Godfred A. Bokpin

Macroeconomic development and capital structure decisions of firms: Evidence from emerging market economies

Purpose - The purpose of this study is to examine the effect of macroeconomic factors on capital structure decisions of emerging firms. Design/methodology/approach - A panel data covering a period from 1990 to 2006 for 34 emerging market countries were analyzed using the seemingly unrelated regression approach to mitigate the effects of multicollinearity and to test for the stability of parameter estimates across the countries. Findings - The results largely suggest that the effect of macroeconomic factors on capital structure varies with capital structure measurement variable in most cases. Bank credit is significant in predicting capital structure choices of firms. The findings of the research also indicate a significantly negative relationship between gross domestic product (GDP) per capita and capital structure choices. Inflation on the other hand positively influences the choice of short-term debt over equity. Stock market development is however insignificant in predicting capital structure decisions of firms and expectations of increasing interest rate positively influences firms to substitute long-term debt for short-term debt over equity. Most of the control variables namely asset tangibility, return on equity, return on assets and Tobins Originality/value - The main value of this paper is to analyze the effect of macroeconomic factors on the capital structure decisions of firms using large dataset from emerging countries.

Investment opportunities, corporate finance, and dividend payout policy: Evidence from emerging markets

Purpose - The purpose of this paper is to investigate the effects of investment opportunities and corporate finance on dividend payout policy. Design/methodology/approach - This issue is tested with a sample of 34 emerging market countries covering a 17-year period, 1990-2006. Fixed effects panel model is employed in our estimation. Findings - A significantly negative relationship between investment opportunity set and dividend payout policy is found. There are, however, insignificant effects of the various measures of corporate finance namely, financial leverage, external financing, and debt maturity on dividend payout policy. Profitability and stock market capitalization are also identified as important in influencing dividend payout policy. Profitable firms are more likely to support high dividend payments to shareholders. However, firms in relatively well-developed markets tend to exhibit low dividend payout policy. Originality/value - The main value of the paper is in respect of the fact that it uses a large dataset from emerging market countries. The results generally support existing literature on investment opportunity set and dividend payout policy.

Corporate governance, disclosure and foreign share ownership on the Ghana Stock Exchange

Purpose - The purpose of this paper is to examine the interaction between corporate disclosure and foreign share ownership on the Ghana Stock Exchange (GSE). Design/methodology/approach - The paper follows the trinary procedure of Aksu and Kosedag and uses the Standard & Poors transparency and disclosure items in the construction of the disclosure index. Therefore, the paper adopts a panel data analysis covering a period from 2002 to 2007 using the seemingly unrelated regression approach. Findings - The results indicate a statistically significant interaction between corporate disclosures and foreign share ownership among the sample firms. The market value of equity and market-to-book value ratio is documented; free cash flow and financial leverage have statistically significant relationships with foreign share ownership. Originality/value - This is the first of its kind in the country that considers the impact of corporate governance and disclosure on foreign share ownership despite the numerous studies carried out on the GSE.

Ownership structure, corporate governance and bank efficiency: An empirical analysis of panel data from the banking industry in ghana.

Purpose – The purpose of this paper is to document the effect of ownership structure and corporate governance on bank efficiency in the Ghanaian banking industry.Design/methodology/approach – The author applies both accounting data and efficiency measures from the period 1999‐2007 via panel data analysis. Efficiency is measured by computing distances from the stochastic frontiers of estimated translog cost and profit functions. These efficiency measures are regressed on ownership and governance variables with dummy variables for bank types.Findings – The results show that foreign banks are more cost‐efficient than domestic banks, but not necessarily more profit‐efficient. Nevertheless, foreign banks are more profitable than domestic banks and enjoy better quality loans. Managerial ownership leads to the cost inefficiency of banks. Banks with inside ownership are unprofitable overall but maintain a high loan quality. Governance (a larger board size) strongly improves profit efficiency but slightly worsens ...

Ownership structure, corporate governance and dividend performance on the Ghana Stock Exchange

Purpose - This paper aims to document the interaction between ownership structure, corporate governance and dividend performance on the Ghana Stock Exchange (GSE). Design/methodology/approach - Panel data covering a period from 2002 to 2007 for 23 firms were analyzed within the framework of fixed effects techniques. Findings - The paper reports that foreign share ownership significantly, positively, influences dividend payment among firms on the GSE. It found board size to have a statistically positive effect on dividend payment among the corporate governance variables. It did not, however, find a significant relationship between inside ownership, board independence, board intensity, CEO duality and dividend performance. The results also indicate that highly leveraged firms will significantly reduce dividend payments. Finally, age and income volatility were found to be significant determinants of dividend performance on the GSE. Originality/value - The paper considers a much broader approach to investigating the impact of ownership structure and corporate governance on dividend performance on the GSE, a marked departure from other studies conducted on the GSE.

