Anthony Kyereboah-Coleman

The impact of capital structure on the performance of microfinance institutions

Purpose - The purpose of this paper is to examine the impact of capital structure on the performance of microfinance institutions. Design/methodology/approach - Panel data covering the ten-year period 1995-2004 were analyzed within the framework of fixed- and random-effects techniques. Findings - Most of the microfinance institutions employ high leverage and finance their operations with long-term as against short-term debt. Also, highly leveraged microfinance institutions perform better by reaching out to more clientele, enjoy scale economies, and therefore are better able to deal with moral hazard and adverse selection, enhancing their ability to deal with risk. Originality/value - This is the first study of its kind in the sector, especially within sub-Saharan Africa.

Outreach and profitability of microfinance institutions: the role of governance

Purpose - This paper aims to examine how selected governance indicators impact on performance measures of outreach and profitability in microfinance institutions (MFIs). Design/methodology/approach - The paper adopts a quantitative approach based on both primary and secondary data from conveniently sampled 52 microfinance institutions. A panel data technique is employed as the key analytical framework. Findings - It is shown that governance plays a critical role in the performance of MFIs and that the independence of the board and a clear separation of the positions of a CEO and board chairperson have a positive correlation with both performance measures. Research limitations/implications - It would have been appropriate to have a larger number of MFIs for the study. This limitation however does not compromise on the validity of the conclusions based on the findings of the study. Practical implications - In the context of multi-dimensional and sometimes conflicting objectives facing MFIs, a clear balancing act of social objectives and institutional sustainability to ensure effective performance of MFIs is recommended. Originality/value - Studies on governance and its relationship with firm behaviour is limited especially in Sub-Saharan Africa. Its application in the microfinance sector with its peculiar characteristics is the added value of this paper.

Impact of macroeconomic indicators on stock market performance: The case of the Ghana Stock Exchange

Purpose - The study aims at examining how macroeconomic indicators affect the performance of stock markets by using the Ghana Stock Exchange as a case study. Design/methodology/approach - Quarterly time series data covering the period 1991-2005 were used. Cointegration and the error correction model techniques are employed to ascertain both short- and long-run relationships. Findings - Findings of the study reveal that lending rates from deposit money banks have an adverse effect on stock market performance and particularly serve as major hindrance to business growth in Ghana. Again, while inflation rate is found to have a negative effect on stock market performance, the results indicate that it takes time for this to take effect due to the presence of a lag period; and that investors benefit from exchange-rate losses as a result of domestic currency depreciation. Originality/value - The single most important contribution of this study is its emphasis on macroeconomic variables and stock market performance in a small country, since most studies have concentrated on stock markets and economic growth in advanced economies.

Effect of exchange‐rate volatility on foreign direct investment in Sub‐Saharan Africa: The case of Ghana

Purpose - The present study aims at using a broader data set and longer time frame coupled with a relatively rigorous and robust methodology to examine the effect of real exchange rate volatility on foreign direct investment (FDI) in a small and developing country such as Ghana. Design/methodology/approach - Time series data covering the period 1970-2002 were used. ARCH and GARCH models were employed for the determination of real exchange rate volatility, and co-integration and ECM were used to determine both the short- and the long-term relationships. Findings - The study showed that the volatility of the real exchange rate has a negative influence on FDI inflow and that the liberalization process has not led to a greater inflow of FDI in Ghana. It is also revealed that while both the stock of FDI and political factors are likely to attract FDI, most foreign investors do not consider the size of the market in making a decision to invest or otherwise in Ghana. Originality/value - The main contribution of the study is its departure from the use of ratios in examining the effect of real exchange rate risk on FDI to a more rigorous and robust methodology, coupled with the fact that studies of this nature are virtually non-existent in Ghana.

On the determinants of board size and its composition: additional evidence from Ghana

Purpose – The fundamental objective of this study is to contribute to the debate by empirically examining the determinants of board size and its composition from a small and developing country perspective.Design/methodology/approach – The paper uses a quantitative approach based on secondary data from firms listed on the Ghana Stock Exchange. Panel data multiple regressions within both fixed and random effects techniques estimations were carried out.Findings – Board size and its composition are a function of firm and industrial characteristics. Specific findings are that, while firm level risk has a positive relationship with board size, CEO tenure has a negative correlation with board size; and that firms with larger institutional shareholding employ less outside directorsResearch limitations/implications – A study of this nature requires a large sample base. It is therefore obvious that sample size was the main limitation of the study. Though, this limitation does not compromise on the validity of our f...

Risk and performance of non-bank financial institutions

This study examines the risk levels of Non-Bank Financial Institutions (NBFIs) and their effect on performance. A panel data analysis of 42 NBFIs over the period of 2006-2010 is used for the study. The results show that NBFIs have been safe as far as bankruptcy is concerned, over the period under study. The risk index used as a measure of overall risk levels show a high mean risk level suggesting that the risk of insolvency of NBFIs in Ghana has been low. The results of the study also establish that lower risk levels lead to an increase in performance of NBFIs. It is further shown that the size of NBFIs has a positive relationship with performance. The results also show that further increases in size of NBFIs measured as the squared of size has a positive impact on performance.

Inflation targeting and inflation management in Ghana

Purpose - The Ghanaian economy has experienced relative stability, improved macroeconomic performance and resilience over the past few years, following the introduction of a new monetary policy framework called inflation targeting (IT). The purpose of this paper is to look at IT and its effect on inflation management in Ghana. Design/methodology/approach - The study employed monthly time series data from 1980 to 2009. Findings - The results gathered in this study demonstrate that IT has had a significant impact on the reduction of inflation series in recent years and has reduced the persistence of inflation series considerably. It is largely amplified that the implementation of an IT framework in Ghana has been a success and has contributed to a change in the conduct of monetary policy towards best practice. Research limitations/implications - The study could have used a lot more macroeconomic variables. Practical implications - The papers findings are very important for Central Banks that are using the IT framework, or planning to do so, for efficiency and effectiveness. Originality/value - The paper is the first of its kind for developing countries, especially in Africa and Ghana for that matter.

External debt among HIPCs in Africa: accounting and panel VAR analysis of some determinants

Purpose - The management of external debt among highly indebted poor countries (HIPCs) in Africa still remains a challenge despite numerous packages and attempts to ameliorate the consequences of such odious debt. The purpose of this paper is to establish the factors that contribute to the growth rate of external debt and how these factors respond to shocks to external debt growth rate in Africa. Design/methodology/approach - Data were obtained from 24 African countries and analyzed using a panel vector autoregression estimation methodology. Findings - The study found that external debt growth rates respond positively to unit shock or changes in government investment spending, consumption spending, and domestic borrowings over a long period of time. In the medium term, external debt growth rates respond negatively to shocks in tax revenue, inflation, and output growth rates. The paper also provides empirical support that external debt may be consumed rather than invested among HIPCs in Africa. Research limitations/implications - The findings of this paper are limited to only HIPCs in Africa. Practical implications - This study has some few debilitating implications for external debt management among HIPCs in Africa. First, the paper suggests that debt repayment may be a problem. This is largely because external debt is consumed rather than invested. External debt sustainability needs a holistic approach in less developed countries. The findings place much emphasis on improvements in gross domestic product and tax revenues as the principal routes out of the debt doldrums. However, this option must be exploited with great caution as there is ample evidence that these poor countries increase their external borrowing capacities with improvements in economic outlook. Originality/value - This paper fills a research gap that identifies specific components of government deficit budgets that may be contributing to the growth rate of external debts among HIPCs.