Department of Banking and Finance

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Risk Management In Oil and Gas Project Financing
(University of Ghana, 2000-06) Akaba, N.Y.
Securing adequate financing for oil and gas investments is a difficult task in the best of environments. In Africa, the task is more difficult on account of political, commercial and force majeure risks. These factors serve to limit the interest of international commercial banks, the main source of oil and gas finance in making long-term credit available for the region. This thesis examines the risk mitigation arrangements that can relief the fears of the international financial institutions. Issues of concern to potential lenders, such as completion risk, performance risk, market risk, economic risks, environmental risk and political risks are evaluated. Measures, which tend to minimize lenders risks, such as escrow accounts, political risk insurance, hedging programmes and standby fund facility, are examined. Security packages such as implementation agreement, land conveyance agreement, fuel supply and transportation agreement, and energy purchase agreement, ownership structure agreement and operation maintenance agreement are all examined. Also, the various ways of strengthening these security packages to attract private financial institutions to finance oil and gas, projects. The study is an evaluation of the roles played by the international financial institutions namely: International Finance Corporation (IFC), the World Bank, Multilateral Investment Guarantee Agency (MIGA), United States Agency for International Development (USAID) and NIB (Ghana) Limited. The findings of the study were gathered through structured personal interviews and questionnaires and are presented in tables and matrices. The study addressed the following research problems: (1) How are oil and gas project risks identified, how are they analysed how are they allocated and what measures are taken to mitigate the risks? (2) What is the quality of security package available for lenders, are how are these security packages be strengthened. (3) Does the involvement of the intonational financial institutions in oil and gas financing serve as an additional security for private financial institutions? The findings of the study have been analysed within the researchers conceptual framework on risk management. The conclusions of the study are: The financial institutions that finance oil and gas projects do not use any scientific method to identify and analyse risk for oil and gas projects, but rather they base the risk identification on the poor infrastructure, debt burdens, refuge problems, war and civil conflicts and perceived political, commercial and force majeure risks of African countries, instead of assessing oil and gas project risks on the performance of the projects profitability and viability, generally. The security packages exist in almost all oil and gas projects financed but the difficulty is about how they should be enforced or strengthened to make them workable in the less developed financial markets in African countries. The World Bank has therefore taken the task of improving the financial markets so as to cushion the financial markets. When the financial markets function very effectively with its legal systems, then security packages can work well. The involvement of the international financial institutions such Multilateral Investment Guarantee Agency (MIGA). the Work! Bank, International Finance Corporation (IFC), and United States Agency for International Development (USAID) serve as additional security package for private financial institutions since the risk is reduced by the surveillance of these corporations. MIGA's political insurance also serves as additional financial tool used to cover risks expected by these lenders. In view of the findings of the study, the researcher has recommended some extra work to be done by these international financial institutions to help attract private financial institutions to finance oil and gas projects in Africa.
Financing Cost and Private Investment in Ghana
(University of Ghana, 2010-06) Ofosu-Mensah Ababio, J.; Osei, K.; Kumankuma, S.; University of Ghana, College of Humanities, Business School, Department of Banking and Finance
This study has investigated empirically the effect o f Financing Cost on Private Investment in Ghana, over the period 1970 - 2008. To this end, the variables used were classified as Cost factors and Non Cost factors o f private investment, using the latter as control variables. The private investment function derived is a variant o f the flexible accelerator principle designed to account for the objective o f the study. It employed the Augmented D ickey-Fuller (ADF) test to address the problem o f unit root faced in time series analysis. The long run estimate o f the private investment function for Ghana was estimated using the Johansen co-integration technique. The Error Correction model was used to determine the short-run dynamics o f the variables used in the model. The study found that all the cost factors (interest rate, inflation rate, exchange rate and budget deficit) had negative and statistically significant impact on private investment in the long run. On the other hand, in the long run. the non cost factors (credit to the private sector, real GDP and public investment) impacted positively on private investment but external debt had adverse effect. The results also found that with the exception o f the stock market variable, all the variables used co-integrated with private investment. The study further revealed that not all the variables used were significant in the long run, since variables such as public investment and external debt had the expected signs but were not significant. This study provided direct evidence that high cost o f financing is associated with low private sector participation in investment activities in Ghana. Accordingly, the study recommended among others that long term policies should be directed towards cost control and macroeconomic stabilization in order to boost private investment 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.
