENDIX I ...... 69

ix

LIST OF TABLES Table4.1:GROSS PROFIT MARGIN OF MANUFACTURING COMPNAIES (%)

------41

Table4.2: NET PROFIT MARGIN OF THE MANUFACTURING COMPANIES (%)

------43

Table 4.3: RETURN ON EQUITY FOR THE MANUFACTURING COMPANIES (%)

------45

Table 4.4: RETURN ON ASSETS OF THE MANUFACTURING COMPANIES

(%) ------46

Table 4.5: RETURN ON EQUITY FOR THE BANKING INSTITUTIONS (%). ----- 49

Table 4.6: RETURN ON ASSET FOR THE BANKING INSTITUTIONS (%). ------50

Table 4.7: AVERAGE RETURN ON EQUITY FOR BOTH BANKING

INSTITUTIONS AND MANUFACTURING COMPANIES. ------51

Table 4.8: AVERAGE RETURN ON ASSETS FOR BOTH MANUFACTURING

COMPANIES AND BANKING INSTITUTIONS. ------53

x

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

The Ghana Stock Exchange was incorporated in July 1989 with trading on the floor commencing in November, 1990. Since then, the Exchange has been progressively strengthening its facilities for businesses and the Government to raise long-term capital as well as for investors to obtain liquidity, reasonable capital, safety and diversity of investments.

From an initial three promoters, the Exchange currently has fifty-two members made up of eleven Licensed Dealing Members (LDM) and forty-one Associate Members. There are currently thirty-eight (38) listed companies. The criteria for listing include capital adequacy, profitability, spread of shares, years of existence, management efficiency.

Nevertheless, while the exchange has performed remarkably well in 1993 by becoming the 6th best performing emerging stock market from years after its inception, it has few of the numerous firms in Ghana listed on the exchange.

Financial managers have the responsibility of ensuring sufficient short-and long-term capital is available to organizations, at the time it is needed, and that surplus funds are placed at suitably high rates of return. As the business grows, it needs money to fuel its operations and sustain its level of development. It passes through different stages of growth, feeding upon the investment you provide and in turn producing output (your product or service) and profit. For many business organizations, the ultimate sign of successful growth and the best way to raise a lot of money is by "going public". Selling stock in your company can be an excellent way to obtain a lot of capital, although it is often a long, complex, and expensive process.

1

This project seeks to deliberate on comparative studies of the performance of companies listed on the Ghana Stock Exchange. This has been possible because unfortunately banks in the developing economies are often not prepared to commit funds for long-term projects. Banks are more interested in short-term projects with high profit potential.

For this reasons, many companies and other forms of business ownership rely on equity shares and debentures to finance long-term projects. Raising capital to achieve a higher level of growth according to Wiley. (1998), Entrepreneur Magazine Guide to Raising

Money, is the main reason why companies go public. Selling shares of stock can bring in large sums of money. Companies that go public usually expected to sell shares.

1.1 STATEMENT OF THE PROBLEM

The objective of every business is to grow and make profit for its owners. Companies have the potential for expansion but lack funds. IMF Working Paper in 2007 on Stock

Market Development in Sub-Saharan Africa stated that corporate financing patterns in

Ghana suggest that the stock market financed about 12 percent of total asset growth of listed companies between 1995-2002, Suggesting stock market as the single most important source of long-term external finance. Stock Exchanges are believed to help improve the performance of companies. With the key concept of opening up ownership of businesses to investors, Stock Exchanges have helped and continue to provide much needed financing for most businesses. In most advanced economies, they have become the yardstick with which the overall performance of an economy is evaluated. Osaze

(2000) sees the capital market as the driver of any economy to growth and development because it is essential for the long term growth capital formation. It is crucial in the mobilization of savings and channeling of such savings to profitable self-liquidating investment. According to Okereke-Onyinka (2000), the capital market has been a viable

2 source of financing state and local government infrastructural projects and developmental strides with less pressures and lean on resources. As companies expand through the acquisition of assets they have choices to make in how that growth is financed. External sources of finance include both the issuance of new equity and various debt instruments. There is hardly any published work in Ghanaian and international literatures that focuses exclusively on comparative studies of the performance of manufacturing companies and banking institutions listed on the Ghana

Stock Exchange. Hence, the importance of this study stems from it being an empirical attempt in this direction to fit the gap in literature.

1.2 THE RESEARCH OBJECTIVES

GENERAL OBJECTIVE

To compare the performance of manufacturing companies and banking institutions listed on the Ghana Stock Exchange.

1.3 SPECIFIC OBJECTIVES

1. To find out three year performance of manufacturing companies after listing and

two years before being listed.

2. To identify three year performance of banking institutions after listing and two

years before being listed.

3. To find out the problems that is hindering manufacturing companies and banking

institutions in getting listed on the Ghana Stock Exchange.

4. To assess the performance of manufacturing companies and banking institutions

before and after being listed.

3

1.4 RESEARCH QUESTIONS

1. What is the performance of manufacturing companies before and after listing?

2. What is the performance of banking institutions before and after being listing?

3. What are the problems that are hindering manufacturing companies and banking

institutions in getting listed?

4. What is the performance of manufacturing companies and banking institutions

before and after listing?

1.5 SIGNIFICANCE OF THE STUDY

This study is expected to contribute to the education of existence and operations of the

Ghana Stock Exchange Literature by investigating the comparative studies of the performance of companies listed on the Ghana Stock Exchange. It is expected to provide a deeper understanding of whether and how the prospective of listed companies can benefit from the operations of the market. This research is considered important for the following reasons.

Firstly, more studies on stock market development in Sub-Saharan Africa. This research is specifically segmenting Ghana Stock Exchange and particularly comparing the performance of companies listed on it and to find their prospects upon listing as a member. Secondly, the study sought to find out why most companies are facing financial difficulties in Ghana but are not interested in getting listed on the exchange. Capital markets are places where organizations which need long term fund meet investors who have finance to offer (King and Levine 1993). The long history of the Ghana stock exchange has still not been utilized as only 38 companies are listed on the market.

4

1.6 SCOPE OF THE STUDY

In an attempt to do comparative studies of the performance of companies listed on the

Ghana Stock Exchange, the research focused on the performance of manufacturing companies and banking institutions on the Ghana Stock Exchange. The banking institutions were made up of Ltd, Cal Bank Ltd, GCB Bank Ltd,

Standard Chartered Bank Ltd and Ltd . The manufacturing companies were also made up of Unilever Ghana Ltd, PZ Cussons Ghana Ltd, Fanmilk

Ghana, Cocoa Processing Company and Ayrton Drugs Manufacturing Company Ltd.

These organizations were chosen for the study in light of the fact that it was anything but difficult to get the abundantly required data from the Ghana stock exchange about their performance. The study covers three years after listing and two years before listing on the Ghana Stock Exchange.

1.7 LIMITATIONS OF THE STUDY

The time limit in which the researcher was allowed to operate was so minimal and that more information was not captured. This is because the research was combined with tight academic schedule. Also, financial constraint coupled with high cost of transportation and materials did not allow quantum of data to be involved. Finally, most of the companies were unwilling to divulge information that would contribute to the success of the research for fear of exposing their weaknesses.

1.8 ORGANISATION OF THE STUDY

The study was structured into five chapters. Chapter one, the present chapter, introduces the context of the study (background study), problem statement, objectives, significant and justification of the study, Scope and limitations and organization of the study.

5

Chapter two focused on review of relevant prior literature. This chapter discussed both the theoretical and empirical background literature. Chapter three discussed the data source, methods of data analysis, research design and profile of the study area. Chapter four looked at the analysis and discussions of major findings gathered. The fifth chapter ended the research with summary, recommendations and conclusions.

6

CHAPTER TWO

LITERATURE REVIEW

2.0 INTRODUCTION

There are many theoretical sources concerning the evaluation of financial position available both in soft and hard copies. This chapter, of the study is devoted to the review of both theoretical and empirical literature of the comparative studies of the performance of manufacturing companies and banking institutions listed on the Ghana Stock

Exchange of other authors and researchers whose work has contributed immensely on the financial performances of businesses. The theoretical and empirical review which forms the basis of the chapter has been outlined as follows:

1. History and evolution of the Ghana stock market

2. Functions of Ghana Stock Exchange

3. Legal framework of Ghana stock Exchange

4. Steps involved in listing

5. Money Market and Capital Market

6. The Role of Capital Market in the Economic Development of Developing

Economics

7. Performance of companies listed on the Ghana Stock Exchange

8. Performance of banking and manufacturing companies on the Ghana Stock

Exchange

9. Performance of stock markets in Africa

10. Performance indicators of companies listed on the Stock Exchange

11. Problems companies face in getting listed

12. Empirical literature review

7

2.1 HISTORY OF GHANA STOCK EXCHANGE

The Ghana Stock Exchange was incorporated in July 1989 as a private company limited by guarantee under Ghana's companies' code, 1963. The Exchange however, changed its status to a public company limited by guarantee in April 1994. Trading on the floor of the Exchange commenced in November 1990. All types of securities can be listed.

From an initial three promoters, the Exchange currently has fifty-two members made up of eleven Licensed Dealing Members (LDM) and forty-one Associate Members. There are currently thirty-eight (38) listed companies. The criteria for listing include capital adequacy, profitability, spread of shares, years of existence, management efficiency.

In 1993, the GSE was the sixth best index performing emerging stock market, with a capital appreciation of 116%. In 1994 it was the best index performing stock market among all emerging markets, gaining 124.3% in its index level. 1995's index growth was a disappointing 6.3%, partly because of high inflation and interest rates. Growth of the index for 1997 was 42%, and at the end of 1998 it was 868.35. GSE-All Share Index is a market capitalization index of all share listed on GSE. As of December 2013 the market capitalization of the Ghana Stock Exchange was GH¢61,158.29million compared to the

December 2012 end figure of GH¢57,264.22million, an increase of 6.80%. Domestic

Market capitalization recorded a 76.68% increase ending December 2014 with

GH¢11,694.93 compared to GH¢6,753.14 recorded for the same period in 2012.

The manufacturing and brewing sectors currently dominate the exchange. A distant third is the banking sector while other listed companies fall into the , mining and petroleum sectors. Most of the listed companies on the GSE are Ghanaian but there are some multinationals.

There is an 8% withholding tax on dividend income for all investors. Capital gains on securities listed on the exchange remain exempt from tax until 2015. The exemption of

8 capital gains applies to all investors on the exchange. There are no exchange control regulations on the remittance of original investment capital, capital gains, dividends, interest payments, returns and other related earnings.

Although non-resident investors can deal in securities listed on the exchange without obtaining prior exchange control permission, there are some restrictions on portfolio investors not resident in Ghana. The current limits on all types of non-resident investor holdings (be they institutional or individual) are as follows: a single investor (i.e. one who is not a Ghanaian and who lives outside the country) is allowed to hold up to 10% of every equity. Secondly, for every equity, foreign investors may hold up to a cumulative total of 74% (in special circumstances, this limit may be waived). The limits also exclude trade in Ashanti Goldfields shares. These restrictions were abolished by the

Foreign Exchange Act, 2006 (Act 723).

2.2 FUNCTIONS OF STOCK EXCHANGE

The Ghana Stock Exchange have existed for over 20 years to provide a marketplace for the buying and selling of stock. As the primary place for trading financial instruments,

Ghana stock exchanges improve the liquidity of shares and provide a clear indication of the market price for each investment. The exchange also serves as the initial place for companies to sell shares in their companies when they want to acquire capital. The exchange was set up with the following objects:

1. To provide the facilities and framework to the public for the purchase and sales

of bonds, shares and other securities;

2. To control the granting of quotations on the securities market in respect of bonds,

shares and other securities of any company, corporation, government,

municipality, local authority or other body corporate;

9

3. To regulate the dealings of members with their clients and other members;

4. To co-ordinate the stock dealing activities of members and facilitate the exchange

of information including prices of securities listed for their mutual advantages

and for the benefit of their clients;

5. To co-operate with associations of stockbrokers and Stock Exchanges in other

countries, and to obtain and make available to members information and facilities

likely to be useful to them or to their clients.

