Browsing by Author "Aboagye, A.Q.Q."

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African Innovations in Harnessing Farmer Assets as Collateral
(Emerald Publishing Limited, 2017) Chapoto, T.; Aboagye, A.Q.Q.
Purpose The purpose of this paper is to document and appraise two innovations by which nontraditional forms of collateral are being used to make smallholder crop and livestock farmers bankable in Ghana and Zimbabwe. Design/methodology/approach The setup and operations of the warehouse receipt system (WRS) in Ghana were evaluated for the extent to which the WRS was meeting crop farmers’ expectations and the WRS’s own objectives. Owners of the WRS, a certified warehouse operator in a big city, and two operators of certified community warehouses in farming communities were interviewed. Two focus group discussions with crop farmers were also held. Information about the setup and operations of the Tawanda Nyambirai Livestock Trust (TNLT) Private Limited in Zimbabwe (TNLT) and extent of serving the credit needs of livestock farmers was obtained by telephone from the managing director. Data were gathered in April 2014 and were analyzed later. Findings Due to low output no smallholder farmer targeted by the WRS had been issued with a tradable certified warehouse receipts to serve as collateral to potential lenders. Grain aggregators (non-farmers) have aggregated enough grains from farmers to be issued warehouse receipts. Grain farmers report substantial reduction in post-harvest losses when they lodge farm proceeds with certified community warehouses. For the TNLT, more than 140 farmers had deposited 700 cattle and had been issued with tradable certificates of deposit within one year of TNLT to obtain revolving credit from one bank. Other benefits and challenges are highlighted. Originality/value Both approaches have potential of helping to solve liquidity constraints of farmers.
Are Ghanaian MFIs performance Associated with Corporate Governance
(Corporate Governance, 2010) Aboagye, A.Q.Q.; Otieku, J.
Are Ghanaian MFIs’ Performance Associated with Corporate Governance?
(Emerald Group Publishing Limited, 2010) Aboagye, A.Q.Q.; Otieku, J.
Purpose – The purpose of this paper is to determine whether in Ghana, corporate governance, outreach to clients, reduced dependence on subsidies and use of modern technology (together called corporate governance plus) are associated with the performance of rural and community banks (RCBs), which are microfinance institutions (MFI), in the context of newly adopted codes of conduct and regulations, ownership rules and quality of management. Design/methodology/approach – A total of 30 randomly sampled RCBs were categorized into four groups based on analysis of several dimensions of financial performance. Next, RCBs were again categorized into four groups based on their corporate governance plus. A chi‐squared test of independence between the two groupings was performed. Findings – The authors found no association between RCBs' categories based on corporate governance plus and their categories based on financial performance. Practical implication – To enhance performance, corporate governance plus must impact financial performance as documented by OECD. Laws and codes of conduct recently designed to guide the conduct of business should be allowed to work. The restriction on individual ownership of RCBs to 30 percent should be relaxed. And RCBs should pay attention to developing the competencies of their boards and senior management. Originality/value – This is the first formal test of the association between state of corporate governance plus and financial performance of microfinance institutions in Ghana.
Assessing the Explanatory Power of Book to Market Value of Equity Ratio (BTM) on Stock Returns on Ghana Stock Exchange (GSE)
(University of Ghana, 2012-06) Brobbey, F.O.; Aboagye, A.Q.Q.; Osei, K.