Macroeconomic Volatility and Foreign Direct Investment in Africa
(University of Ghana, 2012-06) Asamoah, M.E.; Kyereboah-Coleman, A.; Adjasi, C.; University of Ghana, College of Humanities, Business School, Department of Banking and Finance
This study has primarily sought to examine the effect of macroeconomic volatility on foreign direct investment in Africa. The investigation covers the period between 1980 and 2010 for twenty-nine countries. The main variables of concern were Exchange rate volatility and inflation volatility, GDP Growth volatility and Real interest rate volatility. The ARCH and GARCH Models introduced Engle (1982) and Bollerslev (1986) were used to model the volatility of the variables. The volatile variables generated were then used in the FDI determinant function. In the panel analysis the study employed the Arellano and Bond (1990) dynamic panel data estimation method to estimate and analyze the relationship between foreign direct investment and the volatility of the macroeconomic variables. From our empirical results, the conclusion drawn was that Exchange rate volatility, Inflation volatility and Interest rate volatilities exerted significant negative effect on foreign direct investment during the period. Real interest rate, open economy, human capital and inflation were positive and significant in attracting foreign direct investment. As recommendations for policy implementation, the study suggests that policy makers in Africa should target macroeconomic stability. To control for inflation issues involving money supply, government spending, reserve and prime rates should be of prime concern. Controlling for inflation will lead to a rise in the expected return on investment which is the interest rate. With regards to exchange rate, efforts should be aimed at strengthening local industry to boost production of certain commodities. The increase in local production will lead to an increase in exports and a decrease in imports which will lead to strengthening of the local currency. Again, the idea of local firms paying and receiving resident citizens in foreign currencies should be discouraged.
Effect of Funding Sources on Lending Patterns of Banks in Ghana
(University of Ghana, 2013-06) Alu, A.A.; Osei, K.A.; Amidu, M.
This study set out to investigate the effect of funding sources on the lending patterns of banks in Ghana. Using a large and representative sample of 22 banks operating in Ghana from 2005 to 2011, the study investigates the funding sources, the lending patterns of banks in Ghana as well as the effect of funding sources on lending patterns.The study made use of a panel data methodology using a panel corrected errors estimation technique. The findings of the study indicate that deposits comprise the majority of funding sources while non deposit funding sources and internal funding follow in that order. On lending patterns of banks in Ghana, the study finds that most of the loans are allocated to the tertiary sector followed by the secondary sector with the primary sector lagging behind. Additionally, the regression results show a positive and significant relationship between lending to the primary economic sector, the tertiary economic sector, total lending and deposits. Furthermore, the findings suggest that in Ghana, bank loans to the primary and secondary sector are financed by internal funds. The study gives rise to very important policy recommendations. The study recommends that policy makers should put in placepolicies that would make it more attractive for banks to channel more of their lending to the primary economic sector especially as their deposits increase.