2.3 LEGAL FRAMEWORK OF GHANA STOCK EXCHANGE

The securities industry in Ghana is governed by the Securities Industry Law 1993,

PNDCL333. The Securities Industry Law, among other things, brought about the establishment of the Securities and Exchange Commission (formerly Securities

Regulatory Commission). The Law also provides for the functions of the Commission, the establishment of stock markets, the licensing of Stockbrokers/Dealers and Investment

Advisers, Unit Trusts and Mutual Funds, registers of interest in securities, the mode of conduct of securities businesses, issues concerning Accounts and Audits, the establishment of fidelity funds and trading in securities.

The Ghana Stock Exchange is governed by a Council of nine representing three independent members, two representatives of licensed dealing members, two listed company representatives and two executives. The Council acts as the Board of Directors with all powers and functions of a Board under the Companies code. The Council sets the policies of the exchange and its functions include preventing frauds and malpractices, maintaining good order among members, regulating stock market business and granting listing. The Council of the Exchange has various committees, which enable it to give

10 special attention to various aspects of the operations of the Exchange. They are the

Listing, Finance and Risk Management and Surveillance

The following are the key roles of the various Committees.

1. Listing Committee considers applications for listing

2. Finance Committee considers the financial aspects of the Exchange's operations,

including budgets and remuneration.

3. Risk Management and Surveillance Committee appraise, and approve

applications for membership.

2.4 STEPS IN LISTING ON THE GHANA STOCK EXCHANGE.

The steps and guidelines governing the admission of securities to listing on the Ghana

Stock Exchange are prescribed by the Ghana Stock Exchange Listing Regulations 1990

(LI 1509).

The actual approval of an application for listing of securities on the Exchange is the prerogative of the Council of the Exchange. The council may in its judgment as it deems fit dispense with, or modify the application of the rulebook in any particular circumstance. Highlights of the process of listing company securities on the Exchange are indicated below.

2.4.1 DEFINITION OF ‘’LISTED’’

This term may be freely applied to either the securities issuing company/ institution or the securities issued by a company/ institution. In either case the vital implication is that the securities of the issuer has been approved to be dealt in (i.e. purchased and sold) on the trading floor of the Stock Exchange. In other jurisdictions the term "quoted" is used instead.

11

2.4.2 ORIGINAL LISTING REQUIREMENTS

Currently, three classes of Official Lists (OL) have been prescribed by the Exchange's

Regulations, namely: First Official List (FOL), Second Official List (SOL) and Third official List (TOL). Their minimum requirements are generally graduated downward in that order.

The objective for creating these categories is to afford as many companies as possible, the opportunity of gaining admission to the Stock Exchange and of reaping the advantages engendered by listing.

The requirements set out below and which are subject to modification by Council of the

Ghana Stock Exchange relate mostly to the First Official List for Equity securities.

2.4.3 PUBLIC LIMITED LIABILITY STATUS

The company seeking listing must be a public limited liability company duly incorporated under the Companies Code, 1963 (Act 179). The requirements for admitting companies registered outside Ghana are quite similar to those applicable to locally registered companies.

2.4.4 MINIMUM STATED CAPITAL

The company must have at least ¢1 million Ghana cedis in the case of application for admission onto the First Official Listing and 500,000 Ghana cedis for Second Official

Listing.

2.4.5 MINIMUM PUBLIC HOLDING

The value of the shares of the company, which should be issued to the public excluding employees of the company and its associated companies, should not be less than

12

¢30million in the case of application relating to the FOL. The minimum public float should not be less than 25% of the number of shares issued by the company.

2.4.6 FULLY PAID SHARES

All shares for listing must be fully paid for. Only in very exceptional cases, will the

Council, at its discretion, admit partly paid shares.

2.4.7 THE SPREAD OF SHARES

This should be adequate in the estimation of the Exchange.

2.4.8 DEBT SECURITES

Corporate debt security may also be admitted to the FOL and SOL if the class of security involved has a total issued amount of not less than ¢200million nominal value with not less than 100 holders. Debt security for the TOL must be a minimum of ¢50million with at least 50 holders. In the case of Government securities no thresholds are prescribed in respect of amount and number of holders. Debt securities, other than Government

Securities for which listing is sought should be created by a Trust Deed approved by the

Exchange. The trustees should essentially be banks and life insurance institutions.

2.4.9 TRANSFERABILITY OF SECURITIES

The securities must be freely transferable

2.4.10 PERIOD OF EXISTENCE AND PROFITABILITY

For a company's securities to qualify for listing, it must have published or filed audited accounts for

13

1. 5 years in the case of FOL,

2. 3 years in the case of SOL, and

3. 1 year in the case of TOL (which may be waived).

In each case the company must have made reasonable profit –taking the total period into consideration.

2.4.11 MANAGEMENT

There must be continuity of company management with a requisite level of competence and integrity

2.4.12 AUDIT SUB-COMMITTEE

There must be written evidence of the existence, operation and effectiveness of an Audit

Sub-Committee of the company's board of directors.

Membership of the Sub-Committee should comprise non-executive members of the board. The sub-committee has oversight for the appointment and remuneration of auditors; review and evaluation of internal control system; review of audited accounts; review of internal audit procedures and effectiveness; the appraisal of the general conduct of the business of the company.

2.4.13 PROSPECTUS

The company must issue a prospectus, which complies with the provisions of both the

Companies Code, 1963 (Act 179) and the Exchange's rulebook.

14

2.5. MONEY MARKET AND CAPITAL MARKET

Capital markets are financial markets for the buying and selling of long-term debt or equity. These markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments.

According to Al-Faki (2006), the capital market is a ―network of specialized financial institutions, series of mechanisms, processes and infrastructure that, in various ways, facilitate the bringing together of suppliers and users of medium to long term capital for investment in socio-economic developmental projects‖. Financial regulators, such as the

UK's Bank of England (BoE) or the U.S. Securities and Exchange Commission (SEC), oversee the capital markets in their jurisdictions to protect investors against fraud, among other duties. In Ghana, the security and Exchange Commission (SEC) oversee the capital markets operations.

Modern capital markets are almost invariably hosted on computer-based electronic trading systems; most can be accessed only by entities within the financial sector but some can be accessed directly by the public. Entities hosting the systems include stock exchanges, investment banks, and government departments. Physically the systems are hosted all over the world, though they tend to be concentrated in financial centers like

London, New York, and Hong Kong. In Ghana it is hosted in . (Xiaonia, 1997).

A key division within the capital markets is between the primary markets and secondary markets. In primary markets, new stock or bond issues are sold to investors, often via a mechanism known as underwriting. The main entities seeking to raise long-term funds on the primary capital markets are governments (which may be municipal, local or national) and business enterprises (companies). Governments tend to issue only bonds, whereas companies often issue either equity or bonds. The main entities purchasing the bonds or stock include pension funds, hedge funds, sovereign wealth funds, and less

15 commonly wealthy individuals and investment banks trading on their own behalf. In the secondary markets, existing securities are sold and bought among investors or traders, usually on an exchange, over-the-counter, or elsewhere. The existence of secondary markets increases the willingness of investors in primary markets, as they know they are likely to be able to swiftly cash out their investments if the need arises. ((Xiaonia, 1997).

The money market became a component of the financial markets for assets involved in short-term borrowing, lending, buying and selling with original maturities of one year or less. Money market trades in short-term financial instruments commonly called "paper".

This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity. The core of the money market consists of interbank lending—banks borrowing and lending to each other using commercial paper, repurchase agreements, treasury bills, certificate of deposit, bankers‘ acceptance and similar instruments.

Trading in money markets is done over the counter and is wholesale. (Xiaonia, 1997).

2.6. THE ROLE OF CAPITAL MARKET IN THE ECONOMIC

DEVELOPMENT OF DEVELOPING COUNTRIES

The role of capital markets is vital for inclusive growth in terms of wealth distribution and making capital safer for investors. Capital markets can create greater financial inclusion by introducing new products and services tailored to suit investors‘ preference for risk and return as well as borrowers‘ project needs and risk appetite. Innovation, credit counseling, financial education and proper segment identification constitute the possible strategies to achieve this. A well-developed capital market creates a sustainable low-cost distribution mechanism for multiple financial products and services across the country (Xiaonia, 1997).

16

Indeed, most emerging economy has seen a spate of innovations in the area of financial engineering. These financial innovations are a result of number of Government regulations, tax policies, globalization, liberalization, privatization, integration with the international financial market and increasing risk in the domestic financial market. With the increased volatility in the capital market, the need for new financial innovations to hedge risk and increase returns cannot be overstated. (Xiaonia, 1997).

Provides an important alternative source of long-term finance for long-term productive investments. Thus, it reduces the over reliance of the corporate sector on short term financing for long term projects and also provides opportunities for government to finance projects aimed at providing essential amenities for socioeconomic development.

This helps in diffusing stresses on the banking system by matching long-term investments with long-term capital. (Xiaonia,1997).

Provides equity capital and infrastructure development capital that has strong socio- economic benefits. The capital market can aid the government in its privatization programme by offering her shares in the public enterprises to members of the public through the stock exchange for infrastructure development such as roads, water and sewer systems, housing, energy, telecommunications, public transport. It also improves the efficiency of capital allocation through competitive pricing mechanism for better utilization of scarce resources for increased economic growth (Yean 1997).

Provides avenues for investment opportunities that encourage a thrift culture critical in increasing domestic savings and investment ratios that are essential for rapid industrialization. Also, it promotes public-private sector partnerships to encourage participation of private sector in productive investments. Pursuit of economic efficiency shifting driving force of economic development from public to private sector to enhance economic productivity has become inevitable as resources continue to diminish.

17

Assists the Government to close resource gap, and complement its effort in financing essential socio-economic development, through raising long-term project based capital.

The capital market also encourages the inflow of foreign capital when foreign companies or investors invest in domestic securities, provides needed seed money for creative capital development and acts as a reliable medium for broadening the ownership base of family-owned and dominated firms. (Yean 1997).

2.7. PERFORMANCE OF COMPANIES LISTED ON THE GHANA STOCK

EXCHANGE

Stock exchanges are believed to help improve the performance of companies. With the key concept of opening up ownership of businesses to investors, stock exchanges have helped and continue to provide much needed financing for most businesses. In most advanced economies, they have become the yardstick with which the overall performance of an economy is evaluated.

Listed companies have been recording improved company performances in terms of share price appreciation over the years. Interestingly, in 2013 some of the listed companies recorded returns higher than the GSE-CI gain of 78.81%. Out of the 34 companies listed on the GSE, ten companies made gains of more than 100% with PZ

Cussons (PZC) leading the pack with 338.89%. The rest were Ltd

(EGL) – 291.67%; CAL Bank Ltd (CAL)– 155.26%; Mechanical Lloyd Co. Ltd (MLC)

– 153.33%; Guinness Ghana Breweries Ltd ( GGBL) – 136.64%; GCB Ltd (GCB) –

130.95%; Benso Oil Palm Plantation (BOPP) – 129.29%; Societe General (SOGEGH) –

120.59%; Unilever Ghana Ltd (UNIL) – 114.91%; and HFC Bank Ltd (HFC) –

113.33%;. Five companies recorded gains of 50% and above. This category was also led by Ecobank Ghana Ltd (EBG) with 87%; Fan Milk Ltd (FML) – 86.48%; TOTAL

18

Ghana Ltd (TOTAL) – 72.33%; Ecobank Transnational Inc (ETI) – 58.33%; and Sam

Woode Ltd (SWL) – 50%. Similarly, five companies recorded gains of up 50%. There were however, eight companies with no change in their share prices. On the other hand,

TRANSOL led the losers on the market with a significant loss of 25% in its share price among five other companies that lost between 20 % - 5% in their share prices.