The objective of this research was to assess the explanatory power of Book-To-Market value of equity ratio (BTM) and firm size on portfolio returns in Ghana. This study also sought to compare the strength of BTM to size in explaining returns. The last objective was to measure the efficiency of Fama and French (1992) Three-Factor Model on the Ghana Stock Exchange (GSE) over the period January 1997 to December 2009 and to compare the Three-Factor Model to the Capital Asset Pricing Model (CAPM). The sample includes only non-financial firms that traded on the Ghana Stock Exchange over the test period. The sample size increased from eleven (11) non-financial firms in 1997 to twenty-one (21) non- financial firms in 2009. Each year, six Size-BTM sorted portfolios are formed namely; Big-High (BH) portfolio which consist of stocks with big size and high BTM ratio, Big-Medium (BM) portfolio which contains stocks with big size but medium BTM ratio , Big-Low(BL) portfolio which consist of stocks with big size and Low BTM ratio, Small-High (SH) portfolio which contains stocks with small size and high BTM ratio, Small- Medium (SM) portfolio contains small size and medium BTM ration whilst Small-Low (SL) portfolio contains stocks with small size but low BTM ratio. This research found out that, CAPM alone could not predict portfolio returns and that by adding the two other factors, namely the size effect and the book-to-market ratio effect, to the CAPM to derive the Fama and French (1992) Three- Factor Model improves the efficiency of the explanation. It was therefore concluded that The Fama and French Three - Factor Model consisting of Beta, BTM and firm size could explain risk in portfolio return better than the beta alone as contended by the traditional CAPM. This study also identified that BTM effect was stronger on the Ghanaian market than the size effect as identified by Fama and French (1992) on the US market.
Assessing the impact of export processing zones on economic growth in Ghana
(2017) Aboagye, A.Q.Q.; Bokpin, G.A.; Quaico, A.
The study examines the impact of free zones exports and investments on economic growth in Ghana. A vector error correction model (VECM) was employed to ascertain the impact of the Free Zones Programme on economic growth in Ghana on a quarterly time series data spanning 1998–2015. The results show that both free zones exports and free zones investments have significant negative relationship with economic growth. Trade openness also has a significant negative relationship with economic growth but insignificant positive relationship with investment and export. The study concludes that the Free Zones Programme has not served its purpose of promoting economic growth in Ghana. It is universally known that the concept of free zones is actually a second best option and as such is not meant be a lasting policy for promoting economic growth. For this reason, given the negative effect the programme has had on economic growth, the Government of Ghana should scrap it and possibly look at opening up the whole country, especially in terms of infrastructure and other incentives for all firms, so that economic activity can freely take place in every corner of the country to realise balanced and more sustainable growth of the economy.
Bank Concentration and Economic Costs of Deposit Mobilization and Credit Extension in Ghana
(2012) Aboagye, A.Q.Q.
Welfare losses due to misallocation of resources in the deposit and loans markets and inefficiency costs in both markets resulting from the concentration of the Ghanaian banking industry are estimated, respectively using the Harberger‟s triangle and deviations from cost efficient stochastic frontier approaches. Corporate governance variables hypothesized in the literature to be correlated with bank inefficiencies were also investigated. Estimates suggest that net welfare loss over 2001 – 2008 averaged 2.6% of gross domestic product (GDP) per year, while inefficiency costs averaged only 0.7% of GDP. Bank concentration is positively correlated with efficiency in both deposits and loans markets. The elasticity of operating costs with respect to deposits exceeds the elasticity with respect to loans. We recommend that steps be taken to reduce bank concentration as the resultant narrowing of interest rate spreads will likely yield welfare gains that exceed efficiency gains realizable from increased concentration.
Bank Concentration and Economic Costs of Deposit Mobilization and Credit Extension in Ghana
(2012) Aboagye, A.Q.Q.
Welfare losses due to misallocation of resources in the deposit and loans markets and inefficiency costs in both markets resulting from the concentration of the Ghanaian banking industry are estimated, respectively using the Harberger's triangle and deviations from cost efficient stochastic frontier approaches. Corporate governance variables hypothesized in the literature to be correlated with bank inefficiencies were also investigated. Estimates suggest that net welfare loss over 2001 - 2008 averaged 2.6% of gross domestic product (GDP) per year, while inefficiency costs averaged only 0.7% of GDP. Bank concentration is positively correlated with efficiency in both deposits and loans markets. The elasticity of operating costs with respect to deposits exceeds the elasticity with respect to loans. We recommend that steps be taken to reduce bank concentration as the resultant narrowing of interest rate spreads will likely yield welfare gains that exceed efficiency gains realizable from increased concentration.
Bank mergers and acquisitions and the post-merger and acquisition performance of combined banks: evidence from Sub-Saharan Africa
(Cogent Economics & Finance, 2024) Ayagre, P.; Aboagye, A.Q.Q.; Sarpong-Kumankoma, E.; Asuming, P.O.