Corporate Governance and Transparency. Evidence from Stock Return Synchonicity
(University of Ghana, 2013-06) Ntow-Gyamfi, M.; Gemegah, A.; Bokpin, G.A.; University of Ghana, College of Humanities, Business School, Department of Banking and Finance
The purpose of this study was to investigate the extent of stock return synchronicity on the Ghana Stock Exchange. The study compared synchronicity levels across firm size, age and industry type. Finally, the study examined the influence of corporate governance on transparency while using stock return synchronicity as a measure of transparency. A ten year panel data spanning from 2000 to 2009 collected from 31 listed firms in Ghana was used. Daily stock returns were also collected from the Ghana Stock Exchange. A trend analysis of synchronicity was made for the 10 year period. A non-parametric comparison was made between the synchronicity levels of small and large firms, old and new firms, financial and non-financial firms using the Wilcoxon Rank Sum Test. In the empirical estimation, the study uses the panel correct standard errors as well as the Generalized Least Square techniques to provide robust evidence of governance influencing synchronicity through the information environment. The study found that newly listed firms are generally more synchronous while larger firms also exhibited higher levels of R2. The study found Board Size, Board Composition and CEO duality to be significant determinants of transparency proxied by stock return synchronicity. Both the Panel Corrected Standard Errors and the Generalized Least Square estimations provided consistent results. After correcting for possible thin-trading effect using the Dimson’s Beta approach to estimating synchronicity, governance still remains significant determinant of transparency. The study recommends that listed firms choose smaller boards over larger boards since the free rider effect associated with larger boards can increase stock return synchronicity; hence, reducing transparency. Companies should encourage CEO duality but this must be done cautiously in order not to dilute the independence of the corporate board. Companies should increase the proportions of non-executive directors on their boards since this could negatively influence synchronicity and impacts positively on transparency.
Corporate Governance, National Culture, and Corporate Debt Maturity Structure: Evidence from Sub-Saharan Africa
(University of Ghana, 2013-06) Laryea, E.A.; Bokpin, G.; Gemegah, A.
This study examines the impact of corporate governance and national culture on the debt maturity structure of firms in sub-Saharan Africa. A relatively unexplored area world- wide, the dearth of literature on debt maturity structure in Africa necessitates this study. This study sought to understand the impact that the corporate governance systems of sub- Saharan African firms have on corporate debt maturity on the basis of the argument that the debt maturity structure of a firm could augment the efforts of corporate governance systems in alleviating the agency problem of the firm. The study also found it worthwhile to explore the influence of national culture on the debt maturity decision based on the premise that the financial contractual environment within which the debt contract is agreed upon is made up of both formal and informal institutions like norms and values. The study employs a two-stage least square estimation technique and results suggest that the debt maturity structure of firms are explained by the corporate governance systems in place as well as the national culture of the people in the nation. The study therefore suggests that these two factors be carefully considered when the debt maturity structure decision is being made. The study finds that the financial systems in a country tell on the debt maturities of firms as well and recommends that in order to make more long-term debt available for development, policy makers must pay more attention to capital market development. The study also suggests that firm debt maturity decisions should be made bearing in mind the corporate governance system in place.
Liquidity Risk and Bank Profitability in Ghana
(University of Ghana, 2013-06) Siaw, S.; Aboagye, A.Q.Q.; Gemegah, A.
The study examines the determinants of liquidity risk of Ghanaian banks and how it affects their profitability. Theory on the effects of liquidity risk on bank profitability is mixed; while some studies conclude that high liquidity risk increases bank profitability through high net interest margins, others indicate that it reduces profitability due to the high cost associated with securing funding at such times. With an unbalanced data set of 22 banks over a 10 year period spanning 2002 and 2011, the random effects GLS regression based on the Hausman test is used to estimate the determinants of bank liquidity risk. The instrumental variables regression through the two stage least squares (2SLS) approach is applied to estimate the effects of liquidity risk on bank profitability due to the endogenous nature of liquidity risk as a bank profitability determinant while controlling for other variables (bank size, capital adequacy, credit risk, operational expenditure, non-interest income, industry concentration and change in GDP). The study employs the financing gap ratio (FGAPR) as the measure of liquidity risk (dependent variable) with bank size, liquid assets ratio which is further divided into risky and less risky liquid assets, non-deposit dependence, ownership type, industry concentration and change in inflation as the explanatory variables. While bank size, non-deposit dependence and change in inflation exhibit a positive and a statistically significant relationship with liquidity risk (financing gap ratio); meaning that an increase in any of these variables leads to an increase in liquidity risk, risky liquid assets, less risky liquid assets and industry concentration show a negatively significant relationship. Ownership structure has no significant relationship with the financing gap ratio (dependent variable). In order to ascertain the robustness of the results, the ratio of net loans to total deposits (NLD) as an alternative measure for liquidity risk is also applied and the results show consistency with the results obtained from the use of the financing gap ratio as a measure for liquidity risk. Again, the results from the use of instrumental variables for liquidity risk while controlling for other variables (determinants) also show a positive relationship between liquidity risk (both the financing gap ration and the ratio of net loans to total deposits) and bank profitability measured by the return on assets (ROA) and the return on equity (ROE). The study suggests that banks institute strategies that provide effective diversification in the sources of funding while exploiting deposits as a stable cheap source of funding in order to mitigate their liquidity risk exposure. Again, banks in Ghana should strengthen their treasury departments mandated to manage liquidity risk to ensure a sound process for identifying, measuring, monitoring and controlling liquidity risk in order to maximize the positive risk return relationship.