2.8. PERFORMANCE OF BANKING AND MANUFACTURING FIRMS ON

GHANA GSE

According to the Centre for Policy Analysis (CEPA), (2012), the banking sector of

Ghana has grown rapidly over the past five years, both on account of participation of new entrants and an increase in the size of financial assets in the industry. Banks‗ branch networks have been broadened across board from 374 branches in 2005 to 708 branches at the end of 2010; over the same period banking sector assets more than quadrupled from GH¢3.8 billion to GH¢17.4 billion. According to the Central Bank of Ghana

(2013), total assets of the Ghanaian banking industry rose by 23%, from GH¢22.1 billion in December 2011 to GH¢27.2 billion in December 2012. The growth in banks‘ assets was supported by a deposit growth of 22.5% during the period and net worth which recorded a 20.8% growth to GH¢3.1 billion.

According to Central Bank (2013) the banking sector is robust since the financial soundness indicators of the sector remain strong. ―The Capital Adequacy Ratio (CAR) was well above the 10% threshold and increased to 18.6% at the end of December 2012, compared to 17.4% in December 2011. The broad money supply (M2+) grew by 24.3% in December 2012, compared to a 33.2% growth in December 2011. The Net Domestic

Assets of the banking system grew by 49.9% whilst the Net Foreign Assets fell by

10.2%. Reserve money however grew by 36% in December 2012 compared with 31.1%

19 a year earlier. Credit to the private sector grew by 34.1% in December 2012, compared to 26.3% in 2011. In real terms, private sector credit growth was 23.2% in December

2012, relative to 16.3% in 2011. The Bank‘s latest credit conditions survey showed further easing of credit conditions for large enterprises and consumer credit. The banking sector continued to be profitable and solvent. All financial sector soundness indicators measured by earnings, liquidity, and capital adequacy has been recording some growth.

A study conducted by International Monetary Fund (IMF) (2011), on the soundness and resilience of the Ghanaian banking industry, as an update to the Financial System

Stability Assessment on Ghana, showed that official financial soundness indicators do not provide an adequate picture of the soundness of the banking system due to weaknesses in banks‘ financial accounts. Nevertheless, notwithstanding data weaknesses, capital in the banking system has on aggregate increased and liquidity remains high. The high capital levels mainly reflect the recent increase in minimum capital requirements and the significant and increasing share of zero risk-weighted treasury securities. The substantial liquidity in the banking system reflects a combination of intensified deposit mobilization efforts by banks, elevated government expenditures and increased foreign inflows, most notably foreign direct investment, remittances, and portfolio capital flows.

Banks have also remained largely profitable.

Capital adequacy requirement of the banks is to ensure that banks hold sufficient resources to absorb shocks to their balance sheets. It is designed to assess the solvency of banks. The requirement protects the banks‘ depositors and lenders and also maintains confidence in the banking system. It is used to measure leverage and assess whether the banks are prepared to take greater risk. The higher the capital adequacy ratio, the lower the leverage.

20

All the listed banks‘ capital adequacy ratios exceeded the bank of Ghana minimum requirement of 10%, which serves as the benchmark from 2005 to 2009. GCB bank‘s average capital adequacy ratio of 11.91% is the lowest amongst the listed banks. It is however above the minimum requirement of 10%. This is followed by CAL bank which had an average of 14.95%. CAL bank‘s ratio reduced significantly from 21.9% in 2005 to 13.1% in the subsequent year and thereafter experienced marginal increases over the years up to 2011 where it fell marginally. HFC bank‘s capital adequacy ratio is better than that of the rest of the listed banks except EBG. Its ratio increased significantly in

2010 from 17.93% in the previous year to 30.92% and continued the increase in the subsequent year. SGSSB bank‘s average capital adequacy ratio is slightly below that of the industry and also better than GCB and CAL bank. Its ratio increased significantly in

2009 to 24% from 10.43% in the previous year and continued its increasing trend in subsequent years. EBG maintained the highest average capital adequacy ratio amongst the listed banks.

2.8.1 PROFITABILITY ANALYSIS

Profitability is crucial to the survival of every business. The key bank profitability ratios include return on assets and return equity. Return on Assets shows what earnings were generated from the banks‘ assets. It measures the banks‘ efficiency in the utilization of their assets to earn profits. According to Sarpong, Winful and Owusu-Mensah (2014) return on assets for listed banks from 2005 to 2011 has been declining marginally over the years, except HFC and SGSSB which experienced increases in some of the years.

GCB Bank‘s return on assets increased sharply from 2.2% in 2005 to 3.7% in 2006. This represent 68% increase, which is the bank‘s highest for all years as until 2006. It then declined in the subsequent two years till 2010 when it rose up to 2.6%. It however

21 declined sharply to 0.7% in 2011. It however, on the average, generated more returns on its assets than HFC bank.

CAL bank‘s return on assets shot up from 3.1% in 2005 to 3.6% in 2006 and then kept on decreasing over the years till 2011 when it started increasing again. It performed better than GCB and HFC in most of the years and on the average. Even though HFC bank‘s return on assets has been increasing over the years, it had the lowest return on assets in almost all the years. SGSSB bank‘s return on assets grew over the years to a maximum of 3.6% in 2008 and then started declining marginally for the rest of the years.

It reached its lowest of 2.3% in 2011. The bank performed better than the rest of the listed banks with the exception of EBG. It also achieved an average of 3.1%, which is higher than that of the industry. The return on assets for EBG increased from 4.2% in

2005 to 4.4% in 2006 and then decreased to 3.7% the following year. It maintained 3.9% for the rest of the years till 2011 when it dropped to 3.3%. The bank performed better than both the listed companies and the industry. Its seven year average of 3.9 far exceeds that of the industry.

It can be seen from the above that EBG performed relatively better in terms of return on assets. It is followed by SGSSB which also performed creditably. The average of 3.9 and

3.1% for EGB and SGSSB respectively means that on the average , every cedi spent on assets by the banks on their assets generate profits of 3.9 pesewas and 3.1 pesewas respectively. This implies that the banks‘ managements have been relatively efficient in the utilization of assets. They have been implementing strategies which continually enhance the banks‘ efficiency in the utilization of assets for its operations and earning more returns relatively, on their investments.

Apart from CAL bank which returns on asset was very close to that of the industry, GCB and more especially HFC showed a relatively poor performance. These banks on the

22 average generated returns lower from the use of their assets and for that matter were profit inefficient. This may be due to poor asset quality, underutilization of assets and lack of appropriate cost control measures. It may also be due to management‘s inability to implement measures which will ensure improvements in the utilization of assets.

Return on equity is an important profitability metric, which reveals how much profit a bank earns in comparison to total shareholder equity. It measures the return generated on shareholders equity and shows how well the bank uses shareholders‘ funds to generate profits. Generally, the higher the banks‘ return on equity, the better

According to Sarpong and Owusu-Mensah (2014), the banks generally experienced an upward trend for their return on equity till 2009 when it starting falling. Most of them however, started picking up in 2011. GCB banks‘ return on equity increased significantly from 19.9% in 2005 to 32.1% in 2006. It then kept on falling in subsequent years till

2010 when it again increased significantly to 22.6% and thereafter fell sharply to 9.85% in 2011.

CAL bank‘s return on equity also increased significantly from 16.6% in 2005 to 23.2% in 2006 and continued the increase marginally till 2009 when it experienced a downward trend. It however, moved up to 19.7% in 2011 from 11.5% in 2010. It performed poorly on relation to all other listed banks except GBC. HFC bank‘s return on equity maintained an increasing trend over the years up to 2009 when it decreased significantly from 41.6% in the previous year to 26.4%. It however, kept increasing marginally for the rest of the years. HFC bank performed better than the other listed banks except EBG. Its return to shareholders on their investments averaged 24%. It also maintained fairly stable returns over the years.

SGSSB bank‘s return on equity kept on decreasing marginally over the years till 2008 where it increased marginally from 20% in the previous year to 22.3%. It however

23 returned to its downward trend for the rest of the years. The bank performed relatively poor in relation to return on capital. It however performed better than GCB and CAL bank. EBG maintained high return on equity for the first three years, which far exceeded that of the industry. It however experienced a downward trend for the rest of the years.

The bank performed relatively better in relation to its return to equity holders. It can be observed from the above that GCB, CAL bank and SGSSB performed abysmally in relation to their return on equity. These banks generated relatively lower returns to their shareholders on their investments. This means that investments made by shareholders have relatively lower growth potential.

2.8.2 COST EFFICIENCY

The efficiency of operational model, cost reduction enhancements and cost efficiency are essential to the growth of every business including banks. High cost efficiency allows banks to lower interest margins through lower loan rates and higher deposit rates.

Typical cost efficiency ratios are net interest income/gross income and non-interest expense/gross income.

All the listed banks experienced a decrease in their interest ratios in 2009, except SGSSB which made a marginal increase over the previous years. GCB achieved the highest seven year period average interest ratio of 57.33%, which also far exceeds that of the industry. After decreasing significantly in 2009 from 56.75% in the previous year to

40.36%, it however shot up in the subsequent years. CAL bank‘s average of 37.23% is the lowest amongst the listed banks and also lower than that of the industry. It decreased over the years till 2010 when it experienced an upward trend. HFC also experienced a downward trend up to 2010 where it started moving up. Its average of 46.6% is slightly below the industry‘s 46.73%. SGSSB kept on increasing over the years till it reached its

24 apex in 2010 and then fell from 62.27 to 56.87% in the subsequent year. Its seven year average of 54.73% far exceeds that of the industry and all the listed banks with the exception of GCB. EBG experienced marginal decreases and increases over the years.

The bank‘s average of 48.57% trailed behind GCB and SGSSB but exceeded that of the industry and the rest of the listed banks. This means that GCB, CAL BANK, HFC

BANK, SGSSB and EBG have on the average over the seven year period generated

57.33%, 37.23, 46.6, 54.73 and 48.57% respectively of their gross income from interest earned on loans

2.8.3 LIQUIDITY ASSESSMENT

Liquidity ratios are calculated to determine the banks‘ ability to turn short-term assets

(assets that can be readily converted into known amounts of cash without significant loss) into cash to cover debts when creditors are seeking payments. Liquidity ratios are usually used by regulators to determine whether the banking institutions will be able to continue as viable concerns to meet credit payments. The liquidity ratio for 2005 to 2011

GCB maintained an average of 29.59% which exceeds that of the industry of 24.59%.

The bank experienced marginal increases in its liquidity ratio throughout the period till

2011 where it decreased slightly to 30.33% from 31.21% in the previous year. It maintained the highest liquidity ratio in all the years. CAL bank‘s liquidity ratio also decreased marginally over the years but rose up in 2010 and declined slightly in 2011. Its

2011 ratio is the lowest amongst all the listed banks, except HFC bank, but is sufficient.

HFC bank maintained the lowest liquidity in almost all the years, maintaining 20.43% in

2011. These ratios were however sufficient. SGSSB also maintained ratios slightly below that of the industry in almost all the years. The ratio improved in 2011, moving up to

29.54% from 25.22% in the previous year. EBG experienced marginal increases in its

25 liquid assets to total assets ratio over the years. The bank maintained sufficient liquidity, with a ratio of 24 .66% in 2011

2.9 PERFORMANCE OF STOCK MARKETS IN AFRICA

On the global front, African stock markets accounted for approximately 3% of listed companies as at end of 2009. The number of firms listed has declined over 2006-2009

(growth rate of -4%) with the well established markets of South Africa and Egypt recording significant drops in the number of firms listed. The JSE has the highest number of listings on the continent numbering 396 and accounting for approximately 26% of the total number of listings in African stock exchanges. The Egyptian Exchange follows with

313 listings (21%) and Nigeria with 216 listings (14%). Kenya ranks 6th in this indicator of stock market size behind South Africa, Egypt, Nigeria, Morocco and Zimbabwe.

Consequently, the top six stock exchanges in the continent with regards to number of listings account for 76% of the total listings on African stock exchanges while the top three exchanges account for 61% of total listings.