This study sought to ascertain the effects of bank mergers and acquisitions on the performance of merged banks in Sub-Saharan African (SSA) countries between 2003 and 2019. Specifically, the study aimed to investigate the impact of regulation-induced bank mergers and acquisitions (M&A’s) on the post-merger profitability of merged banks in SSA. The motivation for the study is to provide evidence for or against the regulator’s claims that regulation-induced bank M&As will improve the performance of merged banks in SSA. The article presents the results of the total sample of all mergers and acquisitions examined in the study and two sub-samples: the regulation-induced M&A sub-sample and the voluntary M&A sub-sample. We measure profitability by return on assets, return on equity, and net interest margin. The paper employed a dynamic panel Generalized Methods of Moments approach to analyse the relationship between bank M&As and profitability. The study found no profitability improvement after M&A across all profitability measures for the total sample and the two sub-samples. Instead, the empirical results reveal that bank profitability suffers after mergers and acquisitions across all profitability measures. The results show that, for regulation-induced mergers and acquisitions, a merged bank’s profitability is adversely affected from the beginning of the merger or acquisition to the sixth year of mergers and acquisitions. The findings also reveal that bank risk negatively affect profitability, while liquidity positively affect profitability, except returns on equity. Bank costs-to-income ratios as expected to show negative relationship with profitability. All macroeconomic variables show the expected relationship, positive for GDP growth and negative for inflation
A baseline study of Ghanian microfinance institutions
(Journal of African Business, 2009-09) Aboagye, A.Q.Q.
We conducted a baseline study of the historical performance of 34 rural and community banks (RCBs), 27 credit unions (CUs), and 2 savings and loans companies (S&Ls), which are licensed microfinance institutions in Ghana, for future comparisons. The study also investigated their potential for long-term survival. The RCBs and CUs were drawn from five political administrative regions. We found that RCBs and CUs have done reasonably well. Regional differences, however, exist in the performance of both RCBs and CUs, and there are significant differences in performance of RCBs vis-a-vis CUs. Both have good potential for long-term survival, but CU appears to be better positioned. We identified disparate levels of performance and future potential between the two S&Ls studied.
A business study of Ghanaian microfinance institution
(Journal of African Business, 2009) Aboagye, A.Q.Q.
Cost analysis and efficiency of Sub-District Health Facilities in two Districs in Ghana
(International of Health Planning and Management, 2010) Aboagye, A.Q.Q.; Degboe, A.N.K.
Cost Analysis and Efficiency of sub-District Health Facilities in Two Districts in Ghana
(2008) Aboagye, A.Q.Q.; Degboe, A.N.K.
To establish the full costs borne by sub-district health facilities in providing services, we analysed the costs and revenues of 10 sub-district health facilities located in two districts in Ghana. The full costs were obtained by considering staff costs, cost of utilities, cost of using health facility equipment, cost of non-drug consumables, equipment maintenance expenses, amounts spent on training, community information sessions and other outreach activities as well as all other costs incurred in running the facilities. We found that (i) a large proportion of sub-district health facility costs is made up of staff salaries; (ii) at all facilities, internally generated funds (IGFs) are substantially lower than costs incurred in running the facilities; (iii) average IGF is several times higher in one district than the other; (iv) wide variations exist in efficiency indicators and (v) there is some evidence that sub-district health facilities may not necessarily be financially more efficient than hospitals in using financial resources. We suggest that the study should be replicated in other districts; but in the mean time, the health authorities should take note of the conclusions and recommendations of this study. Efforts should also be made to improve record keeping at these facilities
Credit Risk of Banks in Africa: Determinants and Impact of Credit Risk on Banks’ Lending Rate and Bank Stability.