Stress Testing, Disclosure and Risk-Taking of Banks in Ghana
(University of Ghana, 2013-06) Kuranchie-Pong, L.; Bokpin, G.A.; Andoh, C.
The occurrence of the global financial crisis has caused stress testing to receive much attention by regulators, bank management, rating agents and many others in the banking industry. Many investors lost confidence in the banking system after the occurrence of the global financial crises. The central banks have been employing stress testing to restore the confidence in the banking system in their countries. Stress testing is now a popular risk management tool. It is in this light that this study investigates the effect of stress testing, and disclosure on risk-taking of banks in Ghana for the period 2007-2011. The study made use of a panel regression model and relate risk-taking to disclosure, controlling for bank size, profitability, liquidity and treasury bill rate. Disclosure scores from a disclosure index are used to proxy for disclosure, likewise Z-score to proxy for total risk. Each control variable was dropped at a time to serve as a robust test of the regression result. The study also obtained primary data on stress testing to investigate stress test results influence on subsequent risk-taking behaviour of banks. Contrary to expectation, the regression results indicate that greater disclosure is associated with more risk-taking whiles lesser disclosure is associated with reduced risk-taking. Also, it was found that bank size is not important in influencing risk-taking behaviour of banks in Ghana. Besides, the researcher introduced treasury bill rate as a control variable for the first time and the results are economically meaningful and as well as statistically significant in influencing risk-taking of banks in Ghana. Again, the results reveal that greater percentage of the sample banks do not receive stress test results from the central bank (Bank of Ghana) hence relies mainly on their internal stress test results to influence their risk management policies. Also, not all the banks conduct internal stress test exercise. Stress testing is therefore a new phenomenon in banking industry of Ghana. Due to the occurrence of recent financial crises, stress testing, disclosures of information by banks to stakeholders have become very important. However, this is an area not researched in the Ghanaian context and a contribution to literature in this area and for policy makers is laudable. This study therefore, will broaden the approach and the design that can be used to research into the topic. Also, it will serve as a reference for future researchers to contribute to this area.
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.
Corporate Governance and Financing Decisions: A Study of Ghanaian Listed Firms
(University of Ghana, 2013-06) Yussif, T.J.; Abor, J.; Bokpin, G.A.