As at December 2009, the World total market capitalization was US$46.5 trillion.

African stock market capitalization accounted for a meager 2%. In 2008, only Ghana,

Malawi, Tanzania and Tunisia registered an increase in market capitalization. However, market performance improved in 2009 with a majority of stock markets posting a positive capital appreciation with the exception of a few including Kenya, Nigeria and

Ghana. In 2008, Malawi Stock exchange registered the best performance while South

Africa and Tunisia took the honors in 2009. Market Concentration of the 5 largest exchanges in Africa is 95%. Data indicates that the Nairobi Stock Exchange, as at

December 2009, was ranked 5th in Africa in terms of market capitalization behind South

Africa, Egypt, Nigeria and Morocco. Ghana ranks in at a close 6th.

26

Over the last two decades (1990 – 2007), most African economies have adopted the liberalization and privatization as a development strategy for the development of their economies. According to Kibuthu (2005), the changing attitudes towards the role of the private sector in the development of African economies have facilitated the development of the capital markets. As early as the 1990‟s most African countries set up stock exchanges as a precondition for the introduction of market economies under the structural adjustment programs propagated by the international monetary institutions and to facilitate the privatization of state owned enterprises (Rwelamira, 1993). As at 2002, there were eighteen securities exchanges in Africa, eleven of which began operations in the 1990s. The growth in market capitalization in Africa has been described as remarkable as more countries outside of the more advanced economies of the Maghreb region (Northern Africa) and South Africa venture into the development of their capital markets (Sheehan and Zavala 2005).

The growth has not only been in market capitalization, but also in innovation such as is characterized by the integration of regional markets in the francophone countries of West

Africa. Eight (8) French-speaking members of the West African Economic and Monetary

Union (UEMOA), namely, Benin, Burkina Faso, Côte d'Ivoire, Guinea Bissau, Mali,

Niger, Senegal and Togo created the world's first regional exchange, the Bourse

Regionale des Valeurs Mobilieres. The argument for setting up this integration was to consolidate the value of developing a common hub for capital market development in the geographical zone where these countries are located. The BRVM Regional Stock

Exchange has been innovative in using the most modern electronic and satellite communications equipment, which has enabled it to maintain performance despite the under-developed communications infrastructure in the individual countries comprising the exchange (Sheehan and Zavala, 2005). Yet another regional integration is that of

27 some East African Countries. This integration comprises of countries like Kenya,

Uganda and Tanzania.

The majority of the countries establishing new exchanges in Africa have established new legal and regulatory regimes. International financial institutions such as the International

Finance Corporation of the World Bank and various bodies of experts belonging to national securities exchanges of industrialized countries have provided important assistance with a view to building the legislative, regulatory, and accounting basis for the proper running of African securities exchanges (Ibid).

2.10 PERFORMANCE INDICATORS OF COMPANIES

2.10.1 PROFITABILITY

A company's gross, operating and net profits indicate how efficiently it converts revenues to the bottom line. Gross profit is the difference between sales and cost of goods sold. Operating profit is the difference between gross profit and operating expenses, such as administration and marketing. Net profit is the difference between operating margin and non-operating expenses, such as interest and taxes. Successful companies maintain profit margins through good and bad economic times. For example, if a company has increased its advertising expenditures to launch new products or expand into new markets, its sales should increase proportionately. If not, profitability and cash flow will suffer. (Xiaonian, 1993).

2.10.2 LIQUIDITY

Liquidity means having sufficient cash on hand for operations and strategic initiative. A company's statement of cash flows shows the cash inflows and outflows for each reporting period. Companies that drive revenue growth while managing costs generate

28 steady cash flows. This is an important performance metric when researching stocks because liquidity gives management the flexibility to invest in research and development, expand into new markets or plan takeovers. Another important liquidity indicator is the ratio of current assets, such as cash and accounts receivable, to current liabilities, such as accounts payable and short-term loans. A current ratio greater than 1 usually means that a company has sufficient liquid assets to pay its bills. (Xiaonian

1993).

2.10.3 VALUATION

Price-to-earnings and price-to-sales are two key valuation measures. Price-to-earnings is the ratio of a stock's market price divided by the trailing 12-month earnings per share.

Price-to-sales is the ratio of the market price divided by the trailing 12-month sales per share. The ratios are meaningful when compared to other ratios, such as the historical ratios of the industry peer group or the overall market. The general rule of thumb for P/S ratios is that anything below 0.75 is a sign of fair valuation or undervaluation, while anything above 3.0 is overvaluation. Online financial websites, such as the "Industry

Summary" page of Yahoo! Finance, provide average P/Es for various industries. Stocks that are trading near their industry average could represent attractive buying opportunities. Conversely, if the ratio is too high compared to the industry average, it might be time to reduce positions. Xiaonian 1993).

2.10.4 OTHER CONSIDERATIONS

Other performance indicators include innovation and management stability. Successful companies invest in research and development and stay ahead of the competition with cutting-edge products. They refresh their existing products and introduce new products at

29 regular intervals. Management stability means there is limited turnover in the senior executive ranks and there is an orderly transition process for retiring executives. The expertise and independence of board directors are also important success factors.

(Xiaonian, 1993).

2.11 PROBLEMS COMPANIES FACE IN GETTING LISTED

The political and economic decisions that were translated into legal framework for the establishment and operation of the stock exchanges were rushed in many African countries. Therefore, the exchanges have not been successful in attracting a large number of other market transactions in addition to the privatized public enterprises (Asea, 2003).

Most Africa‘s stock exchanges have remained small, underdeveloped and illiquid operating in isolation from other markets and also having low trading volumes.

Additionally, most of these stock exchanges in developing countries like Ghana have and still continue to enjoy some governmental protection. This has prevented competition by national regulations and face barriers to capital mobility because of high costs of travel and communications (Asea, 2003).

The first is the macroeconomic instability or volatility. The Ghana‗s economy has been characterized by high inflation, high interest rate and large exchange rate swings as stated by the Bank of Ghana Monetary Policy report: (vol 3 no 2: 20081). These variables when they are high, they discourage the investors to invest in a specific country because they cannot diversify the risk and also are not sure of getting their investment back. Commenting on the poor performance of the GSE in 2009, Ekow Afedzie explained that high inflation and interest rates are the ―greatest‖ challenge facing the bourse. These factors prevent investors from having a clear-cut visibility of the macro environment in the medium to long term. Investors, generally, are ready to put up with

30 diversifiable risks, but they are unwilling to look at markets characterized by political and macro-uncertainties.

Also, stringent eligibility requirements have discouraged local entrepreneurs and indigenous enterprises that wish to raise funds from capital markets. The eligibility requirements have created high barriers to potential entrants to the stock exchanges such as the numerous family owned businesses in Africa. Thus, the stock exchanges tend to operate like closed membership organizations. Limited presence of institutional investors is constraining equity demand. In addition, lack of an active role in the distribution of securities to the public by other financial institutions such as banks, venture capital funds, pension funds, building societies and insurance companies is constraining supply of equity (Asea 2003).

Some African stock exchanges have limited institutional capacity to police and enforce rules. Most of the smaller African exchanges lack the trained manpower and experience to adequately police the modern regulatory regimes they have adopted. Consequently, enforcement actions are rare and abuses are not uncommon (Sheehan and Zavala, 2005).

In addition, investors, particularly minority shareholders, lack confidence in the market as some listed companies continue to operate under poor corporate governance structures. In some stock markets, participants are subject to multiple regulators thereby causing regulatory complexities, uncertainties and increased costs of compliance with different regulatory regimes (Asea, 2003).

Another problem facing the GSE is due to the stock exchange itself. According to

Benimadhu (2003), among the exchange specific issues affecting stock markets in Africa are low level of liquidity, few listed companies and the small size of the exchange as well as efficiency. We assume that the stock exchanges in Africa face the same challenges. Other factors which has stifled the development of the GSE relates to the

31 absence of a strong and active domestic investor base, led by institutional investors such as pension funds and insurance companies. Clearing, Settlement and Trade systems as well as trading infrastructure should be ameliorated

Again, unpredictability of the market affects most companies from getting listed. In terms of instruments traded and the number of participants in the market, the capital market in Ghana is relatively small as compared to that of the stock exchange in America or Paris or UK. Fluctuation of the economic indicators and instability of the cedi have made very difficult for the investors to predict the Ghanaian capital market. An evaluation of the real return on the Ghana stock exchange by the Bank of Ghana revealed that ― the total annual real return on the stock listed on the Ghana stock exchange have followed an undulating pattern since 1991 falling every two years and rising every two years.(Bank of Ghana report, 2008)

Again, the capital market in Ghana has been characterized by unstable price. Prices of goods and services are volatile and the same for inflation, interest rates and exchange rates. This condition will make it difficult for predicting the share prices which will confirm the theory of efficient market hypothesis.

2.12 EMPPIRICAL LITERATURE REVIEW

The stock exchange has been identified as an institution that contributes to the socio- economic growth and development of emerging and developed economies. This is made possible through some of the vital roles played such as channeling resources, promoting reforms to modernize the financial sectors, financial intermediation, capacity to link deficit to the surplus sector of the economy, and a veritable tool in the mobilization and allocation of savings among competitive uses which are critical to the growth and efficiency of the economy (Alile 1984). It helps to channel capital or long-term resources

32 to firms with relatively high and increasing productivity thus enhancing economic expansion and growth (Alile 1997). Ekundayo (2002) argues that a nation requires a lot of local and foreign investments to attain sustainable economic growth and development.

The stock exchange provides a means through which this is made possible. However, the paucity of long-term capital has posed the greatest predicament to economic development in most African countries including Ghana.

Demiurgic-Kunt and Levine (1996) using data from 44 countries for the period 1986 to

1993 found that different measures of stock exchange size are strongly correlated to other indicators of activity levels of financial, banking, non-banking institutions as well as to insurance companies and pension funds. They concluded that countries with well- developed stock markets tend to also have well-developed financial intermediaries.

Again, Demiurgic-Kunt and Maksimovic (1998) have shown and re-emphasized the complementary role of the stock market and banks that they were not rival or alternative institutions using 30 countries from 1980 to 1991.

Atje and Jovanovic (1993) found in a cross-country study of stock and economic growth of 40 countries from 1980 to 1988 that there was a significant correlation between the average economic growth and stock market capitalization. Levine and Zervos (1996) examined whether there was a strong empirical relationship between stock market development and long-run economic growth. They found a strong correlation between overall stock market development and long-run economic growth.

Osaze (2000) sees the capital market as the driver of any economy to growth and development because it is essential for the long term growth capital formation. It is crucial in the mobilization of savings and channeling of such savings to profitable self- liquidating investment. The Nigerian capital market provides the necessary lubricant that keeps turning the wheel of the economy. It not only provides the funds required for

33 investment but also efficiently allocates these funds to projects of best returns to fund owners. This allocative function is critical in determining the overall growth of the economy. The functioning of the capital market affects liquidity, acquisition of information about firms, risk diversification, savings mobilization and corporate control

(Anyanwu 1998). Therefore, by altering the quality of these services, the functioning of stock markets can alter the rate of economic growth (Equakun 2005).

According to Okereke-Onyinka( 2000), the capital market has been a viable source of financing state and local government infrastructural projects and developmental strides with less pressures and lean on resources. Over the years, some Countries and States have gone to the capital market to source for funds to finance their developmental projects. For instance, the Government of Ghana, identifies the financing opportunities available on the capital market and thus, listed its 2-year and 3-year fixed rate bonds worth some ¢3,261 billion or USD347 million on the Ghana Stock Exchange in 2007.

(GSE Fact Book, 2007). Osaze (1995) while bemoaning the low level at which State and local Governments sought funds from the market stressed the capital market could also be a veritable source of funding for the cash-trapped Nigerian universities yet to be harnessed.