(University of Ghana, 2015-07) Appiah, M.A.F.; Agbloyor, E.K.; Aboagye, A.Q.Q.; University of Ghana, College of Humanities, Business School, Department of Banking and Finance
Purpose – This research is to identify the determinants of credit risk of banks in Africa and examine the impact of credit risk on banks’ lending rates and banks’ stability. Design/methodology/approach – This study considers 197 banks across 29 countries in Africa over the period 2008-2012. Africa was divided into three income brackets according to the 2010 World Bank classification. A large sample of 197 banks was used in order to have enough banks in each income bracket. Sampling was done focussing on the banks and not countries. Multiple regressions were specified and estimated using the Prais –Winstein estimation technique. This estimation technique was adopted due to the heteoroscedatic and serially correlated errors of the traditional generalized least squares technique. Findings – The results of the study suggests that the predictive power of bank specific and macroeconomic variables on credit risk differs among the income brackets within which the bank operates. Credit risk was also found to have an impact on lending rates only in the low income bracket and has an impact on bank stability only in the low middle income bracket. Credit risk however has no impact on banks’ average lending rate and banks stability in the upper middle income bracket. Originality/value – This study, to the best of the knowledge of the author, is the first to consider credit risk in banks and its impact on lending rate and stability in Africa by considering the three income brackets separately. This is important since Africa is not a homogenous unit and countries within the continent have different levels of income and development. Policy makers and bank managers therefore should consider this study so as not to go in for inapplicable policies and regulations towards credit risk, lending rates and stability of banks. Keywords: Credit risk, Lending rates, Bank stability, Africa, Income bracket.
Demand for Treasury Bills in Ghana, Looking Beyond Risk
(University of Ghana, 2013-06) Odarno, V.G.; Aboagye, A.Q.Q.; Andoh, C.
Investment is a very important activity in the life of every income earner. It basically entails setting aside part of one’s income into an investment vehicle to yield returns in a form of reserving and or increasing the value of the initial amount invested. Treasury bills are one of the avenues for investing by income earners since it yields guaranteed returns over various time periods/durations. This study investigates whether there are behavioral factors influencing the demand for treasury bills in Ghana. A convenient sampling method was adopted in the collection of data from workers in Greater-Accra region. A logistic regression analysis was conducted to determine the behavioral factors that drive investment in treasury bills in Ghana. The study found that there are behavioral factors influencing the demand for treasury bills in Ghana. Education, sociability, number of years of work experience, occupation and saving motives were found to be the main behavioral factors that influence the demand for treasury bills in Ghana. However, financial literacy and age were found to be insignificant in influencing the demand for treasury bills. The study has implication for investment organizations that need to need to know the behavioral attributes of Ghanaian workers towards investing in order to strategize in selling their investment products.
Determinants of Universal Bank Lending Rate in Ghana
(University of Ghana, 2015-07) Adoah, I.; Aboagye, A.Q.Q.; Osei, K.A.; University of Ghana, College of Humanities, Business School, Department of Banking and Finance
The factors that determine the level of universal bank lending rate are important to policy makers, investors, the banking industry and the public at large. The market for loans from universal banks is competitive and rates on these loans have tendency to reduce the deposit rate and increase the cost of borrowing. This study sought to investigate the determinants of lending rates in the universal banks in Ghana by answering the, what are the determinants of lending rates of Universal banks in Ghana. In order to quantify the effect of the various factors on lending rate during the period, we use panel estimation techniques. The study found that factors that affect the determinants of the lending rate in Ghana are Policy rate, Exchange rate, Treasury bill rate, GDP, Inflation, Bank size and HHI. The study recommends participation of all the stakeholders on reviews of existing policies on stability and sound practices in the economy. Banks should also explore internally and industry driven strategies that will militate against some of the bank specific factors associated with higher lending rate in Ghana.
Differences in bank profit persistence in Sub-Saharan Africa
(African Journal of Economic and Management Studies, 2018-11) Sarpong-Kumankoma, E.; Abor, J.; Aboagye, A.Q.Q.; Amidu, M.
Purpose The purpose of this paper is to examine differences in determinants of bank profit persistence among Sub-Saharan African (SSA) countries. Design/methodology/approach Using system generalized method of moments and data from four SSA countries during the period 2006–2012, this study considers differences in determinants of bank profit persistence across countries. Findings Efficiency in cost management is a major determinant of profit persistence in all the countries. However, concentration is found to be insignificant in all the estimations, suggesting that efficiency may be a more important determinant of profit persistence than concentration. Economic freedom associates negatively with profit persistence in Ghana, but its effect is insignificant in Tanzania, Kenya and South Africa. Lending specialization translates into less profit persistence in South Africa, but greater persistence in Tanzania. Higher levels of financial development result in lower profit persistence in Kenya and Ghana, but does not matter in Tanzania and South Africa. Practical implications The level of profit persistence gives an indication of the effectiveness of competition policies, and the differences observed in their determinants in this study suggest the need for tailor-made policy responses in the different countries. Originality/value This study improves the understanding of why some banking market competition policies have not achieved the desired outcomes in some countries. It is evident that blanket rules or wholesale importation of policies from other countries may not work in different contexts.