Earlier studies on the Ghana stock exchange failed to consider the influence of institutional ownership and board committee on the financing decisions of the firms. This study examines the impact of institutional ownership and board committee on capital structure decisions. The study also examines the nature of corporate board and financing pattern of the firms for the period under investigation. Twenty nine (29) firms out of total number of thirty four (34), on the Ghana Stock Exchange were used for the periods 2004 to 2011 based on the availability of data. Secondary data on board and ownership structure were obtained from the annual reports of firms and the Ghana Stock Exchange facts book. Information on best governance practices were also from the annual reports and guidelines of Ghana‟s Securities and Exchange Commission. Using unbalance data with a maximum and minimum period of 8 and 3 years respectively, the fixed effect regression technique was used to examine the effect of board characteristics and ownership structure on financing decisions of the firms. A positive and significant relationship was found in the case of board size, board composition, institutional ownership and firm type. CEO duality, board committee and profitability register negative relationships with capital structure. Managerial ownership, growth and firm size recorded not significant relationships with financing decisions. The result suggests that firms on the Ghana Stock Exchange pursue high debt policy with higher proportion of outside directors, larger board size, and higher percentage of institutional shareholdings. However, lesser number of oversight committees and one tier leadership style are associated with lower debt levels. This study therefore reaffirms that corporate governance influences financing decisions of Ghanaian listed firms. The findings of the study also shows that, the board structure of firms on the Ghana Stock Exchange is dominated by non executive directors, larger board size, two tier leadership structure and an average of two board committees. Again the ownership structure is dominated by institutional holdings. As indicated by this work, the capital structure of Ghanaian listed firms is likely to follow the pecking order theory. To access debt financing, the study recommends firms to open up for institutional investors, increase the board size, with greater percentage of it being outside directors. However increase in board size beyond a certain point would reduce debt. Also, the number of oversight board committees must be maintained at a desired minimum. Generally, it was observed that listed firms complied with rules and directives of the regulatory authorities and therefore to ensure best practices in corporate governance in the country as a whole, more firms have to be encouraged to list on the stock exchange so that regulation can compel them to exhibit the best of conducts.
Macroeconomic Indicators, Capital Structure Decisions and Profitability: A Panel Vector Autoregression (Pvar) Approach.
(University of Ghana, 2014-06) Mensah, E.Y.; Kwadzogah, S.H.; Mensah,S.; University of Ghana, College of Humanities , Business School , Department of Banking and Finance
The study sought to examine the impact of macroeconomic indicators on the capital structure decisions of firms and also the causal relationship between capital structure and profitability within the Ghanaian context. A panel data covering a period from 2000 to 2012 for 27 nonfinancial firms listed on the Ghana Stock Exchange were analysed using the Panel Vector Autoregression (PVAR) approach to mitigate endogeneity problems and more importantly to examine the causal relationship between capital structure and profitability. Empirical results from the study suggests that short-term debt is the most popular source of funding followed by equity and finally long-term debt. A significant positive relationship is observed between Real GDP and all the three measures of capital structure. For real effective exchange rates, a positive linear relationship is observed with all the capital structure measures. However, its relationship with long-term debt ratio is insignificant. In terms of the nexus between real Interest rates and capital structure, the study observes a negative relationship with all the three measures but statistically, only the relationship with total debt ratio is significant. Inflation is observed to have an insignificant positive association with all the measures of capital structure. We note that, the causal relationship between profitability and total debt ratio as well as with short-term debt ratio is bi-directional. The causal relationship between long-term debt ratio and profitability is uni-directional flowing form long-term debt ratio to return on equity. We suggest from the study that, in as much as corporate financial managers consider firm and industry fundamentals in deciding on their debt-equity mix, attention should be given to macroeconomic fundamentals. In addition, the fiscal and monetary policies of the government should be geared towards creating a conducive environment for firms to make informed financing decisions to optimize their capital structure.
Corporate Social Responsibility Reporting in the Telecommunications Sector in Africa
(University of Ghana, 2014-06) Abukari, A.J.; Hinson R.E.; Mensah K.; University of Ghana College of Humanities, Business School, Department of Banking and Finance
Corporate social responsibility reporting (CSRR) has received huge attention in both academic and corporate settings, owing partly to the fact that it has been made mandatory in some jurisdictions and the idea that it has the potential of benefitting organizations in the long run. This thesis looked at how the biggest telecommunications companies in Africa report on their CSR via their corporate web sites. Drawing on inspirations from prior studies, this thesis looked at corporate social responsibility reporting (CSRR) from five thematic perspectives in the areas of environment; human resources; product and customer; community and ethical aspect, using content analysis of web sites of 8 top biggest telecommunications companies operating in Africa. Findings of this thesis suggest that telecommunications companies in Africa are committed to CSR and CSRR. Based on the five themes, the community involvement category dominates on the web sites of these telecommunications companies, which supports earlier studies that most organizations are committed to corporate philanthropy. The findings also suggest that the telecommunications companies are committed to good corporate governance in the conduct of their business. Another intriguing finding from the study revealed that telecommunications companies in Africa are committed to issues of the environment, although there is no known as yet any negative impact of telecommunications masts on the environment. This study makes relevant contribution in the area of CSRR in the context of Africa, judging from the fact that the concept CSR and CSRR are relatively new in Africa and also adds literature to a fairly growing area of communicating CSR via corporate web sites which are fast becoming a medium of corporate communication for corporations in Africa and beyond.