According to (Abor and Adjasi, 2007) Stock exchange listing helps in streamlining the operations of listed companies, encouraging them to adhere to certain standards and establishing corporate governance structures that go a long way in improving their overall performance. Therefore, the problem of credit constraint and managerial incompetence in most companies are overcome with the establishment of good corporate governance structures which stock exchange listing provides. Other studies have confirmed the effectiveness of corporate governance at increasing the probability of

34 managers investing in positive net present value projects and hence, increasing the performance of companies (Shliefer and Vishny, 1986).

The stock market represented the most significant source of long-term finance for listed

Ghanaian firms according to Yartey and Adjasi (2006). What makes the stock market most appropriate and the most significant source of long term financing for emerging market companies is that, consistent with Jensen‘s (1986) free cash flow argument, if companies finance their operations with equity, instead of debt, as in the case of accessing financing through the stock market, debt service payments reduce. This increases the amount of free cash flow at the disposal of management for overinvestment resulting in firm performance improvement.

Companies‘ ability to raise capital with ease is also considered to be one of the positive effects of well-functioning stock markets. Less riskiness of assets coupled with companies having access to capital with ease enhances capital allocation thereby promoting economic growth (Arestis, et al 2001). According to Levine (2001), when stock markets are functioning properly they influence growth via increased capital accumulation and efficiency of capital allocation. In sum, equity markets alter the rate of economic growth through liquidity, risk diversification, information acquisition about firms, corporate control, and savings mobilization services (Levine and Zervos, 1996).

Accessing equity financing through the stock exchange, however, comes at a cost to companies according to Yartey and Adjasi (2006). These costs come in the form of fees, generally categorized into IPO stage fees and Ongoing Listing costs. These comprise fees charged by investment banks (both as sponsor and in the underwriting process), the fees paid to accountants and lawyers, the cost of conducting a marketing road show, the

(opportunity) cost of management time, and listing fees (GSE Rule Book, 2006). In addition to these direct costs, there are indirect costs arising from IPO price discounts,

35 measured by the difference between the first-day market closing price and the initial offer price.

In Ghana, the cost of raising capital from the Ghana Stock Exchange is regulated by the

Securities and Exchange Commission, in a bid not to allow these costs to scare off companies from listing. Total costs of listings are not supposed to exceed 10% of amounts to be raised on the market (GSE Rule Book, 2006). These fees notwithstanding, access to financing by companies through the stock exchange, still represents a viable and sustainable medium of financing for emerging market companies compared to debt financing.

Listing by itself, conveys information related to the riskiness of future cash flows (i.e. after listing, future cash flows may be perceived as less risky). In this case a positive reaction may arise because the expected return is reduced. Although stock exchange listing may result in added prestige, visibility, and marketability, the potential benefit of lowering a firm's cost of capital has been debated for many years (Baker and Spitzfaden,

1982). Dhaliwal (1983) leads the research for the school that strongly believes that exchange listing has a strong influence on a firm‘s cost of capital. Dhaliwal in his 1983 paper, ‗Exchange listing effects on a firm‘s cost of capital‘, matched pairs of a sample of exchange listed companies and Over-the-counter (OTC) traded companies based on asset size and industry to test for the existence of a statistically significant difference between them with respect to their cost of capital. He found that exchange-listed firm's cost of equity capital (alternatively measured by the systematic risk and the total risk associated with a firm's rate of return) is significantly less than that of comparable OTC firms.

Dhaliwal‘s study compared exchange listed firms to OTC firms and his findings, establish a basis to believe that in the case of non-listed companies that do not also have shares trading on the OTC market, their cost of capital could be much higher than

36 exchange listed companies. Denis and Kadlec (1994) also show that systematic risk estimates are affected by corporate events such as equity offerings and share repurchase, indicating that the perception of investors in respect of the riskiness of a company is influenced by the firm‘s activities on the stock market.

37

CHAPTER THREE

RESEARCH METHODOLOGY

3.0 INTRODUCTION.

In order to ascertain the true nature of the situation in comparing the performance of companies listed on the Ghana Stock Exchange and come out with meaningful conclusion, the researcher has devised varying methods and strategies for collecting information or data. This chapter identifies the various methods used in collecting data for the analysis and it covers these areas sources of data, research design, population, sample and sampling technique, data collection instruments, research instruments, data collection procedure, mode of data presentation.

3.1 RESEARCH DESIGN.

The design covered the methodology used in assembling data which aimed at providing answers to the research questions. The study was a multiple case study based on primary data collected through interview and secondary data collected through pertinent literature and financial statements. The rationale for using multiple case study focused upon the need to established whether the findings of the first case occur in other cases or not.

This research being comparative study had the purpose of comparing the performance of listed companies on the Ghana Stock Exchange. It was designed to compare the performance of manufacturing companies and banking institutions listed on the Ghana

Stock Exchange. Data are collected from the Ghana Stock Exchange and analyzed. The results either confirmed or dismissed previous research work of the performance of manufacturing companies and banking institutions on the Ghana Stock Exchange.

38

3.2 SOURCES OF DATA.

The study uses both primary and secondary data. The secondary data were obtained from the Ghana Stock Exchange, and other publications such as audited financial reports. The primary data were obtained through interviews to find out what factors are hindering most companies from getting listed.

3.3 POPULATION OF THE STUDY.

The population of the study is the listed banking institutions and manufacturing companies on the Ghana Stock Exchange (GSE).

3.4 SAMPLE SIZE AND SAMPLE TECHNIQUES.

The study compares the performance of five manufacturing company and five financial institutions on the Ghana Stock Exchange. Purposive sampling technique was used to select the companies on the Ghana Stock Exchange. Judgment or purposive sampling is a non-probability sampling technique in which an experience individual selects the sample based on his or her judgment about some appropriate characteristics required of the sample members (Zikmund, 1994). Therefore firms with incomplete data were excluded.

Companies which have just joined the exchange were also rejected based on the limited period of experience. The idea behind these criteria was that the data gathered from those companies would be of high quality and credible to advice both international and local companies wishing to list on the Ghana Stock Exchange.

3.5 DATA COLLECTION TECHNIQUES

Deciding on the data collection techniques is one of the most important aspects of any research. It depends on the research question(s) and the researcher‘s interest in the topic.

39

The method indicates what the researcher views as valuable knowledge and the researches perspective on the nature of reality or ontology. The researcher made personal contact with the head offices of the various companies and later had to confirm their data with the data obtained from the Ghana Stock Exchange. For the pre financial statement a lot of contacts were made on the company‘s registrars in order to ensure the validity of the data.

3.6 DATA PRESENTATION AND ANALYSIS.

Data analysis is one of the major components of any research, quantitative or qualitative.

The approach and method adopted affects the results and conclusion of the study. This therefore means that the careful and necessary utilization of the right data analysis techniques can have great impact on the outcome of the research. In this direction, the quantitative techniques of data analysis were used in the study. That is data was organized and represented in tabular forms to show the percentages of the variables.

They range from creating simple tables or diagrams that show the frequency of occurrence and using statistics such as percentages and ratios to enable comparisons.

40

CHAPTER FOUR

DATA ANALYSIS AND DISCUSSION OF RESULTS

4.0 INTRODUCTION

This section of the study takes a look at the outcome of the data collected. Both primary and secondary data were used. The primary data were obtained through interviews to find out from people who have knowledge on the field about the factors that are hindering both manufacturing and banking institutions from getting listed. The secondary data were obtained from the audited financial reports, made up of profit and loss account, balance sheet, annual report and cash flow statement to determine the profitability trends for pre enlistment and post enlistment.

4.1 PERFORMANCE OF LISTED MANUFACTURING COMPANIES

In looking at the performance of manufacturing companies, profitability ratios were adopted which include gross profit margin, net profit margin, return on equity and return on assets. The results are analyzed below.

4.1.1 GROSS PROFIT ANALSIS

Table4.1:GROSS PROFIT MARGIN OF MANUFACTURING COMPNAIES (%)

Post enlistment period pre enlistment period

Company YEAR 1 YEAR 2 YEAR 3 AVERAGE YEAR 1 YEAR 2 AVERAGE Fan milk 47.77 48.04 53.37 49.73 45.70 44.23 44.97 CPC 7.64 8.10 -17.23 -0.50 7.80 -5.55 1.13 Ayrton 36.73 37.23 40.68 38.21 37.50 37.20 37.35 Unilever 20.61 25.01 14.17 19.93 21.58 19.79 20.69 PZ Cusson 30.06 30.31 25.23 28.53 29.04 29.44 29.24

41

Gross profit margins for the manufacturing companies together with their averages for the pre enlistment period and post enlistment period have been shown in Table 4.1 above. Three companies: CPC, Unilever and PZ Cussons performed better in terms of gross profit margin in the pre enlistment period as compared to Fanmilk and Ayrton drug in the post enlistment period. Fanmilk gross profit margin for the post enlistment period is 47.77%, 48.04% and 53.37% whilst the pre enlistment margins figures are 45.70% and

44.23%. The average gross profit margin for Fanmilk is 49.73% for the post enlistment period and 44.97% for the pre enlistment period. It is also the highest among all the companies. This means that on average, for every cedi of sales, 49.73 pesewas of profit is made in the post enlistment period of Fanmilk as compared to 44.97 pesewas of pre enlistment period. For CPC, the gross profit margin is 7.64%, 8.10% and 17.23% for the post enlistment period whilst the pre enlistment period was 7.80% and -5.55%. The average gross profit margin for CPC is -0.50% and 1.13% for the post and pre enlistment respectively which is the lowest among all the averages for the companies studied. This indicates that, on average, management was able to generate profit of 1.13 pesewas of every cedi of sales made in the pre enlistment period whilst management was not efficient in the post enlistment period as for every cedi of sale, management made a loss of -0.50 pesewas. Aytron drug gross profit margin is 36.73%, 37.33% and 40.68% indicating a marginal increase in the post enlistment period whilst the pre enlistment figures are 37.50% and 37.20. On average, management has been relatively efficient in the generation of higher gross profit margin of 38.21% in the post enlistment period as against 37.35% in the pre enlistment period. This means that for every cedi of sale made by Ayrton drugs, management is able to generate 38.21 pesewas of profit in the post enlistment period as against 37.35 pesewas in the pre enlistment period. For Unilever, gross profit margin is 20.61%, 25.01% and 14.17% for the post enlistment period whilst

42 the pre enlistment figures are 21.58% and 19.79%. Management was efficient in the pre enlistment period in relation to gross profit margin on the average, as for every cedi of sale, management are able to generate 20.69 pesewas as compared to 19.93 pesewas in the post enlistment period. PZ Cussons gross profit margin is 30.06%, 30.31% and

25.23% in the post enlistment period. Its pre enlistment period figures are 29.04% and

29.44%. on average, management performed better in the pre enlistment period as management were able to generate 29.24 pesewas on every cedi of sale made as compare to 28.53 pesewas in the post enlistment period for every sales made

4.1.2 NET PROFIT ANALYSIS

Table4.2: NET PROFIT MARGIN OF THE MANUFACTURING COMPANIES

(%)

Post enlistment periods pre enlistment period

Company YEAR 1 YEAR 2 YEAR 3 AVERAGE YEAR 1 YEAR 2 AVERAGE FAN MILK 14.61 17.05 24.46 18.71 15.55 15.15 15.35 CPC 1.69 8.57 -31.06 -6.93 4.05 -1.01 1.52 AYRTON 19.71 18.16 23.24 20.37 19.65 16.86 18.25 UNILEVER 9.57 18.01 2.62 10.07 4.10 0.64 2.37 PZ CUSSON 14.33 11.15 4.68 10.05 29.04 14.04 21.54

As shown in Table 4.2, three companies: Fanmilk, Ayrton and Unilever performed better in terms of net profit margin in the post enlistment period as compared to CPC and

PZ Cussons. Fanmilk net profit margin for the post enlistment period are 14.61%,

17.05% and 24.46% whilst the pre enlistment margins figures are 15.55% and 15.15%.