Foreign direct investment and natural resources in Africa

Purpose - – The purpose of this paper is to investigate the impact of natural resources on foreign direct investment (FDI) in Africa. Decomposing the measures of natural resource, in terms of contribution to GDP (oil rent (OR), mineral rent (MR) and forest rents (FRs)) and export drive (fuel exports (FE) and minerals export), with the objective of obtaining quantitative estimates of their relationship with FDI, we considered the effect of regional or trade blocks on the continent and control for trade openness, financial market development and infrastructure. Design/methodology/approach - – Using annual panel data of 49 African countries over the period 1980-2011 and employing the system GMM estimation technique. Findings - – The authors show that after allowing for effect of trade or regional block formation, natural resources in its composite form (ORs, MRs, forest rents (FRs), FEs and minerals export) influences FDI in Africa. Quantitatively, we demonstrate that though natural resources (compositely) influences FDI, the different measures of natural resource differ significantly in terms of their marginal contribution in attracting FDI to the continent especially to different trade blocks. The authors provide that in the presence of certain type of natural resources, trade openness or banking sector credit expansion or infrastructural development is less desirable whilst regional or trade blocks strongly moderate the effect of financial market development and infrastructural development on FDI flow on the continent. Originality/value - – The authors employed a broad data set to provide evidence of the association between natural resources in its composite form and well as its various component and FDI to African after accounting for regional/trade blocks.

Microenterprise financing preference: Testing POH within the context of ghana's rural financial market.

Purpose - The purpose of this paper is to investigate the determinants of financing preference of micro and small enterprises (MSEs) whilst distinguishing a broader range of financing sources beyond what is typically the case within the corporate finance literature. Design/methodology/approach - Under the framework of ordinal logistic regression, the paper also tests whether there is evidence of hierarchical preference ordering as predicted by pecking order theory (POH) using field survey data for 2009. Findings - The authors relate that new enterprises are more likely to prefer low cost and less risky or less formal financing such as internal or bootstrap finances. However, as the enterprise gets established or matures, its capacity to seek formal financing increases, thereby becoming more likely to prefer or being in a higher category of formal financing. While the paper affirms the POH, it is argued that this order is a consequence of severe persistent constraints other than sheer preference. The findings further reveal that, microentrepreneurs and MSEs-specific level socio-economic characteristics such as owners education or financial literacy status, households tangible assets, ownership structure, enterprise size, as well as sensitivity to high interest rates in the credit market, to be important determinants of either past (start-up), present or future financing preference. Originality/value - The main value of this paper is to analyse the determinants of financing preference of MSEs within the context of rural financial market (RFM) from a developing country perspective.

Ownership structure, corporate governance and corporate liquidity policy: Evidence from the Ghana Stock Exchange

Purpose - The purpose of this paper is to examine the impact of ownership structure and corporate governance on corporate liquidity policy from a developing country perspective, Ghana Stock Exchange (GSE). Design/methodology/approach - The authors adopt multiple regression analysis in estimating the relationship between ownership structure, corporate governance and corporate liquidity policy as well as the impact of corporate governance on insider ownership. Findings - The authors find that foreign share ownership significantly predicts corporate cash holding on the GSE. The empirical result also portrays positive and statistically significant relationship between board size, financial leverage, firm size, profitability and corporate liquidity holding, and a negative and statistically significant relationship between board composition and corporate liquidity holding. The authors also document positive and statistically significant relationship between the various industry classifications namely manufacturing, distribution and the pharmaceutical industry and corporate cash holdings on the GSE but did not however find significant relationship between corporate governance and insider ownership on the GSE. The authors found positive relationship between Tobins Q and inside ownership. Originality/value - The main value of this paper is to analyze the relationship between ownership structure, corporate governance and corporate liquid policy from a developing country perspective.

Feedback Trading and Autocorrelation Patterns in Sub-Saharan African Equity Markets

ABSTRACT This article examines feedback trading and autocorrelation pattern of stock returns in the equity markets of Ghana, Kenya, Nigeria, and South Africa. We find evidence that positive feedback trading induces negative autocorrelation in the stock returns of Ghana, Kenya, Nigeria, and South Africa. The negative autocorrelation occurs during periods of increasing volatility, and all the four equity markets exhibit volatility asymmetry. We also find that Ghana, Nigeria, and South Africa were influenced by the 2008–2009 global financial crisis, and South Africa experienced the largest impact. These findings may have implications for risk management and price discovery in these equity exchanges.

Determinants and Value Relevance of Corporate Disclosure: Evidence from the Emerging Capital Market of Ghana

Purpose - – The purpose of this paper is to document the determinants and value relevance of corporate disclosure and transparency on the Ghana Stock Exchange (GSE). Design/methodology/approach - – The paper employs the Fama and French model by relating firm value to firm level characteristics, with a sample of 27 firms on the GSE over a six-year period (2003-2008) Findings - – The author found positive though statistically insignificant relationship between corporate disclosure and firm value represented by market to book value ratio and negative for stock price. Consistent with the political cost, signalling, agency and economic theories of corporate disclosure, the author found firm size, financial leverage, audit quality, age and profitability to be significant firm level characteristics determining corporate disclosure in Ghana. Though the adoption of IFRS is significant, it has marginally improved disclosure, though perhaps it is observed more in breach than in compliance and practical steps must be taken to improve disclosure practice on the GSE. Originality/value - – The main value of the paper lies in providing further evidence of the value relevance and determinants of corporate disclosure using emerging data.