Executive Compensation, Ownership Structure and Loan Quality of Banks in Ghana
(University of Ghana, 2014-07) Adjei-Mensah, G.; Abor, J.Y.; Amidu, M.; University of Ghana College of Humanities, Business School, Department of Banking and Finance
Motivated by the need to analyze the effect of effective corporate governance mechanisms on the enhancement of the loan quality of banks in emerging economies, this study aims to analyze the effects of executive compensation and ownership structures of Ghanaian banks on the quality of loans. It also examines the moderation effect of ownership structure on the relationship between compensation and loan quality. The study uses a panel data on 26 Ghanaian banks over the period, 2003-2011.The ratio of non-performing loans to gross loans and advances which served as a measure of loan quality is the dependent variable while executive compensation and various ownership structures are the main independent variables. The findings of the study reveal that management is efficient when director shareholding is very prominent in banks. Institutional ownership and public listing of banks are also found to enhance loan quality through better monitoring and governance while lag of NPL, exchange rate depreciation and increases in net interest margins are as well seen to improve loan quality. No significant relationship is found between the interaction terms and non-performing loans, hence, loan quality in Ghana is not sensitive to the relationship between executive compensation and ownership structures.
Impact of Bank Recapitalisation on the Profitability of Banks in Ghana
(University of Ghana, 2014-07) Ametei, C.T.; Aboagye, A.Q.Q.; Mensah, L.; University Of Ghana, College of Humanities, Business School, Department of Banking and Finance
The scenario of banking in Ghana has been characterised by low capitalisation which exposes the financial system of the country to severe swallowing, together with widespread bank distress as a result of the prolonged economic crisis. Consequently, bank investments have been hampered. It was therefore imperative for the Bank of Ghana to take drastic measures of bank recapitalisation, which is the core of global bank reforms. The Bank of Ghana, in 2009, issued a directive for all banks and non-bank financial institutions to increase their equity capital. Class one banks were to increase their capitalisation to GH¢60.0 million. But in 2012, another directive was issued compelling new entrant class one banks to have a minimum capitalisation of GH¢120 million (in case of a Ghanaian Bank) and in the case of foreign ownership of banking business, it is not less than GH¢120.0 million. This was to help expand the economy and strengthen existing banks to be able to invest in “big ticket” deal and serve as a safety net for banks in their credit supply. While re-capitalisation of Ghana banks may address this concern, the effect of the exercise on banks‟ performance remains an empirical one. The main problem addressed in this study, is whether recapitalisation of Ghanaian banks has improved their profitability. I further investigated the effect of macroeconomic factors on the performance of the Ghanaian banking system over the period before and after the recapitalisation and also how the imposed regulatory increase in capital have affected the lending behaviour of the banks over the period. This study adopted Athanasoglou et al. (2005) model of Generalised Method of Moments (GMM) using the paradigm of Arellano and Bond (1991) of one-lagged GMM to find the impact of bank recapitalisation exercise in Ghana on the profitability performance of banks. It also investigates whether economic factors have effect on the relationship between regulatory capital increase and the profitability of banks. It also used the student‟s t-test to test the equality of means of profitability measures before and after the recapitalisation period. The study employed secondary data which consist of annual bank level seven-year data from 2007 to 2013, gotten from the Bank of Ghana, for 22 banks out of the 26 bank existing as at 2013. The 2007 – 2013 annual average consumer price indices and the Gross Domestic Product annual growth rate was the macroeconomic variables used for the analyses. The study found that, the Return on Equity (ROE) using the test of equality of means was insignificant. The test on equality of means for Return on Assets (ROA) using the t-test of equality of means were insignificant. The result means there is no statistical difference between the mean of pre-recapitalisation ROE and post-recapitalisation of the banks. The same applied to pre and post-recapitalisation ROA. But the test was significant for the pre-recapitalisation After-Tax Profit and post-recapitalisation After-Tax Profit. This means that, the recapitalisation exercise