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 GHANA 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 Ghana Stock Exchange 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...............................................................................................