Do export status and export intensity increase firm performance
(Thunderbird Internal Business Review, 2010) Abor, J.; Aboagye, A.Q.Q.
This study examines the effects of export status and export intensity on the performance of firms in Ghana. Our measures of performance include productivity and profitability. Using the Regional Project on Enterprise Development (RPED) dataset covering the period 1991-2002, the results of this study indicate that export status and export intensity have positive effects on productivity, confirming the learning-by-exporting hypothesis. Competition on the international market exposes exporting firms to new technologies, and this has the potential of increasing their productivity. Thus, economic policy initiatives should be directed at encouraging firms to enter the export market. Existing exporters should also be motivated to intensify their exporting efforts by exporting more of their output to foreign markets. © 2011 Wiley Periodicals, Inc.
Economic freedom, competition and bank stability in Sub Saharan Africa
(International Journal of Productivity and Performance Management, 2020) Sarpong-Kumankoma, E.; Abor, J.Y.; Aboagye, A.Q.Q.; Amidu, M.
Purpose – This study aims to analyze the potential implications of economic freedom and competition for bank stability. Design/methodology/approach – Using system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability. Findings – The results show evidence of the competition-fragility hypothesis in SSA banking but suggest that beyond a setting threshold, market power increases may also damage bank stability. Financial freedom hurts bank stability, implying that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom but low competition in the banking sector. Practical implications – The results suggest to policymakers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks. Originality/value – The study provides insight into the competition–bank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.
Effect of financial development on international trade in Africa: Does measure of finance matter?
(Routledge, 2018-05) Yakubu, A.S.; Aboagye, A.Q.Q.; Mensah, L.; Bokpin, G.A.
Although improving international trade on the back of financial sector development is one of the preoccupations of countries in Africa, empirical literature on financial development-trade nexus has not been rigorous in examining how finance shapes trade. In this study, we examine the effect of financial development on international trade in Africa relying on data for 46 countries over the period 1980–2015. Results from our system generalized method of moments reveal differential effects of finance on trade. In particular, we notice that, private credit does not promote trade while domestic credit positively affects trade. These effects are robust to measures of trade. Thus, improving the level of private (domestic) credit dampens (amplifies) exports and trade openness. However, we also find a U-shaped relationship between private credit and trade measures suggesting that financial sector development may be detrimental (helpful) to trade for economies with low (high) level of private credit. © 2018 Informa UK Limited, trading as Taylor & Francis Group
The Effect of Loan Portfolio Diversification on Banks’ Risks and Returns: Evidence from an Emerging Market.
(Emerald publication, 2016-10-02) Adjobu, L.; Agbloyor, E.K.; Aboagye, A.Q.Q.
Purpose: This paper tests whether diversification of credit portfolios across economic sectors leads to improved profitability and reduced credit risks for Ghanaian banks that have been characterized by high non-performing loans in recent times (IMF, 2011). Design/methodology/approach: Static and dynamic estimations, namely Prais Winsten, fixed and random effect estimators, feasible generalized least squares as well as the system generalized methods of moments are employed on annual data of 30 Ghanaian banks that operated between 2007 and 2014 to determine the effect of loan portfolio diversification on bank performance. Findings: The study shows that loan portfolio diversification does not improve banks’ profitability nor does it reduce banks’ credit risks. Research limitations/implications: The study focuses on a single banking system in Africa largely as a result of data limitation. Practical implications: The study emphasizes the need for banks to perform a careful assessment of the effects of their lending policies geared towards increased sectoral diversification on their monitoring efficiency and effectiveness. A further investment in loan screening and monitoring is necessary to minimize credit risks. Originality/value: This study is the first to present empirical evidence on the effects of loan portfolio diversification on bank performance in an emerging banking market in Africa.