have helped increase the After-Tax Profit significantly. From the empirical result, the recapitalisation exercise had a negative, significant impact on banks‟ profitability. This means that, the regulatory increase in capital for banks in Ghana, have not helped the profitability of the Ghanaian banking industry as returns to shareholders is concerned. This study concludes that while recapitalisation raised the capital base of the banks, it is not all the time that it transforms into good financial intermediation. The study recommends that banks need to diversify their investment and should be more of the long-term type. The government too has a role to play in providing necessary enabling economic environment to ensure that the cost of doing business in Ghana is reduced significantly to allow the banks to make more profit, since funding from banks will no more be a problem.
Does financial inclusion Spur Financial Development in Africa?
(University of Ghana, 2014-07) Abor, J.; Osei, K.; Mensah, Lord
This study assessed the impact of financial inclusion on financial development in Africa. Using cross-section data covering forty-two African countries, the study uses regression analysis, to establish how the banking sector development is affected by financial inclusion. In this study, financial development used as the dependent variable is proxied by the ratios of money supply, bank credit and private credit to Gross Domestic Product. The independent variables include financial inclusion measured with two variables (accounts used to receive wages, and individual formal account) obtained by carrying out principal component analysis of fourteen (14) measures of financial inclusion. The other independent variables used are inflation, financial openness, a measure of institutional quality and natural resource endowment of the country. The empirical result revealed that higher levels of financial inclusion lead to financial development in the banking sector. In addition, institutional quality were found to have a positive effect on financial development whiles inflation and natural resource rents were found to have negative effects on financial development. Based on the findings of this study, it is recommended that the government, policy makers and the banks put in place delebrate measures to provide unrestricted access to financial services to the people. Also, whilst promoting the financial inclusion phenomenon, there is the need to maintain strong institutions and at the same time prudent measures to mitigate economic instability.
Do Remittances Promote Financial Development In Africa?
(University of Ghana, 2014-07) Karikari, K. N.; Mensah, S.; Harvey, K. S.
Remittances to developing countries have become not only the second largest type of flows after foreign direct investments but have also become more than official aids received. This paper uses data on remittance flows to 50 developing countries in Africa from the period 1990 to 2011 in studying the link between remittances and financial sector developments, the extent to which remittances may promote financial developments and the causality traceable between remittances and financial developments in Africa. The study in particular examines the association between remittances and the aggregate level of credit to private sector, bank deposits intermediated by financial institutions and money supply in the developing countries, in this case, countries in Africa. This is an important gap considering the growth-enhancing and poverty-reducing effects of financial sector developments and immense growth of remittances received in the region over the years under study. The study uses the fixed effects, random effect estimations and Vector Error Correction Model method on the panel data in examining the link between remittances and financial development proxied separately by credit to private sector, bank deposits and money supply, all as a percentage of GDP. The study provides evidence of a positive significant link between remittances and financial developments in developing countries in Africa in the short run but tends to be negative in the long run. However, it is evidenced that financial development had a positive effect on the amount of remittances received in the long-run. Again, remittances caused financial development and so did the development of financial sector cause higher remittances in the short run. That is to say, remittances promote financial development to an extent as well as better financial system fostered the receipts of larger remittances, basically via formal channels. The effect of causality is well seen in both the long-run and the short run. The study then alludes to literature that remittances promote financial development and the development of the financial sector can help increase the propensity to remit.