The average net profit margin for fanmilk is 18.71% and 15.35% for the post and pre enlistment period. This means that on average, for every cedi of sales, 18.71 pesewas of operating profit are made as compared to 15.35 pesewas of pre enlistment period. For

43

CPC, the net profit margin is 1.69%, 8.57% and -31.06% for the post enlistment period whilst the pre enlistment period was 4.05% and -1.01%. The average net profit margin for CPC is -6.93% and 1.52% for the post and pre enlistment which is the lowest among all the averages for the companies studied. This indicates that, on average, management is able to generate 1.52 pesewas of every cedi made in the pre enlistment period whilst management were not efficient in the post enlistment period as, for every cedi of sale, management made a loss of 6.93 pesewas. Aytron drug net profit margin are 19.71%,

18.16% and 23.24% whilst the pre enlistment figure are 19.65% and 16.86% indicating a marginal decrease. On average, management has been relatively efficient in the generation of higher net profit margin of 20.37% in the post enlistment period as against

18.25% in the pre enlistment period. For Unilever, net profit margin is 9.57%, 18.01% and 2.62% for the post enlistment period whilst the pre enlistment figures are 4.10% and

0.64%. Management was efficient in the pre enlistment period in relation to net profit margin on average, as for every cedi of sale, management are able to generate 10.07 pesewas as compared to 2.37 pesewas in the post enlistment period. PZ Cussons net profit margin is 14.33%, 11.51% and 4.68% in the post enlistment period. Its pre enlistment period figures are 29.04% and 14.04%. on average, management performed better in the pre enlistment period as management were able to generate 21.54% on every cedi of sale made as compare to 10.05% in the post enlistment period for every sales made.

44

4.1.3 RETURN ON EQUITY ANALSIS

Table 4.3: RETURN ON EQUITY FOR THE MANUFACTURING COMPANIES

(%)

Post enlistment periods pre enlistment periods

Company YEAR 1 YEAR 2 YEAR 3 AVERAGE YEAR 1 YEAR 2 AVERAGE FAN MILK 19.38 21.92 28.75 23.35 56.35 65.64 61.00 CPC 2.69 6.04 -56.39 -15.89 5.97 2.17 2.04 AYRTON 23.90 23.19 30.71 25.93 25.40 21.15 23.28 UNILEVER 20.20 38.74 6.43 21.79 11.40 2.07 6.74 PZ CUSSON 23.51 22.74 9.5 18.67 18.31 30.05 24.18

From Table 4.3, it can be seen that the average pre enlistment return on equity for the companies are higher than the post enlistment period with the exception of Ayrton drugs and Unilever. Fanmilk return on equity is 19.38%, 21.92% and 28.75% in the post enlistment period. Its pre enlistment period figures are 56.35% and 65.64%. Fanmilk performed better in the pre enlistment period as reflected in the average return on equity of 61.00% as against 23.35% in the post enlistment period. This means that on average,

Fanmilk was able to earned 61.00 pesewas on every cedi of investment made by the shareholders in the pre enlistment period as against 23.35 pesewas in the post enlistment period. For CPC return on equity is 2.69%, 6.04% and -56.390% for the post enlistment period whilst the pre enlistment period was 5.97% and 2.17%. The average return on equity for CPC is -15.89% for the post enlistment period and 2.04% for the pre enlistment period indicating that CPC performed better in the pre enlistment period as management made a loss of 15.89 pesewas on every cedi of investment made by shareholders in the post enlistment period. For Ayrton, management was able to generate 23.90%, 23.90% and 30.71% in the post enlistment period as compared to

25.40% and 21.15% in the pre enlistment period. On average, 25.93% was earned on

45 every cedi of investment made by shareholders on post enlistment as compare to 23.28% profit for the pre enlistment period. For Unilever, return on equity of the post enlistment period was 20.20%, 38.74% and 6.43% whilst the pre enlistment periods are 11.40% and

2.07%. The average return on equity of the pre enlistment period of 6.74% is the lowest for all the companies in the pre enlistment period. It has the post enlistment average figure of 21.79%, indicating that management of the banks performed better in the post enlistment period than pre enlistment period. For PZ Cussons, the average return on equity in the post enlistment period is 18.67% as against the pre enlistment figure of

24.18%. PZ Cussons generated return on equity of 23.51%, 22.74% 9.75% in the post enlistment period whilst that of the pre enlistment period is 18.31% and 30.05%.

4.1.4 RETURN ON ASSETS ANALYSIS

Table 4.4: RETURN ON ASSETS OF THE MANUFACTURING COMPANIES

(%)

Post enlistment periods pre enlistment periods

Company YEAR 1 YEAR 2 YEAR 3 AVERAGE YEAR 1 YEAR 2 AVERAGE FAN MILK 1.73 1.68 1.61 1.67 0.30 0.32 0.31 CPC 0.47 0.33 0.23 0.34 0.75 0.72 0.74 AYRTON 1.09 1.14 1.22 1.15 0.21 0.18 0.20 UNILEVER 1.45 1.28 1.43 1.39 8.00 0.92 4.46 PZ 1.00 1.12 1.16 1.09 0.11 0.18 0.15 CUSSON

As shown in Table 4.4, Fanmilk returns on assets are 1.73%, 1.68% and 1.61% for the post enlistment period whilst the pre enlistment period figures are given as 0.30% and

0.31%. On average, the return on asset for the post-enlistment period of 1.67% is better than the pre enlistment period of 0.31%, meaning that on average managements of

46

Fanmilk are able to generate 1.67 and 0.31 pesewas in the pre and post enlistment period for every cedi of asset. CPC post enlistment returns on assets from table 4.4 are given as

0.47%, 0.33%, and 0.23%. That of the pre-enlistment are 0.75% and 0.72%. The average return on assets of CPC of 0.34% is the lowest among all the company‘s studied in the post enlistment period whilst the pre enlistment period is 0.74%. Ayrton Drugs has average return of 1.15% of the post enlistment period and 0.20% for the pre-enlistment period. This indicate that on average, management are able to generate 1.15 pesewas and

0.74 pesewas profit for every cedi spent on asset and that management were more efficient in the post enlistment period than the pre enlistment period. The returns on assets of Unilever are 1.45%, 1.28%, and 1.43% for the post enlistment period. The pre enlistment period figures are 8.00% and 0.92%. The average returns on assets of the post and pre enlistment period are 1.39% and 4.46%. It can be seen that management was more efficient in the pre enlistment period as it were able to generate the highest average return of 4.46 pesewas compared to 1.39 pesewas in the post enlistment period. PZ

Cussons returns on assets are 1.00%, 1.12% and 1.16% for the post enlistment period.

The pre enlistments period figures are 0.11% and 0.81%. The average returns on assets are 1.09% for post enlistment and 0.15% for the pre enlistment which is the lowest among all the averages for the pre enlistment period meaning that assets were poorly managed to generating profit.

It can been seen from the above that, Fanmilk, Ayrton and PZ Cussons performed relatively better in terms of returns on assets in the post enlistment period than the pre enlistment period. The study confirmed a study by Nsiah and Aidoo (2015), that most companies generate more returns on it assets and equity after listing. These companies were profit efficient since their averages exceeds that of the averages of the pre enlistment. Thus, for every cedi spent on asset, management of Fanmilk, Ayton and PZ

47

Cussons were able to generate profit of 1.67 pesewas, 1.15 pesewas and 1.09 pesewas in the post enlistment period as compare to 0.74 pesewas, and 4.46 pesewas in the pre enlistment period for every cedi spent on asset. This implies that they have been relatively efficient in the utilization of assets in the post enlistment period. They were implementing strategies which continually enhance the efficiency in the utilization of assets for operations and earning more returns relatively, on their investment as compare to the pre enlistment period. The pre enlistment period may be due to poor asset quality, under utilization of assets and lack of appropriate cost control measures. It may also due to management inability to ensure improvement in the utilization of assets.

4.2 PERFORMANCE OF LISTED BANKING INSTITUTIONS.

Profitability is crucial to the survival of every business. Several ratios can be calculated for analyzing bank profitability. The key bank profitability ratios used for this study include return on assets and return on equity. Return on Assets shows what earnings were generated from the banks‘ assets. It measures the banks‘ efficiency in the utilization of their assets to earn profits. The Return on Assets figure explains how effectively the banks are converting the money it has to invest into net income. The higher the percentage, the better, because the company is earning more money on less investment.

48

4.2.1 RETURN ON EQUITY.

Table 4.5: RETURN ON EQUITY FOR THE BANKING INSTITUTIONS (%).

Post enlistment pre enlistment

Company YEAR 1 YEAR 2 YEAR 3 AVERAGE YEAR 1 YEAR 2 AVERAGE EBG 56.66 51.80 35.39 47.95 63.02 68.29 65.66 SCB 48.84 49.00 52.60 50.15 54.66 68.85 61.76 SOGEGH 22.36 31.39 24.80 26.18 37.29 45.78 41.15 CALBANK 27.34 29.29 19.33 25.32 14.60 21.90 0.16 GCB 26.65 24.00 9.87 20.17 42.00 20.07 31.04

From Table 4.5, it can be seen that all the return on equity ratios for the banking institutions have been declining from the pre enlistment period to the post enlistment period. The average return on equity for EBG for the pre enlistment period is 65.66%. It declined to 47.95% representing percentage decrease of 27.00%. This means that for every cedi of investment made by shareholders of EBG, a loss of 17.71 pesewas, representing 27.00% was made. This shows that management has been inefficient in managing investment made by shareholders. SCB pre enlistment figure is 61.79% for average return on equity. Its post enlistment return is 50.15%. This means that, SCB experience decline in return on equity of 18.8% from the pre enlistment to the post enlistment. The 18.8% decline is the lowest among all the banking institutions. This means 18.8% loss was made by management for every cedi investment made by shareholders. SOSEGH pre enlistment figure is 41.15% whilst its post enlistment is

26.32%representing a decline of 36.4% CALBANK is the only banking institution that experienced an increase in return on equity in the post enlistment. Its pre enlistment figure is 0.16% which is the least among all the banking institutions for the averages of the pre enlistment. It increases from 0.16% to 25.32% representing an increase of 99.4%.

This means that shareholders of CALBANK received profit 99.4% for every cedi

49 investment made by shareholders of CALBANK. GCB pre enlistment figure of 31.04% declined to 20.17% which is the lowest among the banking institutions for all the post enlistment period. This represent a decline of 35% meaning that management were inefficient in effective utilization of shareholders‘ investment.

4.2.2 ANALSIS OF RETURN ON ASSET.

Table 4.6: RETURN ON ASSET FOR THE BANKING INSTITUTIONS (%).

Post enlistment period Pre enlistment period

Company YEAR 1 YEAR 2 YEAR 3 AVERAGE YEAR 1 YEAR 2 AVERAGE

EBG 4.10 4.77 5.24 4.70 5.92 6.25 6.09 SCB 5.58 4.45 5.96 5.33 6.89 6.93 6.91 SOGEGH 3.57 5.01 4.67 4.42 5.08 6.92 6.00 CALBANK 4.50 3.65 4.08 4.22 2.75 2.99 3.32 GCB 4.07 2.97 1.02 2.69 4.82 2.40 3.61

From Table 4.6 above, it can be seen that, all the return on asset ratios for the banking institutions have been declining marginally. The average pre enlistment figure for EBG is 6.09% whilst the post enlistment is 4.70%. This means that there was a reduction from the pre to the post enlistment of 22.8%. SCG also experienced a decreased in the post enlistment period of 22.8%. EBG and SCG experienced the least decline in the banking institutions. The average pre enlistment period for SOSEGH is 6.00% whilst the post enlistment figure is 4.42% SOSEGH experienced a decrease of 26.5% in the post enlistment period. This means that SOSEGH lost 1.58p on every cedi spent on asset by management. 27.1% decrease of CALBANK is the highest among all the banking institutions. Its pre and post enlistment average is 3.32% and 4.22% respectively. This also means that management lost 0.9 pesewas profit on every cedi investment made on

50 asset. The average return on equity for pre enlistment for GCB is 3.61% whilst the post enlistment figure is 2.69%. It experienced a percentage decreased of 25.5%.

4.3 COMPARATIVE PERFORMANCE OF LISTED MANUFACTURING

COMPANIES AND BANKING INSTITUIONS.

In order to do a comparative analysis of the performance of the banking institutions and manufacturing companies, the averages of the pre and post enlistment period of the banking institutions were compared against the averages of the pre and post enlistment period of the manufacturing companies.

4.3.1 ANALYSIS OF RETURN ON EQUITY

Table 4.7: AVERAGE RETURN ON EQUITY FOR BOTH BANKING

INSTITUTIONS AND MANUFACTURING COMPANIES.

Banking Pre Post Manufacturing Pre Post institutions enlistment enlistment companies enlistment enlistment EBG 65.66 47.95 Fanmilk 61.00 23.35 SCB 61.79 50.15 CPC 2.04 -15.89 SOGEGH 41.15 26.18 Ayrton 23.28 25.93 CALBANK 0.16 25.32 Unilever 6.74 21.79 GCB 31.04or 20.17 PZ Cussons 24.18 18.64

From Table 4.7, it can be seen that four banking institutions return on equity has be declining from the pre enlistment period to the post enlistment period. Three companies from the manufacturing companies: Fanmilk, CPC and PZ Cussons experience declined from the pre enlistment period to the post enlistment period. The average return on equity for EBG for the pre enlistment is 65.66%. It declined to 47.95% representing percentage decrease of 27.00%. This means that for every cedi investment made by

51 shareholders of EBG, a loss of 17.71 pesewas representing 27.00% was made. This shows that management has been inefficient in managing investment made by shareholders. Comparing this to Fanmilk, in the manufacturing companies whose pre enlistment period average of 61.00% declined to 23.35% representing percentage decrease of 61.7%, it can be seen that EBG perform better than Fanmilk. SCB pre enlistment figure of 61.79% for average return on equity, it reduces to 50.15% in the post enlistment period representing percentage decrease of 18.8%. SOGEGH pre enlistment figure is 41.15% whilst its post enlistment figure is 26.32% representing a decline of

36.4%. Comparing this to PZ with pre enlistment period figure of 24.18% and post enlistment period figure of 18.64% representing 22.9%, it can be seen that PZ perform better than SOGEGH in terms of return on equity. CALBANK is the only banking institution that experienced an increase in return on equity in the post enlistment period.

CALBANK pre enlistment figure of 0.16% increased to 25.32% in the post enlistment figure representing an increase in 99.4%. This means that shareholders of CALBANK received profit of 99.4 pesewas of every cedi investment made. Comparing this to

Unilever, with pre enlistment figure of 6.74% and post enlistment figure of 21.79%, representing a percentage increase of 70.3%, it can be seen that CALBANK has perform better than Unilever. GCB pre enlistment average figure of 31.04%declined to 20.17% in the post enlistment period which is the lowest among all the banking institutions in the post enlistment period. This represents a decline of 35%. As compare to CPC pre enlistment of 2.04% and -15.89 post enlistment period which is also the lowest among the manufacturing companies it can be seen that the GCB performed better than CPC.

52

4.3.2 ANALYSIS OF RETURN ON ASSETS

Table 4.8: AVERAGE RETURN ON ASSETS FOR BOTH MANUFACTURING

COMPANIES AND BANKING INSTITUTIONS.

Banking Pre Post Manufacturing Pre Post institutions enlistment enlistment companies enlistment enlistment EBG 6.09 4.70 Fanmilk 0.31 1.67 SCB 6.91 5.33 CPC 0.74 0.34 SOSEGH 6.00 4.42 Ayrton 0.20 1.15 CALBANK 3.32 4.22 Unilever 4.46 1.39 GCB 3.61 2.69 PZ Cussons 0.15 1.16

From the Table 4.8, it can be seen that four banking institutions and two manufacturing companies return on asset has declined from the pre enlistment period to the post enlistment period meaning that management have been inefficient in the utilization of assets in the post enlistment. They have been implementing strategies which continually do not enhance the banks efficiency in utilization of assets for its operations and earning less return relatively on their investment. The average return on equity for EBG for the pre enlistment period is 6.09%. It declined to 4.70% representing percentage decrease of

22.8%. This means that for every cedi of investment made by shareholders of EBG, a loss of 1.39 pesewas representing 22.8% was made. This shows that management has been inefficient in managing investment by shareholders. SCB pre enlistment figure is

6.91% for average return on equity. Its post enlistment period figure is 5.33%. This means SCB experience decline in return on equity of 22.8% from the pre enlistment period to post enlistment period. SOSEGH average return on equity in the pre enlistment period is 6.00%. It reduces to 4.42% representing a decrease of 26.3%. For GCB, the pre enlistment period average of 3.61% decline to 2.69% representing 24.9% decrease in the post enlistment period. For the manufacturing companies, CPC pre enlistment average is

53

0.74% and its post enlistment average is 0.34%representing a percentage decrease of

54.1% which is higher than any of the percentage decrease in the banking institutions.

Unilever also had pre enlistment average of 4.46%. It reduces to 1.39% in the post enlistment period representing percentage decrease of 68.8%which is also higher than any of the percentage decrease in the banking institutions. Fanmilk pre enlistment average is 0.31% and its post enlistment is 1.67% representing a percentage increase of

81.4%. Ayrton drug also had a percentage increase of 82.3% as its pre enlistment average of 0.20% increase to 1.15% meaning that management has be efficient in managing investment made by shareholders. PZ Cussons pre enlistment average is

0.15% and it increase to 1.16% in the post enlistment in the post enlistment period representing an increase of 87.1%. The only banking institution that had an increase in post enlistment period is CALBANK, with pre enlistment average of 3.33% and post enlistment average of 4.22% representing an increase of 21.3% which is lower than any of the manufacturing companies that experience an increase in average post enlistment period.

4.4 FACTORS HINDERING LISTING.

This section of the chapter presents the empirical results and analysis for the factors that are hindering manufacturing and banking institutions from getting listed on the Ghana

Stock Exchange. The result were based on the reasons why some banking and manufacturing companies get listed, factors that hinder banking and manufacturing companies from being listed, comments on the performance of the banking and manufacturing companies before and after listing, the need for banking and manufacturing companies to be listed on the GSE and the way forward for the GSE. An interview guide was used solicit the view of people with knowledge on the field.

54

The respondents stated that the main reasons why companies get listed on the stock exchange as:

1. To increase capital formation. The respondents see the capital market as the

driver of any economy to growth and development because it is essential for the

long term growth capital formation.

2. To promotes economic growth. They were of the view that Ghana Stock

Exchange (GSE) has impacted positively on economic growth since it became

operational and therefore matters for economic growth in Ghana.

The companies listed the following as the main reasons why most companies do not get listed:

1. Macro-economic instability such as high inflation, exchange rate. The

respondents view macro-economic instability as the single most important factor

militating against most companies from listing on the stock market in this

country. These factors they said prevent investors from having a clear-cut

visibility of the macro environment in the medium to long term and when they

are high, they discourage investors to invest in a country.

2. The requirements involved before a company is accepted onto the stock market

are very cumbersome. The respondents were of the view that a company needs to

go through a lot of steps in other to get listed and not all companies are willing to

do that. This they said have discouraged local entrepreneurs and indigenous

enterprises that wish to raise funds from capital markets.

3. Another problem hindering companies from listed on the stock exchange

according to the respondents is the low level of capital that is facing the GSE.

Most companies cannot raise huge capital from the GSE as a result of low level

55

of liquidity, and few listed companies and the small size of the exchange as well

as efficiency.

4. High cost of listing: Most of the issuer and operators have complained that the

cost of listing is generally very expensive in Ghana. The cost of going public is

about 10% of the IPO proceeds which the respondents consider to be high.

5. Lack of education: Most Ghanaians do not understand the whole concept of

investing or buying shares on the GSE and very few also appreciate long-term

investing according to the respondents.

The companies listed the following as the reasons why manufacturing and banking institutions get listed:

1. Listing on the stock exchange increases capital formation of companies.

According to the respondents, listing will help to increase capital of banking and

manufacturing firms which helps in expanding their operations.

2. Listing will also help improve the operations of the banking and manufacturing

companies as it will encourage them to adhere to certain standards which go a

long way in improving their overall performance.

3. Listing can help raise capital easily from the stock exchange as compare to other

sources of raising capital for the company‘s. They were of the view that the

ability to raise capital with ease is considered to be one of the positive effects of

well-functioning stock markets.

4. Also, the respondents held the view that listing can lead to economic growth and

development. It will provide a long term capital to these companies‘ and if these

companies also efficiently allocates these funds to projects of best returns to fund

owners, it can lead to economic growth and development.

56

4.5 DISCUSSION OF RESULTS.

Most of the manufacturing companies performed better after they are listed on the Stock

Exchange. A study by Nsiah and Aidoo (2015) revealed that most companies generate more returns on asset after they are listed on the Stock Exchange. From Table 4.4, three companies out of the five manufacturing companies: Fanmilk, Ayrton and PZ Cussons had an average post enlistment period return on equity of 1.67%, 1.15% and 1.09% as compare to the pre enlistment average of 0.31%, 0.20% and 0.15% confirming Nsiah and

Aidoo‘s study. Also Table 4.2 also confirmed Nsiah and Aidoo‘s study as three manufacturing companies: Fanmilk, Aryton and Unilever performed better in the post enlistment period in terms of net profit margin. This may be due to decrease in selling prices to attract more customers, reduction in production cost such as labour material and production overheads and reduction in purchase cost as a result of discount received.

Four out of five listed banking institution performed better in the pre enlistment period as compared to the post enlistment period in the return on equity. According to a study by Sarpong and Owusu-Mensah (2014), most banks generally experienced an upward trend for their returns on equity after they are listed which contradict this study. Only

CALBANK experience an upwards trends after it was listed as return on equity increased from 0.16% to 25.32%.

The respondents listed macro-economic instability, low level of capital facing GSE, stringent eligibility requirement, high cost of listing and lack of education as the main factors that are hindering most companies from listing on the GSE. This was corroborated by Ekow Afedzie, when commenting on the poor performance of the GSE in 2009. He explained that high inflation and interest rates are the greatest challenges facing the GSE. Also, Asea (2003) stated that stringent eligibility requirements have discouraged local entrepreneurs and indigenous enterprises that wish to raise funds from

57 capital markets. According to Benimadhu (2003), among the exchange specific issues affecting stock markets in Africa are low level of liquidity, and few listed companies and the small size of the exchange as well as efficiency. In order to attract more companies to list on the Ghana stock Exchange, government and the GSE must put in incentives to get more companies listed, there should be more education on stock market and the GSE must lower the cost of listing

58

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.0 INTRODUCTION

This chapter provides a summary of the entire work and major findings, the conclusion drawn and recommendations base on the findings. The attempt to evaluate the comparative studies of the performance of manufacturing companies and banking institutions listed on the Ghana Stock Exchange, specifically aimed at assessing the companies‘ pre-enlistment profitability trend as against post-enlistment profitability trend and to find out factors that are hindering most companies from enlisting on the

Ghana stock exchange. Using secondary data from the Ghana Stock Exchange on the financial statement of the companies concerned, the financial data was duly discussed to clear the assertion held by most financial analyst and writers that the Stock Exchange is the single most important sources of raising capital and growth of companies.

5. 1 SUMMARY OF MAJOR FINDINGS

Manufacturing companies performed better after listing on the Stock Exchange. For net profit margin, three companies, Fanmilk, Ayrton and Unilever performed better after listing on the Stock Exchange. Also, for return on assets, Fanmilk, Ayrton and Unilever performed better after listing on the Stock Exchange.

The banking institutions performed better when not listed on the Ghana Stock Exchange.