Overcoming the Resource Curse: Does Resource Governance Matter?
(University of Ghana, 2015-03) Owusu, P.; Osei-Assibey, E.; Agbloyor, E. K.
The relationship between natural resource-richness and economic growth and development has been a focus of discussion for decades but recent debate was started in the 1990s. There has not been agreement as to how natural resources are vital to economic growth. This paper re-examines two main aspects of resource curse and growth literature, the first has to do with the measurement of natural resource endowment and economic growth while the second one has to do with the institutional quality. We employed standard empirical growth model, both OLS and 2SLS estimators with cross sectional data average over the periods 2008-2012. Our results reveal a direct positive link between natural resources endowment and economic growth, the positive association between resource and economic growth are strong in the natural resources rents per capita. In addition, our findings also indicate no evidence of negative effects of natural resources through the institutional quality. The possible implication to be drawn from this study is that countries should establish robust natural resource mechanism to cater for the uncertainties in this sector. Finally, government of resource endowed economies should have a special account where windfall gains from the resources sector can be deposited pending economic and social infrastructure.
Determinants of Loan Portfolio Size of Universal Banks in Ghana
(2015-05) Yeboah-Mensah, E.; Harvey, S.K; University of Ghana,College of Humanities, Business School, Department of Banking and Finance
This study examines the determinants of universal banks’ loan portfolio size in Ghana using the system generalize method of moments (GMM) estimator. The study made use of data gathered from Universal banks from 2000 to 2011. It was discovered from the analysis of the study that the determinants of banks portfolio size of universal banks in Ghana are previous periods’ loan size, total investments of the banks, total deposits, credit risk, money supply and the foreign or local ownership majority of the banks. The more foreign ownership dominated a universal bank is the less loans its gives out relative to local majority owned banks. However, these foreign ownership dominated banks tend to increase loans when they make good investments to complement it. It was also revealed that high credit risk discourages universal banks in Ghana from giving out more loans. It is recommended that in giving out loans universal banks’ credit evaluation of borrowers must be more rigorous to reduce the credit risk so as not to discourage them from giving out more subsequent loans. Universal banks must put in measures to develop strong relationship with their loan clients to encourage then to service their loans and interest since previous year loans portfolio size affects current year loans portfolio size. Government must help improve the work of credit bureaus through enactment and enforcement of laws and also create a conducive environment to enable foreign dominated banks conduct the necessary research about the Ghanaian economy that gives them confidence, familiarity and comfort to create more loans.
Predicting The Imminence Of Fire Disaster Risk On The Economy Of Ghana: An Early Warning System
(University of Ghana, 2015-06) Boadi, C.; Harvey, S. K.; Gyeke-Dako, A.; University of Ghana, College of Humanities, Business School, Department of Banking and Finance
This study examines the nature of regional fire risk frequency in Ghana and provides a fire prediction model, fire risk assessment and also contributes to development of disaster risk capacities in Ghana. The study adequately provides with clear messages and consequences of the fire disaster risk and also provide reliable information to institutions on how to respond to the warnings received. Secondary data obtained from the Ghana Open Data Initiative for this study includes monthly fire frequency count data on Ghana from 2007 to 2011. The data consists of the number of rescues, injury, death, cost of damage and count fire occurrence on all the ten regions including two operational regions in Ghana. An empirical negative binomial probability distribution, normal and Poisson model are fitted to the count fire frequency and fire fatality data in various operational and administrative regions. The likelihood of estimated parameter values of the fitted distribution for fire frequency and fatalities was bootstrapped where standard errors of the bootstrapped parameter helped in computing of the confidence interval of the estimated parameters. The statistical distribution fitted to the fire frequency data helps identify the class of models that is exhibited by the data from each region and provides time leading decisions for Government institutions, academics, risk managers, actuaries and the entire population. Based on the predictions of the statistical models, the study suggest that Government and stakeholders should make available necessary equipment to help fight fire in various vulnerable areas in the regions.

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