Four banking institutions, EBG, SCB, SOSEGH, and GCB all performed better when it was not listed on the Ghana Stock Exchange for both return on equity and return on

59 assets. CALBANK is the only banking institution that performed better after it was listed.

The study identifies macro-economic instability, low level of capital facing the GSE, high cost of listing and stringent eligibility requirements as the main problems that are hindering listing in Ghana. These variables when they are high discourage the investors to invest in a country and thus having a clear-cut visibility of the macro environment in the medium to long term.

The requirements involve before a company is accepted onto the stock exchange is very cumbersome. Stringent eligibility requirements such as massive disclosures and strict regulations have discouraged local entrepreneurs and indigenous enterprises that wish to raise funds from capital markets to be listed..

Low level of capital facing the Ghana Stock Exchange. Among the low level of capital facing the GSE are low level of liquidity, few listed companies and the small size of the exchange as well as efficiency. Most companies have also complained that the cost of listing is very expensive in Ghana. The cost of going public is about 10%-15% of the

IPO proceeds in Ghana..

Comparing the performance of banking institutions and manufacturing companies, it is clearly that the banking institutions performed better when not listed on the Ghana Stock

Exchange as compared to after listing but the manufacturing companies performed better in the post enlistment than pre enlistment.

60

5.2 CONCLUSION

Listing on the stock exchange have effect on the profitability of manufacturing companies as majority of the companies performed well after listing than when it was not listed on the stock exchange. But the banking institutions, on the other hand performed better when not listed on the Ghana Stock Exchange. Comparing the performance of banking institutions and manufacturing companies, the manufacturing companies perform better after listing but the banking institutions perform better when not listed. This means that even though listing improves the capital base of banking institutions, it does not translate into profitability. Therefore, newly–registered companies must work to improve the profitability of the firm. For more companies to be listed on the stock exchange, macro-economic indicators such as inflation, interest rate should be addressed. The government should put measures in place to control these factors. Also, most Ghanaians do not understand the whole concept of investing or buying shares on the GSE and very few also appreciate long-term investing. The government, SEC and GSE should educate Ghanaian to know the benefits of listing on the stock exchange.

5.3 RECOMMENDATIONS

Listing on the alternative market will afford the companies the opportunity for securing long term capital, broaden their investor base and improved liquidity on the stock market by providing a structure conducive to attract SMEs to float shares on the Ghanaian Stock

Exchange. According to GSE Listing Regulations 1990 (LI 1509) a company must have at least 1million Ghana Cedis in the case of application for admission onto the First

Official Listing and 500000 Ghana cedis for Second Official Listing. Most Companies in

Ghana cannot afford this minimum capital and for that matter the use of alternative

61 market can be a means of securing long term capital to finance their activities. Also, company that is productive but unable to meet the rigorous requirements for listing on the main stock exchange would also benefit from listing on the alternative market.

The Ghanaian economy has over the last decade witnessed relative macroeconomic stability in terms of GDP growth, significant reduction of interest rates, and stability of the exchange rate and inflation. The Bank of Ghana must continue to put measures in place to bring these factors to the lowest level since relative stability has been attributed to the growth of major sectors of the economy including the money markets (financial institutions) and the capital markets (debt and equity). According to Ekow Afedzie, the deputy managing director of the GSE, high interest rates and inflation are the greatest challenges facing the GSE. These factors prevent investors from having a clear cut visibility of the macro environment in the medium to long term. Evidence from the

Ghana Stock Exchange (GSE) indicates that the relative stability of the interest rates and other macroeconomics variables have been the contributory factor to the growth of the stock markets. The attention of most investors has been shifted from investing in

Treasury bills and other financial instruments which are risk free, as a result of the stability of the interest rate.

Banks assume various kinds of financial risks in the process of providing financial services such as credit risk. According to the Wharton Financial Institutions Center in

1997, firms that had been performing well suddenly announced large losses due to credit exposures that turned sour, interest rate positions taken or derivative exposure that may or may not have been assumed to hedge balance sheet risk. Management must put in strong risk management system in order to reduce the cost of financial distress of the

62 banks. Management must practice risk avoidance by reducing the chances of unusual losses from standard banking activity. Also, credit quality must be meaningfully monitored and reviewed periodically which will signal changes in expected loan losses.

This will improve return on equity of the banking institutions and will have correlation with profitability.

A system of strong internal controls can help to ensure that the goals and objectives of banking organization are met, and that the bank will achieve long-term profitability targets, and maintain reliable financial and managerial reporting. It also help to ensure that the bank comply with laws and regulations as well as policies, plans, internal rules and procedures, and decrease the risk of unexpected losses or damage to the bank‘s reputation. According to Basle Committee on Banking Supervision, there has been a significant loss incurred by several banking organizations. An analysis of the problems related to these losses indicates that they could probably have been avoided had the banks maintained effective internal control systems. Such systems would have prevented or enabled earlier detection of the problems that led to the losses, thereby limiting damage to the banking organization. Management must ensure that adequate internal controls are in place at the bank and to foster an environment where individuals understand and meet their responsibilities in this area thereby enabling early detection of problems that lead to losses.

According to Aberdeen Group in 2008, traditionally, manufacturing systems capabilities were built and configured to address specific departmental needs. This often resulted in an insufficient use of internal resources as well as an increase cost of ownership.

Manufacturers now must turn to technology solutions that manage operations across maintenance, production quality, and inventory management with the goal of improving

63 material utilization, asset utilization and continuous improvement team effectiveness.

This will ultimately help manufacturers to reduce manufacturing costs and improve the response to demand variability. Also, manufacturers must adopt a technology platform capable of connecting all aspects of manufacturing operations management. This will enable manufacturers to leverage the platform for standardizing processes and implementing key capabilities which will help reduce cost in the long run.

64

REFERENCES

Alile HI (1997), Government must divest. The Business Concord December 2, P. 8.

Alile HI. (1984), The Nigerian Stock Exchange: Historical Perspectives ,Operations and Contributions to Economic Development, Central Bank of Nigerian Bullion, 2: 65-69.

Al-FakI M. (2006). The Nigerian Capital Market and Socioeconomic Development. Paper presented at the 4th Distinguished Faculty of Social Science Public Lecture, University of Benin, 26 July, pp. 9-16

Asea J. (2003) Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Economics 53: 335- 384.

Anyanwu JC (1998), Stock Market Development and Nigerian Economic Growth, Nigerian Financial Review, 7(2): 6-13.

Atje R Jovanovic (1993), Stock Market and Development. European Economic Review, 37: 632-640.

Arestis, P., Demetriades, P.O., & Luintel, K.B. (2001). Financial development and economic growth: the role of stock markets. Journal of Money, Credit and Banking, 33(1), 16–41. http://dx.doi.org/10.2307/2673870

Aberdeen Group (2008), Manufacturing Operations Management. The Next Generation of Manufacturing System.

Bank of Ghana (2007). ―Building a Financial Sector for an Emerging Market Economy‖, Bank of Ghana consultation paper, 11/2007

65

Basle Committee on Banking Supervision (1997). Framework for Internal Control System in Banking Organization.

Bank of Ghana (2012), BOG monetary policy report Vol. 5: No.1/2012

Centre for Policy Analysis (2012), ―Ghana Economic Review and Outlook‖, CEPA Annual Economic Review Report

Demirgue Kunt, A., and Levin, R. ( 1996), Stock Market Development and Financial Intermediaries: Stylized Facts. The World bank Economic Review, 10(2):241-265.

Ekundayo IK. (2002), Creating a conducive Environment for Investment in the Nigerian Capital Market. Paper Presented at Public Enlightenment on Opportunities in the Capital Market for industrial Development of Kogi stat ‗ Lokoja 29th March to1st April, 2002.

Equakun CO. (2005), The Nigerian Capital Market: Impact on Economic Growth. Masters Thesis, Unpublished. Benin City University of Benin.

GSE. (2006) rule book (200)

Harris RDF. (1997), Stock Markets and Development: A Re-assessment. European Economic Review, 1: 136-139.

IMF Working Paper (2007), Stock Market Development in Sub-Saharan Africa

International Monetary Fund. (2011). Ghana: Financial System Stability Assessment Update, IMFCountryReportNo.11/131 https://www.imf.org/external/pubs/cat/longres.aspx?sk=24917.0

Jensen, M and Meckling, W., (1976). Theory of the firm: managerial behavior, agency costs, and ownership structure. Journal of Financial Economics 3, 305-360

John Wiley (1998), Entrepreneur Magazine Guide to raising money

66

King R., Levine R. (1993), Finance and Growth: Schumpeter might be right, Quarterly Journal of Economics, 108, pp. 717-737.

Kibuthu A. (2005), The determinants of corporate liquidity: Theory and evidence‖. Journal of Financial and Quantitative Analysis, 33: 335–59.

Levine R., Zervos S. (1996), Stock Market Development and Long-run Growth. The World Bank Economic Review, 10(3): 323 – 339.

Nsiah F. and Aidoo P (2015), Financial Performance of Listed Pharmaceutical Companies on the Ghana Stock Exchange.

Okereke-Onyiuke N. (2000), Stock Market Financing Options for Public Projects in Nigeria. The Nigerian Stock Exchange Fact Book, pp. 41 – 49. Osaze BE 2000.The Nigeria Capital Market in the African and Global Financial System. Benin City: Bofic Consults Group Limited.

Osaze BE. (1995), Paradigm shift, Misplaced Concreteness and the Nigerian Financial System. Inaugural Lecture Series, 41 University of Benin pp. 40-41.

Osei V. (2005), Does the Stock Market Matter in Ghana? A Granger-Causality Analysis. Bank of Ghana, WP/BOG-05/13.

Ross, Levine and Sava, Zervos (1996), .Stock Market Development and Long-Run Growth. The World bank Economic Review, Vol. 10, Number 2, pgs 323-339

Sheehan S. and Zavala O. (2005) The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle‖. Journal of Banking and Finance, 22: 613–73

Shleifer, A and Vishny, R, (1997). A survey of corporate governance. Journal of Finance 52, 737 -783

67

Sunil Benimadhu. (2004) „An Investigation on the Relationship between Capital Structure and Corporate Performance of Firms in the Financial and Consumer Product During and After Financial Crisis

Weygyandt J.J., Kieso D.E., Kell W.G. (1996), Accounting Principles 4th Edn., USA, Von Hoffmann Press Inc., pp798-823.

Winful EC., Sarpong Jr. D., Prince K-K. (2012), The Performance of Ghana stock exchange for the period 2007–2009, Afr. J. Bus. Manage. 6(38):10340-10359 http://academicjournals.org/article/article1380809881_Winful%20et% 20al.pdf

The Wharton Financial Institution Center (1997). Commercial Bank Risk Management: an analysis of the process

Yean Z (1999), The Empirical Research on influence of Financial Repression to Enterprise Financing ability. Economic Research Journal, Issue 2, 1999.

Xiaonian X (1997), Building a Company Governance Mechanism and Capital Market on the base of Corporation Structure. Reform, Vol.5, 1997.

Yartey, C. A. and Adjasi, C. K. (2007), Stock Market Development in Sub-Saharan Africa: Critical Issues and Challenges, IMF Working paper, WP/07/209

68

APPENDIX I

KWAME NKRUMAH UNIVERSITY OF SCIENCE AND TECHNOLOGY

SCHOOL OF BUSINESS PROGRAMME: MASTER OF BUSINESS

ADMINISTRATION (ACCOUNTING)

INTERVIEW GUIDE

I am a final year student of KNUST School of Business pursuing MBA and

conducting a research into comparative studies of the performance of companies

listed on the Ghana Stock Exchange.

I would be very grateful if you could answer these questions for me. These

questions are meant for academic purpose therefore confidentiality of

information you provide is assured.

1. What do you think are some of the reasons why some banking and

manufacturing companies get listed?

2. What do you think are some of the factors that hinder banking and

manufacturing companies from being listed on the Stock Exchange?

3. What are your comments on the performance of your bank before and after

being listed?

4. What is the way forward for the Ghana Stock Exchange?

69